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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transi on period from _________ to _________
Commission File Number: 001-36721
Coherus BioSciences, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdic on of
incorpora on or organiza on)
333 Twin Dolphin Drive, Suite 600
Redwood City, California 94065
(Address of principal execu ve offices)
27-3615821
(I.R.S. Employer
Iden fica on No.)
94065
(Zip Code)
(650) 649-3530
(Registrant’s telephone number, including area code)
Securi es registered pursuant to Sec on 12(b) of the Act:
Title of each class
Common Stock, $0.0001 par value per share
Trading
Symbol(s)
CHRS
Name of each exchange on which registered
The Nasdaq Global Market
Securi es Registered Pursuant to Sec on 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securi es Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Sec on 13 or Sec on 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sec on 13 or 15(d) of the Securi es Exchange Act of 1934 during the preceding
12 months (or for such shorter period than 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 submi ed electronically every Interac ve Data File required to be submi ed pursuant to Rule 405 of Regula on S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller repor ng company, or an emerging growth
company. See the defini ons of “large accelerated filer,” “accelerated filer,” “smaller repor ng company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
☐
☒
Non-accelerated filer
☐
Smaller repor ng company
Emerging growth company
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transi on period for complying with any new or revised financial
accoun ng standards provided pursuant to Sec on 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and a esta on to its management’s assessment of the effec veness of its internal control over financial
repor ng under Sec on 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accoun ng firm that prepared or issued its audit report. ☒
If securi es are registered pursuant to Sec on 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correc on of an error to previously issued financial statements ☐
Indicate by check mark whether any of those error correc ons are restatements that required a recovery analysis of incen ve-based compensa on received by any of the
registrant’s execu ve 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 Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock, held by non-affiliates of the registrant as of June 30, 2023 (which is the last business day of registrant’s most
recently completed second fiscal quarter) based upon the closing market price of such stock on the Nasdaq Global Market on that date, was $324,137,955. For purposes of this
disclosure, shares of common stock held by each officer and director have been excluded in that such persons may be deemed to be “affiliates” as that term is defined under
the Rules and Regula ons of the Securi es Exchange Act of 1934, as amended. This determina on of affiliate status is not necessarily conclusive.
The number of shares of the registrant’s common stock issued and outstanding as of February 29, 2024 was 112,714,488.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this annual report on Form 10-K incorporates by reference certain informa on from the registrant’s defini ve proxy statement for the 2024 Annual Mee ng of
Stockholders, which will be filed with the Securi es and Exchange Commission within 120 days a er the end of the fiscal year ended December 31, 2023.
COHERUS BIOSCIENCES, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Table of Contents
PART I
ITEM 1.
Business
ITEM 1A.
Risk Factors
ITEM 1B.
Unresolved Staff Comments
ITEM 1C.
Cybersecurity
ITEM 2.
Proper es
ITEM 3.
Legal Proceedings
ITEM 4.
Mine Safety Disclosures
PART II
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Ma ers, and Issuer Purchases of Equity Securi es
ITEM 6.
[Reserved]
ITEM 7.
Management’s Discussion and Analysis of Financial Condi on and Results of Opera ons
ITEM 7A.
Quan ta ve and Qualita ve Disclosures About Market Risk
ITEM 8.
Financial Statements and Supplementary Data
ITEM 9.
Changes in and Disagreements with Accountants on Accoun ng and Financial Disclosure
ITEM 9A.
Controls and Procedures
ITEM 9B.
Other Informa on
ITEM 9C.
Disclosure Regarding Foreign Jurisdic ons that Prevent Inspec ons
PART III
ITEM 10.
Directors, Execu ve Officers and Corporate Governance
ITEM 11.
Execu ve Compensa on
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Ma ers
ITEM 13.
Certain Rela onships and Related Transac ons, and Director Independence
ITEM 14.
Principal Accoun ng Fees and Services
PART IV
ITEM 15.
Exhibits and Financial Statement Schedules
ITEM 16.
Form 10-K Summary
Signatures
UDENYCA®, YUSIMRY® and LOQTORZI®, whether or not appearing in large print or with the trademark symbol, are
trademarks of Coherus, its affiliates, related companies or its licensors or joint venture partners, unless otherwise noted.
Trademarks and trade names of other companies appearing in this Annual Report on Form 10-K are, to the knowledge of
Coherus, the property of their respec ve owners.
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As used in this Annual Report on Form 10-K, unless the context requires otherwise, references to “Coherus,” the “Company,” “we,” “us,”
and “our,” and similar references refer to Coherus BioSciences, Inc. and its wholly owned subsidiaries.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements regarding future events and our future results that are subject
to the safe harbors created under the Securi es Act of 1933, as amended (the “Securi es Act”), and the Securi es Exchange Act of 1934, as
amended (the “Exchange Act”). Any statements that are not statements of historical facts contained in this Annual Report on Form 10-K may be
deemed to be forward-looking statements. In some cases, you can iden fy forward-looking statements by words such as “aim,” “an cipate,”
“assume,” “a empt,” “believe,” “contemplate,” “con nue,” “could,” “due,” “es mate,” “expect,” “goal,” “intend,” “may,” “objec ve,” “plan,”
“predict,” “poten al,” “seek,” “should,” “strive,” “target,” “will,” “would” and other similar expressions that are predic ons of or indicate future
events and future trends, or the nega ve of these terms or other comparable terminology. These forward-looking statements include, but are
not limited to, statements about:
● whether we will be able to con nue to maintain or increase sales for our products;
● our expecta ons regarding our ability to develop and commercialize our product candidates in the United States and Canada;
● our ability to maintain regulatory approval for our products and our ability to obtain and maintain regulatory approval of our
product candidates, if and when approved;
● our expecta ons regarding government and third-party payer coverage and reimbursement;
● our ability to manufacture our product candidates in conformity with regulatory requirements and to scale up manufacturing
capacity of these products for commercial supply;
● our reliance on third-party contract manufacturers to supply our product candidates and products for us;
● our expecta ons regarding the poten al market size and the size of the pa ent popula ons for our products and product
candidates, if approved for commercial use;
● our expecta ons about making required future interest and principal payments as they become due in connec on with our debt
obliga ons;
● our financial performance, including, but not limited to, projected future performance of our gross margins, research and
development expenses and selling and general administra ve expenses;
● the implementa on of strategic plans for our business, products and product candidates;
● the ini a on, ming, progress and results of future preclinical and clinical studies and our research and development programs;
● the scope of protec on we are able to establish and maintain for intellectual property rights covering our products and product
candidates;
● our expecta ons regarding the scope or enforceability of third-party intellectual property rights, or the applicability of such rights
to our products and product candidates;
● the cost, ming and outcomes of li ga on involving our products and product candidates;
● our reliance on third-party contract research organiza ons to conduct clinical trials of our product candidates;
● the benefits of the use of our products and product candidates;
● the rate and degree of market acceptance of our current or any future products product candidates;
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● our ability to compete with companies currently producing compe tor products, including Neulasta and Humira and other
biosimilar products made by other companies;
● developments and projec ons rela ng to our compe tors, our market opportunity and our industry; and
● the poten al impact of COVID-19 and the con nua on of the war in Ukraine and conflicts in the Middle East on our business and
prospects.
We have based these forward-looking statements on our current expecta ons about future events. These statements are not
guarantees of future performance and involve risks, uncertain es and assump ons that are difficult to predict. Our actual results may differ
materially from those suggested by these forward-looking statements for various reasons, including those iden fied in Part I, Item 1A of this
Annual Report on Form 10-K under the heading “Risk Factors.” Given these risks and uncertain es, you are cau oned not to place undue reliance
on forward-looking statements. The forward-looking statements included in this report are made only as of the date hereof. Except as required
under federal securi es laws and the rules and regula ons of the Securi es and Exchange Commission (“SEC”), we do not undertake, and
specifically decline, any obliga on to update any of these statements or to publicly announce the results of any revisions to any forward-looking
statements a er the distribu on of this report, whether as a result of new informa on, future events, changes in assump ons or otherwise.
This Annual Report on Form 10-K also contains es mates, projec ons, market opportunity es mates and other informa on concerning
our industry, our business, and the markets for certain diseases, including data regarding the es mated size of those markets, and the incidence
and prevalence of certain medical condi ons. Informa on that is based on es mates, forecasts, projec ons, market research or similar
methodologies is inherently subject to uncertain es and actual events or circumstances may differ materially from events and circumstances
reflected in this informa on. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports,
research surveys, studies and similar data prepared by market research firms and other third par es, industry, medical and general publica ons,
government data, publicly filed reports and similar sources.
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Item 1. Business
Overview
PART I
We are a commercial-stage biopharmaceu cal company focused on the research, development and commercializa on of innova ve
cancer treatments and the commercializa on of our por olio of United States Food and Drug Administra on (“FDA”)-approved oncology
products, including LOQTORZI® (toripalimab-tpzi). Our strategy is to build a leading immuno-oncology business funded with cash generated
from our diversified por olio of FDA-approved therapeu cs.
As of March 15, 2024, our commercial por olio includes two FDA-approved biosimilar products. Our first product, UDENYCA®, a
biosimilar to Neulasta, a long-ac ng G-CSF, was launched commercially in the United States in January 2019. The FDA approved the prior
approval supplement (“PAS”) for an autoinjector (“AI”) presenta on of UDENYCA on March 3, 2023, and on May 22, 2023 we announced the
availability of UDENYCA AI for commercial sale. On December 26, 2023 we announced that the FDA approved the PAS for our third pegfilgras m
presenta on, the UDENYCA® on-body injector (“UDENYCA ONBODY”). UDENYCA ONBODY became commercially available in the first quarter of
2024. Our second product, YUSIMRY® (adalimumab-aqvh), a biosimilar to Humira (adalimumab), was launched in the United States in July 2023.
Another product, CIMERLI® (ranibizumab-eqrn), was approved by the FDA in August 2022 as a biosimilar product interchangeable with Lucen s
(ranibizumab injec on) for the treatment of neovascular (wet) age-related macular degenera on, macular edema following re nal vein
occlusion, diabe c macular edema, diabe c re nopathy, and myopic choroidal neovasculariza on. We launched CIMERLI commercially in the
United States in October 2022. On January 19, 2024, we entered into a Purchase and Sale Agreement (the “Purchase Agreement”) by and
between us and Sandoz Inc., a Delaware corpora on (“Sandoz”). Pursuant to the terms and subject to the condi ons set forth in the Purchase
Agreement, on March 1, 2024, we completed the dives ture of our CIMERLI ophthalmology franchise through the sale of our subsidiary,
Coherus Ophthalmology LLC, to Sandoz (the “Sale Transac on”) for upfront, all-cash considera on of $170.0 million plus an addi onal $17.8
million for CIMERLI product inventory and prepaid manufacturing assets. Such considera on is subject to certain adjustments that will be
finalized following the closing pursuant to the Purchase Agreement.
Our commercial por olio includes LOQTORZI, a novel PD-1 inhibitor that we developed in collabora on with Shanghai Junshi
Biosciences Co., Ltd. (“Junshi Biosciences”). On October 27, 2023, we announced that LOQTORZI was approved by the FDA in combina on with
cispla n and gemcitabine for the first-line treatment of adults with metasta c or recurrent locally advanced nasopharyngeal carcinoma
(“NPC”), and as monotherapy for the treatment of adults with recurrent, unresectable, or metasta c NPC with disease progression on or a er
pla num-containing chemotherapy. We announced the launch of LOQTORZI in the U.S. on January 2, 2024.
We also have a pipeline of earlier stage clinical and preclinical immuno-oncology programs. On September 8, 2023, we acquired
Surface Oncology, Inc. (“Surface”) and took ownership of its assets, including its por olio of product candidates. The lead clinical stage product
candidate from our acquisi on of Surface (the “Surface Acquisi on”) is casdozokitug (CHS-388, formerly SRF388), an inves ga onal an body
targe ng interleukin 27 (“IL-27”), an immune regulatory cytokine, or protein that is overexpressed in certain cancers, including hepatocellular,
lung and renal cell carcinoma. IL-27 is a cytokine secreted by macrophages and an gen presen ng cells that plays an important physiologic role
in suppressing the immune system, as evidenced by its ability to resolve ssue inflamma on. In addi on, both IL-27 subunits, EBI3 and p28, are
highly expressed during pregnancy in the placenta and their expression is associated with maternal-fetal tolerance. Due to its
immunosuppressive nature, there is a ra onale for inhibi ng IL-27 to treat cancer, as this approach will influence the ac vity of mul ple types
of immune cells that are necessary to recognize and a ack a tumor. Casdozokitug received orphan drug designa on and fast track designa on
from the FDA for the treatment of hepatocellular carcinoma (“HCC”) in November 2020.
Casdozokitug is currently in two on-going clinical studies, a Phase 1/2 study in pa ents with advanced solid tumors (clinicaltrials.gov
iden fier# NCT04374877) and a Phase 2 study in HCC (clinicaltrials.gov iden fier# NCT05359861). Our second clinical-stage product candidate
from the Surface Acquisi on, CHS-114 (formerly SRF114), is an inves ga onal afucosylated immunoglobulin isotype G1 (“IgG1”) an body
targe ng CCR8, a chemokine receptor highly expressed on regulatory T cells (“Treg cells”) in the tumor microenvironment (“TME”). CHS-114 is
designed to cause deple on of intra-tumoral CCR8 expressing Treg cells, important regulators of immune suppression, through an body-
dependent cellular cytotoxicity (“ADCC”), or an body-dependent cellular phagocytosis (“ADCP”), or both, and CCR8 cytoly c an bodies have
shown an -tumor ac vity in preclinical cancer models. We are enrolling pa ents with advanced solid tumors in North America in a clinical trial
evalua ng safety and pharmacokine cs of CHS-114 (clinicaltrials.gov iden fier# NCT05635643). We are also pursuing an early-stage
development candidate that is in inves ga onal new drug applica on-enabling studies, CHS-1000, an an body targe ng human ILT4, designed
to improve an -PD-1 clinical benefit by transforming an unfavorable TME to a more favorable TME.
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In addi on to our internally developed por olio of product candidates that we obtained in the Surface Acquisi on, we also own two
product candidates, NZV930 and GSK4381562, which are exclusively licensed to Novar s Ins tutes for Biomedical Research, Inc. (“Novar s
Ins tutes”) and GlaxoSmithKline Intellectual Property No. 4 Limited (“GSK”), respec vely. We will pay 70% of all milestone- and royalty-based
payments that we or our affiliates actually receive from the product candidates licensed to Novar s Ins tutes and GSK during the ten-year
period following the entry into the Con ngent Value Rights Agreement, dated September 8, 2023, by and among us and Computershare Inc.
and its affiliate Computershare Trust Company, N.A., together, as the rights agent thereunder (the “CVR Agreement”) to the holders of
con ngent value rights (“CVRs”).
Products and Product Candidates
Our por olio includes the following products and product candidates:
Oncology
● UDENYCA, a biosimilar to Neulasta, a long-ac ng G-CSF, was launched commercially in the United States in January 2019. The FDA
approved the PAS for an AI presenta on of UDENYCA on March 3, 2023, and on May 22, 2023 we announced the availability of
UDENYCA AI for commercial sale. We announced on December 26, 2023 that the FDA approved the PAS for our third
pegfilgras m presenta on, UDENYCA ONBODY™, the first and only pegfilgras m biosimilar on-body injector novel in its design.
UDENYCA ONBODY became commercially available in the first quarter of 2024.
● LOQTORZI was developed for its ability to block PD-1 interac ons with its ligands, PD-L1 and PD-L2, by binding to the FG loop on
the PD-1 receptor. We believe blocking PD-1 interac ons with PD-L1 and PD-L2 can help to promote the immune system’s ability
to a ack and kill tumor cells.
On October 27, 2023, we announced that LOQTORZI was approved by the FDA in combina on with cispla n and gemcitabine for
the first-line treatment of adults with metasta c or recurrent locally advanced NPC, and as monotherapy for the treatment of
adults with recurrent, unresectable, or metasta c NPC with disease progression on or a er pla num-containing chemotherapy.
LOQTORZI is an an -PD-1 an body that we developed in collabora on with Junshi Biosciences. We announced the launch of
LOQTORZI in the U.S. on January 2, 2024.
On December 11, 2023 we announced that the Na onal Comprehensive Cancer Network (“NCCN”) updated the clinical prac ce
guidelines for NPC to include LOQTORZI as a preferred, category 1 first-line treatment op on for adults with metasta c or
recurrent locally advanced NPC when used in combina on with cispla n and gemcitabine. The guidelines also recommend
LOQTORZI monotherapy as the only preferred treatment in subsequent lines of therapy if disease progression on or a er a
pla num-containing therapy.
● Casdozokitug (CHS-388, formerly SRF388), is an inves ga onal recombinant human IgG1 monoclonal an body targe ng IL-27, an
immune regulatory cytokine, or protein that is overexpressed in certain cancers, including hepatocellular, lung and renal cell
carcinoma. IL-27 is a cytokine secreted by macrophages and an gen presen ng cells that plays an important physiologic role in
suppressing the immune system, as evidenced by its ability to resolve ssue inflamma on. In addi on, IL-27 is highly expressed
during pregnancy and its expression is correlated with maternal-fetal tolerance. Due to its immune regulatory nature, there is a
ra onale for inhibi ng IL-27 to treat cancer, as this approach will influence the ac vity of mul ple types of immune cells that are
necessary to recognize and a ack a tumor. Casdozokitug received orphan drug designa on and fast track designa on from the
FDA for the treatment of HCC in November 2020. Casdozokitug is currently in two on-going clinical studies, a Phase 1/2 study in
advanced solid tumors (clinicaltrials.gov iden fier# NCT04374877) and a Phase 2 study in HCC (clinicaltrials.gov iden fier#
NCT05359861).
● CHS-114 (formerly SRF114), is an inves ga onal highly specific human afucosylated IgG1 monoclonal an body selec vely
targe ng CCR8, a chemokine receptor highly expressed on Treg cells in the TME. CHS-114 is designed as a cytoly c an body to
cause deple on of intra-tumoral Treg cells, important regulators of immune suppression and tolerance, through ADCC, or ADCP
or both. CHS-114 has shown an -tumor ac vity as monotherapy or in combina on with an -PD-1 an bodies in preclinical
models. We are enrolling pa ents with advanced solid tumors in North America in a clinical trial evalua ng safety and
pharmacokine cs of CHS-114 (clinicaltrials.gov iden fier# NCT05635643).
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● We are pursuing a development candidate, CHS-1000, an an body targe ng human ILT4, designed to improve an -PD-1 clinical
benefit by transforming an unfavorable TME to a more favorable TME. We plan to submit an inves ga onal new drug applica on
(“IND”) to the FDA in the second quarter of 2024 for CHS-1000.
● In addi on to our internally developed por olio of product candidates that we obtained in the Surface Acquisi on, we also own
NZV930 and GSK4381562, which are exclusively licensed to Novar s Ins tutes and GSK, respec vely. NZV930 is an an body
designed to inhibit CD73, which is a cri cal enzyme involved in the produc on of extracellular adenosine, a key metabolite with
strong immunosuppressive proper es within the TME. NZV930 aims to reduce the produc on of immunosuppressive adenosine
within the TME. GSK4381562 is an an body targe ng CD112R, also known as PVRIG, an inhibitory protein expressed on natural
killer (“NK”) and T cells. GSK4381562 is designed to block the interac on of CD112R with CD112, its binding partner that is
expressed on tumor cells. GSK4381562 is designed to promote the ac va on of both NK and T cells, with poten al to elicit a
strong an -tumor response and promote immunological memory. We will pay 70% of all milestone- and royalty-based payments
that we or our affiliates receive from the product candidates licensed to Novar s Ins tutes and GSK during the ten-year period
following the entry into the CVR Agreement to the holders of the CVRs.
Immunology
● YUSIMRY, a biosimilar of Humira (adalimumab), is a monoclonal an body that can bind to tumor necrosis factor (“TNF”).
YUSIMRY provides certain therapeu c benefits for treatment of pa ents with certain inflammatory diseases characterized by
increased produc on of TNF in the body, including rheumatoid arthri s, juvenile idiopathic arthri s, psoria c arthri s, ankylosing
spondyli s, Crohn’s disease, psoriasis and ulcera ve coli s. In December 2021, the FDA approved YUSIMRY, which we launched in
the United States in July 2023. The list price of YUSIMRY at launch represented an approximately 85% discount to the list price of
Humira. YUSIMRY is now available for sale na onwide through select retail, mail order, and specialty pharmacy channels,
including Mark Cuban Cost Plus Drug Company, PBC.
Ophthalmology – Sold to Sandoz pursuant to the Sale Transac on
● CIMERLI is a Lucen s biosimilar. On November 4, 2019, we entered into a license agreement (the “Bioeq Agreement”) with Bioeq
IP AG (“Bioeq”) for the commercializa on of CIMERLI in certain dosage forms in both a vial and pre-filled syringe (“PFS”)
presenta on. Under the Bioeq Agreement, Bioeq granted to us an exclusive royalty-bearing license to commercialize CIMERLI in
the field of ophthalmology (and any other approved labelled indica on) in the United States.
On August 2, 2022, the FDA approved CIMERLI as a biosimilar product interchangeable with Lucen s for the treatment of
neovascular (wet) age-related macular degenera on, macular edema following re nal vein occlusion, diabe c macular edema,
diabe c re nopathy, and myopic choroidal neovasculariza on. The FDA also granted CIMERLI 12 months of first interchangeable
exclusivity. On October 3, 2022, we launched CIMERLI commercially in the United States in both 0.3 mg and 0.5 mg dosage forms.
On January 19, 2024, we entered into the Purchase Agreement by and between us and Sandoz. Pursuant to the terms and subject
to the condi ons set forth in the Purchase Agreement, on March 1, 2024, we completed the dives ture of our CIMERLI
ophthalmology franchise through the sale of our subsidiary, Coherus Ophthalmology LLC, to Sandoz for upfront, all-cash
considera on of $170.0 million plus an addi onal $17.8 million for CIMERLI product inventory and prepaid manufacturing assets.
Such considera on is subject to certain adjustments that will be finalized following the closing pursuant to the Purchase
Agreement.
Oncology Franchise Market Opportunity
LOQTORZI Opportunity
According to Clarivate/Decision Resource Group, the Squamous Cell Carcinoma of the Head and Neck (“SCCHN”) therapy market was
expected to increase 9% annually over the 2022-2032 forecast period. In 2022, sales of SCCHN therapies in the major pharmaceu cal markets
under study (United States, France, Germany, Italy, Spain, United Kingdom, and Japan) totaled $1.5 billion, and sales were expected to increase
to almost $3.5 billion in 2032. Fueling this growth are the con nued uptake of pembrolizumab in the recurrent or metasta c first-line se ng, its
label expansion into the locoregionally advanced se ng, and the expected approval of four new therapies.
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PD-1 inhibitors are expected to be the sales-leading drug class in 2032, garnering major-market sales of over $1.7 billion, and we
expect these agents to be approved for both non-nasopharyngeal and nasopharyngeal drug-treatable pa ent popula ons. By the end of 2032,
we expect them to be prescribed mostly in the large and commercially lucra ve locoregionally advanced and recurrent or metasta c first-line
se ng.
Immuno-oncology agents, and the PD-1/PD-L1 class in par cular, have shi ed the treatment paradigm across a broad range of tumors,
and across the con nuum of cancer se ngs (metasta c to early stage). Clinical adop on of PD-1/PD-L1 therapies has been driven by the
proven versa lity of certain therapies within the class to be used as a monotherapy, as well as combina on therapy with targeted agents such
as tyrosine kinase inhibitors, chemotherapy, or other immunotherapy agents to achieve durable tumor responses and improved survival
benefits, with acceptable toxicity profiles. The improved safety profile observed for approved PD-L1 therapies versus chemotherapy enables
these therapies to be used as a backbone therapy in a broad array of combina on regimens.
On October 27, 2023, we announced that LOQTORZI was approved by the FDA in combina on with cispla n and gemcitabine for the
first-line treatment of adults with metasta c or recurrent locally advanced nasopharyngeal carcinoma (NPC), and as monotherapy for the
treatment of adults with recurrent, unresectable, or metasta c NPC with disease progression on or a er pla num-containing chemotherapy.
LOQTORZI is an an -PD-1 an body that we developed in collabora on with Junshi Biosciences. We announced the launch of LOQTORZI in the
U.S. on January 2, 2024.
LOQTORZI is a next-genera on programmed death receptor-1 (“PD-1”) monoclonal an body that blocks PD-1 ligands PD-L1 and PD-L2
with high potency at a unique site on the PD-1 receptor, enabling the immune system to ac vate and kill the tumor.
NPC is a type of aggressive cancer that starts in the nasopharynx, the upper part of the throat behind the nose and near the base of
the skull. NPC is rare in the United States, with an annual incidence of fewer than one per 100,000 people. The five-year survival rate for all
pa ents diagnosed with NPC is approximately 60%, however, those who are diagnosed with advanced disease have a five-year survival rate of
approximately 49%.
Due to the loca on of the primary tumor, surgery is rarely an op on, and, before the launch of LOQTORZI, pa ents with localized
disease were treated primarily with radia on and chemotherapy. Pa ents treated with chemotherapy alone experience poor prognosis: only
20% experience one-year progression-free survival; up to 50% developed distant metastasis during their disease course; and low median overall
survival (“OS”) of 29 months.
Based on SEER and DRG models, we es mate that the annual drug-treatable popula on in the United States for NPC is approximately
2,000 pa ents annually. Of this group, 60% have relapsed/metasta c disease and would be candidates for LOQTORZI. 40% have localized
disease that can progress to relapsed/metasta c within a 12-24 month meframe.
On Dec. 11, 2023 we announced that the NCCN updated the clinical prac ce guidelines for NPC to include LOQTORZI as a preferred,
category 1 first-line treatment op on for adults with metasta c or recurrent locally advanced NPC when used in combina on with cispla n and
gemcitabine. The guidelines also recommend LOQTORZI monotherapy as the only preferred treatment in subsequent lines of therapy if disease
progression on or a er a pla num-containing therapy.
The NCCN recommenda ons were based on results of the JUPITER-02 Phase 3 study and the POLARIS-02 Phase 2 study. In the
JUPITER-02 Phase 3 study, LOQTORZI combined with chemotherapy significantly improved progression-free survival, reducing the risk of disease
progression or death by 48% compared to chemotherapy alone. LOQTORZI also demonstrated a sta s cally significant and clinically meaningful
improvement in OS, with treatment resul ng in a 37% reduc on in the risk of death versus chemotherapy alone. In the POLARIS-02 clinical
study, LOQTORZI demonstrated durable an -tumor ac vity in pa ents with recurrent or metasta c NPC who failed previous chemotherapy,
with an objec ve response rate of 20.5%, a disease control rate of 40%, and a median OS of 17.4 months with an acceptable safety profile.
LOQTORZI is the first FDA-approved therapy for NPC, and we believe could represent a new standard of care for trea ng the disease
when used in combina on with cispla n and gemcitabine in the first line se ng or as monotherapy in the second line or greater se ng. On
November 27, 2023, we announced that we established a wholesale acquisi on cost for LOQTORZI of $8,892.03 per single-use vial.
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UDENYCA Biosimilar
We ini ated United States sales of UDENYCA in January 2019, and in 2023 we recorded UDENYCA net product sales of $127.1 million.
UDENYCA is currently approved by the FDA in both PFS and AI presenta on, and as we announced on December 26, 2023, the FDA approved
the PAS for our third pegfilgras m presenta on, UDENYCA ONBODY. UDENYCA ONBODY became commercially available in the first quarter of
2024.
PFS products currently account for approximately 56% of the overall pegfilgras m market, which annually comprises sales of
approximately 1.4 million units. Prior to the launch of UDENYCA ONBODY, approximately 43% of the remaining market was held by Neulasta
Onpro®, an on-body presenta on of pegfilgras m owned by Amgen Inc. and Amgen USA Inc. (collec vely “Amgen”). UDENYCA ONBODY could
poten ally expand the UDENYCA market opportunity into a por on of the market held by Neulasta Onpro.
Immunology Franchise Market Opportunity
YUSIMRY
In 2023, Humira revenue in the United States was approximately $12.2 billion. In December 2021, the FDA approved YUSIMRY, which
we launched in the United States in July 2023. The list price of YUSIMRY at launch represented an approximately 85% discount to the list price
of Humira. This pricing strategy provides physicians, pa ents, payers, and employers with access to low-cost, high-quality, safe and effec ve
treatment. YUSIMRY Solu ons™—our pa ent services pla orm—facilitates improved access and fast and seamless experience as pa ents start
or switch to YUSIMRY based on a determina on by their healthcare provider.
YUSIMRY is now available for sale na onwide through select retail, mail order, and specialty pharmacy channels and was the first
biologic offered by Mark Cuban Cost Plus Drug Company, PBC.
For our commercial strategy with YUSIMRY, we believe that payor coverage policies and formularies dictate provider access to both
Humira and adalimumab biosimilars and that a combina on of factors influence formulary decision making. With the implementa on of the
Infla on Reduc on Act of 2022 (the “IRA”), in 2025 the Part D benefit will be restructured and liability for all Part D plans will significantly
increase. This change in liability will shi plan costs into Part D plan bids, as opposed to costs being primarily paid through reinsurance, as is the
case under the benefit today. Therefore, Part D plans may re-structure formularies to include products with low WAC prices, crea ng poten al
opportunity for YUSIMRY in 2025 to achieve broader payer coverage.
Ophthalmology Franchise – Sold to Sandoz pursuant to the Sale Transac on
CIMERLI
On August 2, 2022, the FDA approved CIMERLI as a biosimilar product interchangeable with Lucen s for the treatment of neovascular
(wet) age-related macular degenera on, macular edema following re nal vein occlusion, diabe c macular edema, diabe c re nopathy, and
myopic choroidal neovasculariza on. On October 3, 2022, we launched CIMERLI commercially in the United States in both 0.3 mg and 0.5 mg
dosage forms.
On January 19, 2024, we entered into the Purchase Agreement by and between us and Sandoz. Pursuant to the terms and subject to
the condi ons set forth in the Purchase Agreement, on March 1, 2024, we completed the dives ture of our CIMERLI ophthalmology franchise
through the sale of our subsidiary, Coherus Ophthalmology LLC, to Sandoz for upfront, all-cash considera on of $170.0 million plus an
addi onal $17.8 million for CIMERLI product inventory and prepaid manufacturing assets. Such considera on is subject to certain adjustments
that will be finalized following the closing pursuant to the Purchase Agreement.
Sales and Marke ng
Our strategy is to build a leading immuno-oncology franchise funded with cash generated from our diversified por olio of FDA-
approved therapeu cs.
Following the FDA approval of LOQTORZI for NPC, the commercial launch commenced in January 2024 with our exis ng Oncology
commercial and medical affairs teams. There are approximately 2,200 Oncologists that treat 80% of pa ents in the United States with NPC and
90% of these physicians prac ce in exis ng UDENYCA accounts crea ng significant synergies in our commercial execu on. Our
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Oncology commercial team was built to scale and meet the needs of our exis ng Oncology por olio, as well as new indica ons for LOQTORZI
that could come in the future, pending FDA approval.
In addi on to the field facing teams, Coherus has a team of strategic account managers that support the por olio of products and
work directly with the largest accounts including group purchasing organiza ons, integrated delivery networks, and large clinic customers.
We have an experienced market access and pa ent services team that support the por olio of Coherus’ products. This team is
responsible for nego a ng payer coverage with na onal and regional health plans and pension benefit managers (via a team of Na onal
Account Directors), servicing account specific ques ons regarding the billing, coding and reimbursement of Coherus’ products (via a team of
Field Reimbursement Managers), and managing our Coherus Solu ons pa ent services hub which provides product specific coverage,
reimbursement and co-pay support for pa ents and providers.
For a discussion of risks related to sales and marke ng, please see “Risk Factors—Risks Related to Launch and Commercializa on of
our Products and our Product Candidates.”
Manufacturing
We have entered into agreements with several contract manufacturing organiza ons (“CMOs”) for the manufacture and clinical drug
supply of our commercial products and product candidates. We con nue to screen other contract manufacturers to meet our clinical,
commercial and regulatory supply requirements on a product-by-product basis. We have and may be required again to take inventory write-
downs and incur other charges and expenses for products that are manufactured in reliance on a forecast that proves to be inaccurate because
we do not sell as many units as forecasted. For example, during the fourth quarter of 2023, we recorded a $47.0 million charge for the write-
down of slow moving YUSIMRY inventory and the related par al recogni on of certain firm purchase commitments. For a discussion of risks
related to our sources and availability of supplies, please see “Risk Factors—Risks Related to Our Ability to Hire and Retain Highly Qualified
Personnel” and “Risk Factors—Risks Related to Manufacturing and Supply Chain.”
Compe on
While we believe that our biologics pla orm, knowledge, experience and scien fic resources provide us with compe ve advantages,
we face compe on from many different sources. We operate in a highly compe ve environment. Such compe on includes larger and
be er-funded pharmaceu cal, generic pharmaceu cal, specialty pharmaceu cal and biotechnology companies commercializing and
developing immuno-oncology and biosimilar products that would compete with our products and the product candidates in our pipeline.
LOQTORZI, following its recent launch, faces a compe ve market in the United States where a number of an -PD-1 or PD-L1 an body
drugs have been approved by the FDA including the following marketed products from several compe tors: Keytruda® (pembrolizumab) from
Merck & Company, Inc. (“Merck”), Opdivo® (nivolumab) from Bristol-Myers Squibb Company (“BMS”), Tecentriq® (atezolizumab) from
Genentech, Inc. (“Genentech”), Imfinzi® (durvalumab) from AstraZeneca plc (“AstraZeneca”), Bavencio® (avelumab) from EMD Serono Inc. and
Pfizer Inc. (“Pfizer”), Libtayo® (cemiplimab-rwlc) from Regeneron Pharmaceu cals, Inc. (“Regeneron”) and Sanofi S.A. (“Sanofi”), and Jemperli
(dostarlimab-gxly) from GlaxoSmithKline plc (“GlaxoSmithKline”). In addi on to LOQTORZI, mul ple other compe tors are seeking to develop
and approve novel an -PD-1 or PD-L1 an body drugs in the United States in the coming years, including but not limited to BeiGene, Ltd. (in
collabora on with Novar s Interna onal AG (“Novar s”)). As the only immunotherapy approved by the FDA for the treatment of NPC, we
believe LOQTORZI addresses a poten ally high unmet need.
CHS-114, if approved, faces compe on from programs in development specifically targe ng CCR8, including those by BMS,
Gilead/Jounce, Shionogi, AbbVie, Bayer, LaNova and Immunophage.
UDENYCA faces compe on in the United States from Amgen, Viatris Inc. (“Viatris”), Sandoz, Pfizer and Spectrum Pharmaceu cals,
Inc. (“Spectrum”), and also faces compe on from Amneal Pharmaceu cals, Inc. (“Amneal”) and Fresenius Medical Care AG & Co. KGaA
(“Fresenius”), each of which has announced the approval of a pegfilgras m biosimilar and have launched their products for sale in the United
States.
YUSIMRY faces compe on in the United States from AbbVie (the holder of rights to Humira), Amgen (AmjevitaTM (adalimumab-a o)),
Sandoz (HyrimozTM (adalimumab-adaz)), Samsung Bioepis (HadlimaTM (adalimumab-bwwd)), Pfizer (AbriladaTM (adalimumab-afzb)),
Boehringer Ingelheim GmbH (“Boehringer Ingelheim”) (CyltezoTM (adalimumab-adbm)) as well as Viatris / Biocon (“Biocon”) (Hulio®
(adalimumab- jp)), Alvotech Holdings S.A. and Fresenius, each a company that has disclosed development plans for a Humira biosimilar
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candidate. As a result of con nued expected compe on from Humira and a large number of poten al adalimumab (Humira) biosimilar
compe tors, we may not be able to achieve substan al topline sales for YUSIMRY in the United States.
We expect any products that we develop and commercialize directly or with partners to compete on the basis of, among other things,
price and the availability of reimbursement from government and other third-party payers. Our compe tors also may obtain FDA or other
regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our compe tors establishing a
strong market posi on before we are able to enter the market. For a discussion of risks related to our compe on, please see “Risk Factors—
Risks Related to Compe ve Ac vity.”
Collabora on and License Agreements
Distribu on Agreement with Orox Pharmaceu cals B.V. (“Orox”)
In December 2012, we entered into a distribu on agreement with Orox, for the commercializa on of biosimilar versions of our
internally developed biosimilars. Under this agreement, we granted to Orox an exclusive license to commercialize UDENYCA in La n America,
except Brazil and Argen na, and YUSIMRY and CHS-0214 (our etanercept (Enbrel®) biosimilar candidate, for which we discon nued
development in 2020) in La n America, except Brazil. Under this agreement, Orox has an op on, exercisable within a defined me period, to
obtain an exclusive license to commercialize certain addi onal biosimilar products in the same field and territory. We are obligated to
manufacture and supply licensed products to Orox.
We are obligated to develop licensed products and achieve regulatory approval for such products outside of the Caribbean and La n
American countries covered by the agreement by specified dates in order to support Orox’s ac vi es under the agreement in its licensed
territory. We are eligible to receive from Orox a share of gross profits in the low twenty percent range from the sale of licensed products, on a
product-by-product basis.
Our agreement with Orox will expire on a product-by-product and country-by-country basis ten years a er regulatory approval of such
product in such country, subject to automa c three-year extensions unless Orox no fies us in wri ng at least 18 months in advance of the date
upon which the term would otherwise expire that it does not wish to extend the term for such product in such country. Either party may
terminate the agreement for material breach by the other party that is not cured within a specified me period. Orox may terminate the
Agreement for convenience on a product-by-product basis at any me upon 12-months prior wri en no ce. Each party may terminate the
agreement upon bankruptcy or insolvency of the other party, and we may terminate the agreement immediately upon wri en no ce to Orox if
Orox challenges the licensed patents or commits a breach of specified provisions of the agreement.
Se lement and License Agreements with AbbVie
In January 2019, we entered into three se lement and license agreements with AbbVie that grant Coherus global, royalty-bearing,
non-exclusive license rights under AbbVie’s intellectual property to commercialize YUSIMRY. The global se lements resolve all pending disputes
between the par es related to YUSIMRY. Under the United States se lement, our license period in the United States commenced on July 1,
2023.
Se lement and License Agreements with Pfizer
In October 2019, we entered into a license and se lement agreement with Pfizer rela ng to Coherus’ patents and applica ons for
patents directed to Humira (adalimumab) formula ons.
License Agreement with Bioeq
In November 2019, we entered into the Bioeq Agreement with Bioeq for the commercializa on of a biosimilar version of ranibizumab
(Lucen s) in certain dosage forms in both a vial and pre-filled syringe presenta on (the “Bioeq Licensed Products”). Under this agreement,
Bioeq granted to us an exclusive, royalty-bearing license to commercialize the Bioeq Licensed Products in the field of ophthalmology (and any
other approved labelled indica on) in the United States. Bioeq will supply us the Bioeq Licensed Products in accordance with terms and
condi ons specified in the agreement and a manufacturing and supply agreement to be executed by the par es in accordance therewith.
Under the Bioeq Agreement, Bioeq must use commercially reasonable efforts to develop and obtain regulatory approval of the Bioeq
Licensed Products in the United States in accordance with a development and manufacturing plan, and we must use commercially
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reasonable efforts to commercialize the Bioeq Licensed Products in accordance with a commercializa on plan. Bioeq will manufacture and
supply the Bioeq Licensed Products to us in accordance with terms and condi ons specified in the Bioeq Agreement and a manufacturing and
supply agreement between us and Bioeq dated as of September 29, 2022 (the “Bioeq Manufacturing Agreement”). The Bioeq Manufacturing
Agreement will remain in force un l the first to occur of the following: (1) the termina on of the Bioeq Agreement; (2) the exercise of a right to
termina on by us or Bioeq for a material breach of the other party that is not cured in accordance with the Bioeq Manufacturing Agreement;
and (3) the exercise of a right to termina on by Bioeq if invoices are not paid in full in accordance with the Bioeq Manufacturing Agreement.
Addi onally, we must commit certain post-launch resources to the commercializa on of the Bioeq Licensed Products for a limited me as
specified in the Bioeq Agreement. The development, manufacturing, and commercializa on of the Bioeq Licensed Products in the United States
is governed by a governance commi ee as described in more detail in the Bioeq Agreement.
We paid Bioeq an upfront payment of €5.0 million and a milestone payment of €5.0 million in 2019. In 2022, we paid Bioeq a €2.5
million milestone payment related to the FDA approval of the CIMERLI Sec on 351(k) BLA. We share a percentage of gross profits on sales of
Bioeq Licensed Products in the United States with Bioeq in the low- to mid-fi y percent range.
The Bioeq Agreement’s ini al term con nues in effect for ten years a er the first commercial sale of a Bioeq Licensed Product in the
United States, which occurred on October 3, 2022, and therea er renews for an unlimited period of me unless otherwise terminated in
accordance with its terms. Either party may terminate the Bioeq Agreement for the other party’s material breach which is not cured within a
specified me period or for the other party’s bankruptcy or insolvency-related events. Bioeq may terminate the Bioeq Agreement in certain
limited circumstances for failure to obtain specified minimum market share requirements during certain windows of me, if we conduct certain
commercial or advanced pre-commercial ac vi es with respect to certain compe ve products, if we challenge the validity or enforceability of
the patent rights licensed to us under the Bioeq Agreement, or if we undergo a change of control with a compe tor of Bioeq and do not divest
certain compe ve products in connec on therewith. We may terminate the Bioeq Agreement if Bioeq receives certain adverse regulatory
feedback from the FDA for the Bioeq Licensed Products.
The FDA approval of CIMERLI occurred on August 2, 2022, and we commercially launched CIMERLI in the United States on October 3,
2022. Pursuant to the terms and subject to the condi ons set forth in the Purchase Agreement, on March 1, 2024, we completed the
dives ture of our CIMERLI ophthalmology franchise through the sale of our subsidiary, Coherus Ophthalmology LLC, to Sandoz for upfront, all-
cash considera on of $170.0 million plus an addi onal $17.8 million for CIMERLI product inventory and prepaid manufacturing assets. Such
considera on is subject to certain adjustments that will be finalized following the closing pursuant to the Purchase Agreement.
License Agreement with Bioeq and Genentech
On June 22, 2022, we entered into a license agreement with Genentech, Inc. (“Genentech”) and our partner Bioeq (the “Genentech
Agreement”). Under the agreement, Genentech granted us and Bioeq a non-exclusive, royalty-bearing, license under certain of its patent rights
to commercially launch and sell CIMERLI in the United States which started on the launch date on October 3, 2022. Pursuant to the terms of the
Genentech Agreement, the royalty is a low single-digit percentage of net sales of CIMERLI that must be paid through the end of 2023. In
addi on, we obtained the right to make non-binding offers to sell and engage in manufacturing and stockpiling ac vi es during specified me
periods prior to the launch date pursuant to the terms of the Genentech Agreement. The term of the Genentech Agreement will expire when
all of the valid claims in the patent rights licensed under the agreement expire. The agreement may be terminated by either party if a party
materially breaches one or more of its material obliga ons, subject to customary cure period. If we, Bioeq or either party’s respec ve affiliates
ini ate, par cipate, or assist any other person in bringing or prosecu ng any challenge to the validity of any patent rights licensed under the
Genentech Agreement, Genentech may terminate the licenses granted under such licensed patent rights or terminate the Genentech
Agreement in its en rety, unless we, Bioeq, or the applicable affiliates withdraw all such challenges or stop assis ng in any such challenges.
Genentech may also terminate the agreement in the event of our insolvency. Pursuant to the terms and subject to the condi ons set forth in
the Purchase Agreement, on March 1, 2024, we completed the dives ture of our CIMERLI ophthalmology franchise through the sale of our
subsidiary, Coherus Ophthalmology LLC, to Sandoz for upfront, all-cash considera on of $170.0 million plus an addi onal $17.8 million for
CIMERLI product inventory and prepaid manufacturing assets. Such considera on is subject to certain adjustments that will be finalized
following the closing pursuant to the Purchase Agreement.
License Agreement with Junshi Biosciences
On February 1, 2021, we entered into the Collabora on Agreement with Junshi Biosciences for the co-development and
commercializa on of toripalimab, Junshi Biosciences’ an -PD-1 an body in the United States and Canada (the “Collabora on Agreement”).
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Under the terms of the Collabora on Agreement, we paid $150.0 million upfront for exclusive rights to LOQTORZI in the United
States and Canada, an op on in these territories to Junshi Biosciences’ an -TIGIT an body CHS-006, an op on in these territories to a next-
genera on engineered IL-2 cytokine, and certain nego a on rights to two undisclosed preclinical immuno-oncology drug candidates. We have
the right to conduct all commercial ac vi es of LOQTORZI in the United States and Canada. We are obligated to pay Junshi Biosciences up to a
20% royalty on net sales of LOQTORZI and up to an aggregate $380.0 million in one- me payments for the achievement of various regulatory
and sales milestones.
In March 2022, we paid $35.0 million for the exercise of our op on to license the TIGIT Program (as defined in the Collabora on
Agreement). Subsequent joint development consistent with the Collabora on Agreement commenced. On January 10, 2024, we announced
that we had delivered a no ce of termina on of the TIGIT Program to Junshi Biosciences pursuant to the Collabora on Agreement. Under the
Collabora on Agreement, we retain the right to collaborate in the development of LOQTORZI and the other licensed compounds and will pay
for a por on of these co-development ac vi es up to a maximum of $25.0 million per licensed compound per year. Addi onally, we are
responsible for certain associated regulatory and technology transfer costs for LOQTORZI and other licensed compounds and will reimburse
Junshi Biosciences for such costs.
We accounted for the licensing transac on as an asset acquisi on under the relevant accoun ng rules. The $35.0 million payment for
the op on to license CHS-006 was reflected in our first quarter of 2022 financial statements. We recorded research and development expense
of $145.0 million during the first quarter of 2021, related to an upfront payment for exclusive rights to LOQTORZI in the United States and
Canada. We had entered into a Right of First Nego a on agreement with Junshi Biosciences and paid a fee of $5.0 million which was expensed
as research and development expense in the fourth quarter of 2020. The Right of First Nego a on fee was fully credited against the total
upfront license fee obliga on under the Collabora on Agreement. As of December 31, 2023, we recorded $26.3 million in accrued and other
current liabili es, inclusive of the $25.0 million milestone payment to Junshi Biosciences. Addi onally, we recorded $6.3 million in accounts
payable related to the co-development, regulatory and technology transfer costs related to these programs, as well as an immaterial royalty
obliga on. The addi onal milestone payments, op on fee for the IL-2 cytokine and royal es are con ngent upon future events and, therefore,
will be recorded if and when it becomes probable that a milestone will be achieved, or when an op on fee or royal es are incurred.
Adimab Development and Op on Agreement
In October 2018, Surface and Adimab LLC (“Adimab”), entered into an amended and restated development and op on agreement, (as
amended by the amendments dated as of December 16, 2020, June 1, 2022 and July 18, 2022, “the A&R Adimab Agreement”), which amended
and restated the development and op on agreement with Adimab dated July 2014, as amended, (“the Original Adimab Agreement”), for the
discovery and op miza on of proprietary an bodies as poten al therapeu c product candidates. Under the A&R Adimab Agreement, we will
select biological targets against which Adimab will use its proprietary pla orm technology to research and develop an body proteins using a
mutually agreed upon research plan. The A&R Adimab Agreement, among other things, extended the discovery term of the Original Adimab
Agreement, provided access to addi onal an bodies, and expanded our right to evaluate and use an bodies that were modified or derived
using Adimab technology for diagnos c purposes.
Upon our selec on of a target, we and Adimab will ini ate a research plan and the discovery term begins. During the discovery term,
Adimab will grant us a non-exclusive, non-sublicensable license under its technology with respect to the target, to research, design and
preclinically develop and use an bodies that were modified or derived using Adimab technology, solely to evaluate such an bodies, perform
our responsibili es under the research plan, and use such an bodies for certain diagnos c purposes. We also will grant Adimab a non-
exclusive, nontransferable license with respect to the target under our technology that covers or relates to such target, solely to perform its
responsibili es under the research plan during the discovery period. We are required to pay Adimab at an agreed upon rate for its full- me
employees during the discovery period while Adimab performs research on each target under the applicable research plan.
Adimab granted us an exclusive op on to obtain a non-exclusive, worldwide, fully paid-up, sublicensable license under Adimab’s
pla orm patents and other Adimab technology solely to research up to ten an bodies, chosen by us against a specific biological target for a
specified period of me (the “Research Op on”). In addi on, Adimab granted us an exclusive op on to obtain a worldwide, royalty-bearing,
sublicensable license under Adimab pla orm patents and other Adimab technology to exploit, including commercially, 20 or more an bodies
against specific biological targets (the “Commercializa on Op on”). Upon the exercise of a Commercializa on Op on, and payment of the
applicable op on fee to Adimab, Adimab will assign us the patents that cover the an bodies selected by such Commercializa on Op on. We
will be required to use commercially reasonable efforts to develop, seek market approval of, and commercialize at least one an body against
the target covered by the Commercializa on Op on in specified markets upon the exercise of a Commercializa on Op on.
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Under the A&R Adimab Agreement, we are obligated to make milestone payments and to pay specified fees upon the exercise of the
Research Op on or Commercializa on Op on. During the discovery term, we may be obligated to pay Adimab up to $0.3 million for technical
milestones achieved against each biological target. Upon exercise of a Research Op on, we are obligated to pay a nominal research
maintenance fee on each of the next four anniversaries of the exercise. Upon the exercise of each Commercializa on Op on, we will be
required to pay an op on exercise fee of a low seven-digit dollar amount, and we may be responsible for milestone payments of up to an
aggregate of $13.0 million for each licensed product that receives marke ng approval. For any licensed product that is commercialized, we are
obligated to pay Adimab ered royal es of a low to mid single-digit percentage on worldwide net sales of such product. We may also par ally
exercise a Commercializa on Op on with respect to ten an bodies against a biological target by paying 65% of the op on fee and later either
(i) paying the balance and choosing addi onal an bodies for commercializa on, up to the maximum number under the Commercializa on
Op on, or (ii) foregoing the Commercializa on Op on en rely. For any Adimab diagnos c product that is used with or in connec on with any
compound or product other than a licensed an body or licensed product, we are obligated to pay Adimab up to a low seven digits in regulatory
milestone payments and low single-digit royal es on net sales. No addi onal payment is due with respect to any companion diagnos c or any
diagnos c product that does not contain any licensed an body. Any payments payable to Adimab as a result of any product candidates being
developed pursuant to the license agreement between Surface and GSK, dated December 16, 2020, which was subsequently amended in
August 2021 (as amended, the “GSK Agreement”), will be payable to Adimab directly by GSK.
The A&R Adimab Agreement will remain in effect un l (a) the earlier of (i) the expira on of the Research and Commercializa on
Op ons (if they expire without exercise) and (ii) 12 months from the effec ve date without us providing materials that pass Adimab’s quality
control; or (b) if a Research Op on is exercised but the Commercializa on Op on is not, then upon the expira on of the last to expire research
license term; or (c) upon commercializa on of a product, un l the end of the royalty term, which will vary on a product-by-product and country-
by-country basis, ending on the later of (y) the expira on of the last valid claim covering the licensed product in such country as the product is
manufactured or sold, or (z) ten years a er the first commercial sale of the licensed product in such country.
Either party may terminate the A&R Adimab Agreement for material breach if such breach remains uncured for a specified period of
me, however, if a Research Op on or Commercializa on Op on has been exercised and the breach only applies to the applicable target of
such Research Op on or Commercializa on Op on, then the termina on right will only apply to such target. We may also terminate the A&R
Adimab Agreement for any reason with prior no ce to Adimab. If Adimab is bankrupt, we will be en tled to a complete duplicate of, or
complete access to, all rights and licenses granted under or pursuant to the A&R Adimab Agreement.
Novar s Ins tutes Out-licensing Agreement
In January 2016, Surface entered into the collabora on agreement between Surface and Novar s Ins tutes dated January 9, 2016
which was subsequently amended in May 2016, July 2017, September 2017, and October 2018 (as amended, the “Novar s Agreement”).
Pursuant to the Novar s Agreement, Surface granted Novar s Ins tutes a worldwide exclusive license to research, develop, manufacture and
commercialize an bodies that target cluster of differen a on 73 (“CD73”). Under the Novar s Agreement, we are currently en tled to
poten al development milestones of $325.0 million and sales milestones of $200.0 million, as well as ered royal es on annual net sales by
Novar s Ins tutes ranging from high single-digit to mid-teens percentages upon the successful commercializa on of NZV930. Due to the
uncertainty of pharmaceu cal development and the historical failure rates generally associated with drug development, we may not receive
any milestone payments or any royalty payments under the Novar s Agreement. We did not recognize any revenue rela ng to the Novar s
Agreement from September 8, 2023 through December 31, 2023.
Unless terminated earlier, the Novar s Agreement will con nue in effect un l neither us nor Novar s Ins tutes is researching,
developing, manufacturing or commercializing NZV930. Novar s Ins tutes may terminate the Novar s Agreement for any or no reason upon
prior no ce to the Company within a specified me period. Either party may terminate the Novar s Agreement in full if an undisputed material
breach is not cured within a certain period of me or upon no ce of insolvency of the other party. To the extent Novar s Ins tutes terminates
for convenience, or we terminate for Novar s Ins tutes’ uncured material breach, Novar s Ins tutes will grant us, on mutually agreeable
financial terms, an exclusive, worldwide, irrevocable, perpetual and royalty-bearing license with respect to intellectual property controlled by
Novar s Ins tutes that is reasonably necessary to research, develop, manufacture or commercialize NZV930.
GSK Out-licensing Agreement
In December 2020, Surface entered into the GSK Agreement. Pursuant to the GSK Agreement, Surface granted GSK a worldwide
exclusive, sublicensable license to develop, manufacture and commercialize an bodies that target CD112R, also known as PVRIG, including the
an body GSK4381562 (the “Licensed An bodies”). GSK is responsible for the development, manufacturing and commercializa on of the
Licensed An bodies and a joint development commi ee was formed to facilitate informa on sharing. GSK is responsible for all costs
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and expenses of such development, manufacturing and commercializa on and is obligated to provide us with updates on its development,
manufacturing and commercializa on ac vi es through the joint development commi ee. In March 2022, Surface earned a $30.0 million
milestone payment from GSK upon the dosing of the first pa ent in the Phase 1 trial of GSK4381562. We are eligible to receive up to $60.0
million in addi onal clinical milestones and $155.0 million in regulatory milestones. In addi on, we may receive up to $485.0 million in sales
milestone payments. We are also eligible to receive royal es on global net sales of any approved products based on the Licensed An bodies,
ranging in percentages from high single digits to mid-teens. Due to the uncertainty of pharmaceu cal development and the historical failure
rates generally associated with drug development, we may not receive any milestone payments or any royalty payments under the GSK
Agreement. We did not recognize license-related revenue under the GSK Agreement from September 8, 2023 through December 31, 2023.
Unless terminated earlier, the GSK Agreement expires on a licensed product-by-licensed product and country-by-country basis on the
later of ten years from the date of first commercial sale or when there is no longer a valid patent claim or regulatory exclusivity covering such
licensed product in such country. Either party may terminate the GSK Agreement for an uncured material breach by the other party or upon the
bankruptcy or insolvency of the other party. GSK may terminate the GSK Agreement for its convenience. We may terminate the GSK Agreement
if GSK ins tutes certain ac ons related to the licensed patents or if GSK ceases development ac vi es, other than for certain specified technical
or safety reasons. In the event of termina on, we would regain worldwide rights to the terminated program.
License Agreement with Vaccinex
On March 23, 2021, Surface and Vaccinex, Inc. (“Vaccinex”) entered into an exclusive product license agreement (the “Vaccinex
License Agreement”) to exclusively license certain an bodies, including CHS-114. Pursuant to the terms of the Vaccinex License Agreement, we
have a worldwide, exclusive, sublicensable license to make, have made, use, sell, offer to sell, have sold, import and otherwise exploit licensed
products that incorporate certain Vaccinex intellectual property which covers certain an bodies (each, a “Vaccinex Licensed Product”),
including the an body CHS-114 targe ng CCR8.
Under the Vaccinex License Agreement, we are obligated to use commercially reasonable efforts to develop, clinically test, achieve
regulatory approval, manufacture, market and commercialize at least one Vaccinex Licensed Product and have the sole right to develop,
manufacture and commercialize the licensed products worldwide. We are responsible for all costs and expenses of such development,
manufacturing and commercializa on. Pursuant to the Vaccinex License Agreement, Surface paid Vaccinex a one- me fee of $0.9 million.
Vaccinex is eligible to receive up to an aggregate of $3.5 million based on achievement of certain clinical milestones and up to an aggregate of
$11.5 million based on achievement of certain regulatory milestones per Vaccinex Licensed Product. We also owe low single-digit royal es on
global net sales of any approved licensed products. Commencing on the third anniversary of the date of the Vaccinex License Agreement and
con nuing un l the first dosing of a Vaccinex Licensed Product in a clinical trial, we will be required to pay Vaccinex a nominal yearly
maintenance fee. Since a pa ent was dosed with a Vaccinex Licensed Product, CHS-114, in January 2023, no yearly maintenance fees are due
under the Vaccinex License Agreement.
We may terminate the Vaccinex License Agreement for convenience upon the no ce period specified in the Vaccinex License Agreement. Either
party may terminate the agreement for an uncured material breach by the other party. Vaccinex may terminate the Vaccinex License
Agreement if we default on any payments owed to Vaccinex under the agreement, if we are in material breach of, and fail to cure, our
development obliga ons, or ins tute certain ac ons related to the licensed patents. In the event of termina on, all rights in the licensed
intellectual property would revert to Vaccinex.
Term Sheet with Klinge Biopharma
On January 9, 2023, we announced that we entered into a term sheet (the “Term Sheet”) with Klinge Biopharma GmbH (“Klinge
Biopharma”) for the exclusive commercializa on rights to FYB203, a biosimilar candidate to Eylea® (aflibercept), in the United States. We
no fied Klinge Biopharma that we do not intend to pursue the transac on contemplated by the Term Sheet.
Intellectual Property
Our commercial success depends in part on our ability to avoid infringing the proprietary rights of third par es. Addi onally, our
commercial success may depend on our ability to obtain and maintain proprietary protec on for our technologies where applicable and to
prevent others from infringing our proprietary rights. We seek to protect our proprietary technologies by, among other methods, filing United
States and interna onal patent applica ons on these technologies, inven ons and improvements that are important to our
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business. We also rely on trade secrets, know-how and con nuing technological innova on to develop and maintain our proprietary posi on.
The term of individual patents depends upon the legal term of the patents in countries in which they are obtained. In most countries,
including the United States, the patent term is generally 20 years from the earliest date of filing a non-provisional patent applica on in the
applicable country. In the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a
patentee for administra ve delays by the United States Patent and Trademark Office (“USPTO”) in examining and gran ng a patent or may be
shortened if a patent is terminally disclaimed over a commonly owned patent or a patent naming a common inventor and having an earlier
expira on date.
In the normal course of business, we pursue patent protec on for inven ons related to our product candidates. Each patent family
includes United States patent applica ons and/or issued patents, and some include foreign counterparts to certain of the United States patents
and patent applica ons. Our patent por olio includes issued or pending claims directed to formula ons, methods of manufacturing biological
proteins, and drug products and devices, including their methods of use and methods of manufacture.
For a discussion of risks related to our proprietary technology and processes, please see “Risk Factors — Risks Related to Intellectual
Property.”
Government Regula on
Our opera ons and ac vi es are subject to extensive regula on by numerous government authori es in the United States, the
European Union (the “E.U.”) and other countries, including laws and regula ons governing the tes ng, manufacture, safety, efficacy, labeling,
storage, record keeping, approval, adver sing and promo on of our products. As a result of these regula ons, product development and
product approval processes are very expensive and me consuming. The regulatory requirements applicable to drug development and approval
are subject to change. Any legal and regulatory changes may impact our opera ons in the future. A country’s regulatory agency, such as the
FDA in the United States, must approve a drug before it can be sold in the respec ve country or countries. The general process for biosimilar
approval in the United States is summarized below. Many other countries, including countries in the E.U., have similar regulatory structures.
FDA Approval Process for Drugs and Biologics
Our products and product candidates are subject to regula on in the United States by the FDA as biological products or as drug
product candidates. The FDA subjects drugs and biologics to extensive pre- and post-market regula on pursuant to the Federal Food, Drug and
Cosme c Act (“FFDCA”) and its implemen ng regula ons, and in the case of biologics, the FFDCA and the Public Health Service Act (“PHSA”)
and their implemen ng regula ons. In addi on, we are subject to other federal and state statutes and regula ons. These laws and regula ons
govern, among other things, the research, development, tes ng, manufacture, storage, recordkeeping, approval, labeling, promo on and
marke ng, distribu on, post-approval monitoring and repor ng, sampling and import and export of drugs and biologics. Failure to comply with
applicable United States requirements may subject a company to a variety of administra ve or judicial sanc ons, such as FDA refusal to approve
a pending biologics license applica on (“BLA”) or new drug applica on (“NDA”), withdrawal of approvals, clinical holds, warning le ers, product
recalls, product seizures, total or par al suspension of produc on or distribu on, injunc ons, fines, civil penal es or criminal penal es.
The process required by the FDA before a new biologic or drug may be marketed in the United States is long, expensive and inherently
uncertain. Biologic and drug development in the United States typically involves the comple on of certain preclinical laboratory and animal
tests in accordance with good laboratory prac ces (“GLP”), the submission to the FDA of an IND, which must become effec ve before clinical
tes ng may commence, the performance of adequate and well-controlled clinical trials to establish the safety and effec veness of the biologic
or drug for each indica on for which FDA approval is sought in compliance with good clinical prac ce (“GCP”) requirements, the submission to
the FDA of an original BLA under Sec on 351(a) of the PHSA (“original BLA”) or an NDA, as appropriate, sa sfactory comple on of an FDA
inspec on of the manufacturing facility or facili es at which the drug or biologic is produced, and FDA approval and review of the original BLA
or NDA. Developing the data to sa sfy FDA pre-market approval requirements typically takes many years and the actual me required may vary
substan ally based upon the type, complexity and novelty of the product or disease.
Preclinical tests include laboratory evalua on of product chemistry, formula on and toxicity, as well as, when applicable, animal
studies to assess the characteris cs and poten al safety and efficacy of the product. The conduct of the preclinical tests must comply with
federal regula ons and requirements, including GLP. An IND is a request for allowance from the FDA to administer an inves ga onal drug or
biologic to humans. The central focus of an IND submission is on the general inves ga onal plan and the protocol(s) for human studies,
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although the IND must also include the results of preclinical tes ng and animal tes ng assessing the toxicology, pharmacokine c, pharmacology
and pharmacodynamic characteris cs of the product along with other informa on, including informa on about product chemistry,
manufacturing and controls and a proposed clinical trial protocol. Long-term preclinical tests, such as animal tests of reproduc ve toxicity and
carcinogenicity, may con nue a er the IND is submi ed.
An IND must become effec ve before United States clinical trials may begin. A 30-day wai ng period a er the submission of each IND
is required prior to the commencement of clinical tes ng in humans. If during the 30-day wai ng period the FDA raises concerns or ques ons
related to the proposed clinical studies, the sponsor and the FDA must resolve any outstanding concerns or ques ons before clinical studies can
begin. If the FDA has neither commented on nor ques oned the IND within this 30-day period, the clinical trial proposed in the IND may begin.
Clinical trials involve the administra on of the inves ga onal new drug or biologic to healthy volunteers or pa ents with the condi on
under inves ga on, all under the supervision of a qualified inves gator. Clinical trials must be conducted: (i) in compliance with federal
regula ons; (ii) in compliance with GCP requirements, which are designed to protect the rights and health of pa ents and to define the roles of
clinical trial sponsors, administrators and monitors; as well as (iii) under protocols detailing the objec ves of the trial, the parameters to be
used in monitoring safety and the effec veness criteria to be evaluated. Each protocol involving tes ng on United States pa ents and
subsequent protocol amendments must be submi ed to the FDA as part of the IND. While the IND is ac ve, progress reports summarizing the
results of the clinical trials and nonclinical studies performed since the last progress report, among other informa on, must be submi ed at
least annually to the FDA, and wri en IND safety reports must be submi ed to the FDA and inves gators for serious and unexpected suspected
adverse events, findings from other studies sugges ng a significant risk to humans exposed to the same or similar drugs, findings from animal
or in vitro tes ng sugges ng a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse
reac on compared to that listed in the protocol or inves gator brochure.
Human clinical trials for novel drugs and biologics are typically conducted in three sequen al phases that may overlap or be combined.
● Phase 1—The product candidate is ini ally introduced into healthy human subjects and tested for safety, dosage tolerance,
absorp on, metabolism, distribu on and elimina on. In the case of some therapeu c candidates for severe or life-threatening
diseases, such as cancer, especially when the product candidate may be inherently too toxic to ethically administer to healthy
volunteers, the ini al human tes ng is o en conducted in pa ents.
● Phase 2—Clinical trials are performed on a limited pa ent popula on intended to iden fy possible adverse effects and safety
risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and
op mal dosage.
● Phase 3—Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded pa ent popula on
at geographically dispersed clinical study sites. These studies are intended to establish the overall risk-benefit ra o of the product
and provide an adequate basis for product labeling.
Post-approval trials, some mes referred to as “Phase 4” clinical trials, may be conducted a er ini al marke ng approval. These trials
are used to gain addi onal experience from the treatment of pa ents in the intended therapeu c indica on. In certain instances, the FDA may
mandate the performance of such “Phase 4” clinical trials.
The FDA may order the temporary or permanent discon nua on of a clinical trial at any me or impose other sanc ons if it believes
that the clinical trial either is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial
pa ents. The study protocol and informed consent informa on for pa ents in clinical trials must also be submi ed to an ins tu onal review
board (“IRB”), for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to
comply with the IRB’s requirements or may impose other condi ons. The study sponsor may also suspend a clinical trial at any me on various
grounds, including a determina on that the subjects or pa ents are being exposed to an unacceptable health risk.
Concurrent with clinical trials, sponsors usually complete addi onal animal safety studies, develop addi onal informa on about the
chemistry and physical characteris cs of the product candidate and finalize a process for manufacturing commercial quan es of the product
candidate in accordance with current Good Manufacturing Prac ces (“cGMP”) requirements. The manufacturing process must be capable of
consistently producing quality batches of the product candidate and the manufacturer must develop methods for tes ng the quality, purity and
potency of the product candidate. To help reduce the risk of the introduc on of adven ous agents with use of
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biological products, the PHSA emphasizes the importance of manufacturing control for products whose a ributes cannot be precisely defined.
The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other criteria, the
sponsor must develop methods for tes ng the iden ty, strength, quality, potency and purity of the final biological product. Addi onally,
appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the biological product
candidate does not undergo unacceptable deteriora on over its shelf life. Addi onally, for both NDA and BLA products, appropriate packaging
must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo
unacceptable deteriora on over its proposed shelf-life.
Assuming successful comple on of all required tes ng in accordance with all applicable regulatory requirements, detailed informa on
regarding the inves ga onal product is submi ed to the FDA in the form of a BLA or NDA reques ng approval to market the product for one or
more indica ons. The BLA or NDA must include all relevant data available from per nent preclinical and clinical trials, including nega ve or
ambiguous results as well as posi ve findings, together with detailed informa on rela ng to the product’s chemistry, manufacturing, controls,
and proposed labeling, among other things. Data can come from company-sponsored clinical studies intended to test the safety and
effec veness of a use of the product, or from a number of alterna ve sources, including studies ini ated by inves gators. Under the PDUFA as
amended, each original BLA or NDA must be accompanied by a significant user fee. Fee waivers or reduc ons are available in certain
circumstances, such as where a waiver is necessary to protect the public health, where the fee would present a significant barrier to innova on,
where the product candidate has received orphan drug designa ons for the sought indica on or where the applicant is a small business
submi ng its first human therapeu c applica on for review.
Within 60 days following submission of the applica on, the FDA reviews an original BLA or NDA submi ed to determine if it is
substan ally complete before the agency accepts it for filing. The FDA may refuse to file any original BLA or NDA that it deems incomplete or
not properly reviewable at the me of submission, and may request addi onal informa on. In this event, the original BLA or NDA must be
resubmi ed with the addi onal informa on. The resubmi ed applica on also is subject to review before the FDA accepts it for filing. Once the
submission is accepted for filing, the FDA begins an in-depth substan ve review of the original BLA or NDA. The FDA reviews the original BLA to
determine, among other things, whether the proposed product is safe, pure and potent for its intended use, and has an acceptable purity
profile, and in the case of an NDA, whether the product is safe and effec ve for its intended use, and in each case, whether the product is being
manufactured in accordance with cGMP. The FDA may refer applica ons for novel products or products that present difficult ques ons of safety
or efficacy to an advisory commi ee, typically a panel that includes clinicians and other experts, for review, evalua on and a recommenda on
as to whether the applica on should be approved and under what condi ons. The FDA is not bound by the recommenda ons of an advisory
commi ee, but it considers such recommenda ons carefully when making decisions. The FDA’s goal is to review standard applica ons within
ten months a er the filing date, or, if the applica on qualifies for Priority Review, six months a er the FDA accepts the applica on for filing. A
BLA or NDA is eligible for Priority Review if the product or the product candidate has the poten al to provide a significant improvement in the
treatment, diagnosis or preven on of a serious disease or condi on compared to marketed products. In both standard and Priority Reviews, the
review process may also be extended for a three-month period by the FDA to review addi onal informa on deemed a major amendment to the
applica on.
During the product approval process, the FDA also will determine whether a risk evalua on and mi ga on strategy (“REMS”) is
necessary to assure the safe use of the product. If the FDA concludes a REMS plan is needed, the sponsor of the original BLA or NDA must
submit a proposed REMS plan. The FDA will not approve an original BLA or NDA without a REMS plan, if required. In determining whether a
REMS plan is necessary, the FDA must consider the size of the popula on likely to use the drug or biologic, the seriousness of the disease or
condi on to be treated, the expected benefit of the drug or biologic, the dura on of treatment, the seriousness of known or poten al adverse
events, and whether the drug or biologic is a new molecular en ty. A REMS plan may be required to include various elements, such as a
medica on guide or pa ent package insert, a communica on plan to educate health care providers of the risks, limita ons on who may
prescribe or dispense the drug or biologic, or other measures that the FDA deems necessary to assure the safe use of the drug or biologic. In
addi on, the REMS plan must include a metable to assess the strategy at 18 months, three years, and seven years a er the strategy’s
approval, or at another frequency specified in the REMS.
The FDA will not approve the applica on unless it determines that the manufacturing processes and facili es are in compliance with
cGMP requirements and adequate to assure consistent produc on of the product within required specifica ons. Addi onally, before approving
an original BLA or NDA, the FDA will typically inspect one or more clinical sites to ensure compliance with cGCP. A er the FDA evaluates an
original BLA or NDA and conducts any inspec ons in the U.S. or interna onally that it deems necessary, the FDA may issue an approval le er or
a CRL. An approval le er authorizes commercial marke ng of the product with specific prescribing informa on for specific indica ons. A CRL
indicates that the review cycle of the applica on is complete, and the applica on is not ready for approval. A CRL may require addi onal clinical
data and/or an addi onal clinical trial or trials, and/or other significant, expensive and me-consuming requirements related to clinical trials,
preclinical trials or manufacturing. Even if such addi onal informa on is submi ed, the FDA may ul mately decide that the original BLA or NDA
does not sa sfy the criteria for approval.
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Even if a product receives regulatory approval, the approval may be significantly limited to specific indica ons and dosages or the
indica ons for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that
certain contraindica ons, warnings or precau ons be included in the product labeling. The FDA may impose restric ons and condi ons on
product distribu on, prescribing, or dispensing in the form of a risk management plan, or otherwise limit the scope of any approval. In addi on,
the FDA may require post marke ng clinical trials, some mes referred to as “Phase 4” clinical trials, designed to further assess a biological
product’s safety and effec veness, and tes ng and surveillance programs to monitor the safety of approved products that have been
commercialized.
Abbreviated Licensure Pathway of Biological Products as Biosimilar under Sec on 351(k)
The Biologics Price Compe on and Innova on Act of 2009 (“BPCIA”) amended the PHSA and created an abbreviated approval
pathway for biological products shown to be highly similar to an FDA-licensed reference biological product. The BPCIA a empts to minimize
duplica ve tes ng and thereby lower development costs and increase pa ent access to affordable treatments. Thus, an applica on for
licensure of a biosimilar product pursuant to a Sec on 351(k) BLA must include informa on demonstra ng biosimilarity based upon the
following, unless the FDA determines otherwise:
● analy cal studies demonstra ng that the proposed biosimilar product is highly similar to the approved product notwithstanding
minor differences in clinically inac ve components;
● animal studies (including the assessment of toxicity); and
● two clinical study phases: first, a clinical study or studies (generally termed “Phase 1”) that demonstrate the PK and PD similarity
(e.g., bioequivalence study) of the proposed biosimilar to the originator molecule, and second, a clinical study or studies
(generally termed “Phase 3”) that demonstrate the safety (including immunogenicity), purity and that potency is sta s cally not
inferior to that of the originator in one or more condi ons for which the reference product is licensed and intended to be used.
In addi on, an applica on submi ed under the Sec on 351(k) pathway must include informa on demonstra ng that:
● the proposed biosimilar product and reference product u lize the same mechanism of ac on for the condi on(s) of use
prescribed, recommended or suggested in the proposed labeling, but only to the extent the mechanism(s) of ac on are known
for the reference product;
● the condi on or condi ons of use prescribed, recommended or suggested in the labeling for the proposed biosimilar product
have been previously approved for the reference product;
● the route of administra on, the dosage form and the strength of the proposed biosimilar product are the same as those for the
reference product; and
● the facility in which the biological product is manufactured, processed, packed or held meets standards designed to assure that
the biological product con nues to be safe, pure and potent.
Biosimilarity is defined to mean that the proposed biological product is highly similar to the reference product notwithstanding minor
differences in clinically inac ve components and that there are no clinically meaningful differences between the biological product and the
reference product in terms of the safety, purity and potency of the product. In addi on, a biosimilar may also be determined to be
“interchangeable” with the reference products, whereby the biosimilar may be subs tuted for the reference product without the interven on
of the health care provider who prescribed the reference product. The higher standard of interchangeability must be demonstrated by
informa on sufficient to show that:
● the proposed product is biosimilar to the reference product;
● the proposed product is expected to produce the same clinical result as the reference product in any given pa ent; and
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● for a product that is administered more than once to an individual, the risk to the pa ent in terms of safety or diminished efficacy
of alterna ng or switching between the biosimilar and the reference product is no greater than the risk of using the reference
product without such alterna on or switch.
FDA approval is required before a biosimilar may be marketed in the United States. The FDA has discre on over the kind and amount
of scien fic evidence — laboratory, preclinical and/or clinical — required to demonstrate biosimilarity to a licensed biological product. The FDA
intends to consider the totality of the evidence provided by a sponsor to support a demonstra on of biosimilarity, and recommends that
sponsors use a stepwise approach in the development of their biosimilar products. Biosimilar product applica ons thus may not be required to
duplicate the en rety of preclinical and clinical tes ng used to establish the underlying safety and effec veness of the reference product.
However, the FDA may refuse to approve a biosimilar applica on if there is insufficient informa on to show that the ac ve ingredients are the
same or to demonstrate that any impuri es or differences in ac ve ingredients do not affect the safety, purity or potency of the biosimilar
product. In addi on, as with original BLAs, biosimilar product applica ons will not be approved unless the product is manufactured in facili es
designed to assure and preserve the biological product’s safety, purity and potency.
The submission of an applica on via the Sec on 351(k) pathway does not guarantee that the FDA will accept the applica on for filing
and review, as the FDA may refuse to accept applica ons that it finds are incomplete. The FDA will treat a biosimilar applica on or supplement
as incomplete if, among other reasons, any applicable user fees have not been paid. In addi on, the FDA may accept an applica on for filing but
deny approval on the basis that the sponsor has not demonstrated biosimilarity, in which case the sponsor may choose to conduct further
analy cal, preclinical or clinical studies to demonstrate such biosimilarity under Sec on 351(k) or submit an original BLA for licensure as a new
biological product under Sec on 351(a) of the PHSA.
The ming of final FDA approval of a biosimilar for commercial distribu on depends on a variety of factors, including whether the
manufacturer of the branded product is en tled to one or more statutory exclusivity periods, during which me the FDA is prohibited from
approving any products that are biosimilar to the branded product. The FDA cannot approve a biosimilar applica on for 12 years from the date
of first licensure of the reference product. Addi onally, a biosimilar product sponsor may not submit an applica on under the Sec on
351(k) pathway for four years from the date of first licensure of the reference product. In certain circumstances, a regulatory exclusivity period
can extend beyond the life of a patent and thus block the Sec on 351(k) BLA from being approved on or a er the patent expira on date. In
addi on, the FDA may under certain circumstances extend the exclusivity period for the reference product by an addi onal six months if the
FDA requests, and the manufacturer undertakes, studies on the effect of its product in children, a so-called pediatric extension.
The first biological product determined to be interchangeable with a branded product for any condi on of use is also en tled to a
period of exclusivity, during which me the FDA may not determine that another product is interchangeable with the reference product for any
condi on of use. This exclusivity period extends un l the earlier of: (1) one year a er the first commercial marke ng of the first interchangeable
product; (2) 18 months a er resolu on of a patent infringement suit ins tuted under 42 U.S.C. § 262(l)(6) against the applicant that submi ed
the applica on for the first interchangeable product, based on a final court decision regarding all of the patents in the li ga on or dismissal of
the li ga on with or without prejudice; (3) 42 months a er approval of the first interchangeable product, if a patent infringement suit
ins tuted under 42 U.S.C. § 262(l)(6) against the applicant that submi ed the applica on for the first interchangeable product is s ll ongoing; or
(4) 18 months a er approval of the first interchangeable product if the applicant that submi ed the applica on for the first interchangeable
product has not been sued under 42 U.S.C. § 262(l)(6).
FDA Regula on of Combina on Products
Certain products or product candidates, such as the OBI presenta on of UDENYCA we developed, may be composed of components,
such as drug components and device components that would normally be regulated under different types of regulatory authori es, and
frequently by different centers at the FDA. These products are known as combina on products. Specifically, under regula ons issued by the
FDA, a combina on product may be:
● a product composed of two or more regulated components that are physically, chemically, or otherwise combined or mixed and
produced as a single en ty;
● two or more separate products packaged together in a single package or as a unit and composed of drug and device products,
device and biological products, or biological and drug products;
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● a drug, or device, or biological product packaged separately that according to its inves ga onal plan or proposed labeling is
intended for use only with an approved individually specified drug, or device, or biological product where both are required to
achieve the intended use, indica on, or effect and where upon approval of the proposed product the labeling of the approved
product would need to be changed, e.g., to reflect a change in intended use, dosage form, strength, route of administra on, or
significant change in dose; or
● any inves ga onal drug, or device, or biological product packaged separately that according to its proposed labeling is for use
only with another individually specified inves ga onal drug, device, or biological product where both are required to achieve the
intended use, indica on, or effect.
Under the FFDCA and its implemen ng regula ons, the FDA is charged with assigning a center with primary jurisdic on, or a lead
center, for review of a combina on product. The designa on of a lead center generally eliminates the need to receive approvals from more
than one FDA component for combina on products, although it does not preclude consulta ons by the lead center with other components of
the FDA. The determina on of which center will be the lead center is based on the “primary mode of ac on” of the combina on product. Thus,
if the primary mode of ac on of a drug-device combina on product is a ributable to the drug product, the FDA center responsible for
premarket review of the drug product would have primary jurisdic on for the combina on product. The FDA has also established an Office of
Combina on Products to address issues surrounding combina on products and provide more certainty to the regulatory review process. That
office serves as a focal point for combina on product issues for agency reviewers and industry. It is also responsible for developing guidance
and regula ons to clarify the regula on of combina on products, and for assignment of the FDA center that has primary jurisdic on for review
of combina on products where the jurisdic on is unclear or in dispute.
A combina on product with a biologic primary mode of ac on generally would be reviewed and approved pursuant to the biologic
licensure processes under the PHSA. In reviewing the BLA or Sec on 351(k) BLA for such a product, however, FDA reviewers in the drug center
could consult with their counterparts in the device center to ensure that the device component of the combina on product met applicable
requirements regarding safety, purity, potency, durability and performance. In addi on, under FDA regula ons, combina on products are
subject to cGMP requirements applicable to both drugs and devices, including the Quality System regula ons applicable to medical devices.
Adver sing and Promo on
Once an NDA, original BLA, or Sec on 351(k) BLA is approved, a product will be subject to con nuing post-approval regulatory
requirements, including, among other things, requirements rela ng to recordkeeping, periodic repor ng, product sampling and distribu on,
adver sing and promo on and repor ng of adverse experiences with the product. For instance, the FDA closely regulates the post-approval
marke ng and promo on of biologics, including standards and regula ons for direct-to-consumer adver sing, off-label promo on, industry-
sponsored scien fic and educa onal ac vi es and promo onal ac vi es involving the internet. Failure to comply with these regula ons can
result in significant penal es, including the issuance of warning le ers direc ng a company to correct devia ons from FDA standards, a
requirement that future adver sing and promo onal materials be pre-cleared by the FDA and federal and state civil and criminal inves ga ons
and prosecu ons.
Biologics and drugs may be marketed only for the approved indica ons and in accordance with the provisions of the approved
labeling. A er approval, most changes to the approved product, including changes in indica ons, labeling or manufacturing processes or
facili es, require submission and FDA approval of a new marke ng applica on or supplement to the approved marke ng applica on before the
change can be implemented. A supplement for a new indica on typically requires clinical data similar to that in the original applica on, and the
FDA uses the same procedures and ac ons in reviewing supplements as it does in reviewing original applica on. There are also con nuing
annual program user fee requirements for marketed products.
Adverse Event Repor ng and GMP Compliance
Adverse event repor ng and submission of periodic reports are required following FDA approval of a marke ng applica on. The FDA
also may require post-market tes ng, including Phase 4 tes ng, implementa on of a REMS, and/or surveillance to monitor the effects of an
approved product, or the FDA may place condi ons on an approval that could restrict the distribu on or use of the product. In addi on,
manufacturing, packaging, labeling, storage and distribu on procedures must con nue to conform to cGMPs a er approval. Manufacturers and
certain of their subcontractors are required to register their establishments with the FDA and certain state agencies. Registra on with the FDA
subjects en es to periodic unannounced inspec ons by the FDA, during which the agency inspects manufacturing facili es to assess
compliance with cGMPs. Accordingly, manufacturers must con nue to expend me, money and effort in the areas of produc on and quality
control to maintain compliance with cGMPs. Regulatory authori es may withdraw product approvals,
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request product recalls or impose marke ng restric ons through labeling changes or product removals if a company fails to comply with
regulatory standards, if it encounters problems following ini al marke ng or if previously unrecognized problems are subsequently discovered.
The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur
a er the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of
unan cipated 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 informa on; imposi on of post-market studies or clinical studies to assess new safety risks; or
imposi on of distribu on restric ons or other restric ons under a REMS program. Other poten al consequences include, among other things:
● restric ons on the marke ng or manufacturing of the product, complete withdrawal of the product from the market or product
recalls;
● fines, warning le ers or holds on post-approval clinical trials;
● refusal of the FDA to approve pending applica ons or supplements to approved applica ons or suspension or revoca on of
product license approvals;
● product seizure or deten on or refusal to permit the import or export of products; or
● injunc ons or the imposi on of civil or criminal penal es.
Other Healthcare Laws and Compliance Requirements
We are subject to healthcare regula on and enforcement by the federal government and the states and foreign governments in which
we conduct our business. These laws include, without limita on, state and federal an -kickback, fraud and abuse, false claims, privacy and
security and transparency laws and regula ons.
The federal An -Kickback Statute prohibits, among other things, any person from knowingly and willfully offering, solici ng, receiving
or providing remunera on, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or
ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid
programs. The An -Kickback Statute is subject to evolving interpreta ons. In the past, the government has enforced the An -Kickback Statute
to reach large se lements with healthcare companies based on sham consul ng and other financial arrangements with physicians. Further, a
person or en ty does not need to have actual knowledge of the statutes or specific intent to violate it in order to have commi ed a viola on.
The majority of states also have an -kickback laws, which establish similar prohibi ons and in some cases, may apply to items or services
reimbursed by any third-party payer, including commercial insurers.
Addi onally, federal civil and criminal false claims laws, including the civil False Claims Act, prohibit knowingly presen ng or causing
the presenta on of a false, fic ous or fraudulent claim for payment to the United States government. Ac ons under the False Claims Act may
be brought by the A orney General or as a qui tam ac on by a private individual in the name of the government. In addi on, the government
may assert that a claim including items or services resul ng from a viola on of the federal An -Kickback Statute cons tutes a false or
fraudulent claim for purposes of the federal False Claims Act. Viola ons of the False Claims Act can result in very significant monetary penal es
and treble damages. The federal government is using the False Claims Act, and the accompanying threat of significant liability, in its
inves ga on and prosecu on of pharmaceu cal and biotechnology companies throughout the country, for example, in connec on with the
promo on of products for unapproved uses and other sales and marke ng prac ces. The government has obtained mul -million and mul -
billion dollar se lements under the False Claims Act in addi on to individual criminal convic ons under applicable criminal statutes. Given the
significant size of actual and poten al se lements, it is expected that the government will con nue to devote substan al resources to
inves ga ng healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws.
The federal Civil Monetary Penal es Law prohibits, among other things, the offering or transferring of remunera on to a Medicare or
Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selec on of a par cular supplier of Medicare
or Medicaid payable items or services. Noncompliance with such beneficiary inducement provision of the federal Civil Monetary
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Penal es Law can result in civil money penal es for each wrongful act, assessment of three mes the amount claimed for each item or service
and exclusion from the federal healthcare programs.
Federal and state government price repor ng laws require manufacturers to calculate and report complex pricing metrics to
government programs. Such reported prices may be used in the calcula on of reimbursement and/or discounts on marketed products.
Par cipa on in these programs and compliance with the applicable requirements subject manufacturers to poten ally significant discounts on
products, increased infrastructure costs, and poten ally limit the ability to offer certain marketplace discounts.
In addi on, there has been a recent trend of increased federal and state regula on of payments made to physicians and other
healthcare providers. The Pa ent Protec on and Affordable Care Act, as amended by the Health Care and Educa on Reconcilia on Act
(collec vely, the “ACA”), among other things, imposed new repor ng requirements on drug manufacturers for payments made by them to
physicians (defined to include doctors, den sts, optometrists, podiatrists, chiropractors, certain non-physician prac oners (physician
assistants, nurse prac oners, clinical nurse specialists, cer fied registered nurse anesthe sts, anesthesiologist assistants, and cer fied nurse
midwives) and teaching hospitals, as well as ownership and investment interests held by such physicians and their immediate family members.
Failure to submit required informa on may result in significant civil monetary penal es for any payments, transfers of value or ownership or
investment interests that are not mely, accurately and completely reported in an annual submission, and addi onal penal es for “knowing
failures.” Certain states also mandate implementa on of commercial compliance programs, impose restric ons on pharmaceu cal
manufacturer marke ng prac ces and/or require the tracking and repor ng of gi s, compensa on and other remunera on to physicians.
The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) created new federal criminal statutes that prohibit
among other ac ons, knowingly and willfully execu ng, or a emp ng to execute, a scheme to defraud any healthcare benefit program,
including private third‑party payers, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstruc ng a
criminal inves ga on of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any
materially false, fic ous or fraudulent statement in connec on with the delivery of or payment for healthcare benefits, items or services.
Similar to the federal An ‑Kickback Statute, a person or en ty does not need to have actual knowledge of the statute or specific intent to
violate it in order to have commi ed a viola on.
Some states also require pharmaceu cal companies to comply with the pharmaceu cal industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the federal government and require manufacturers to report informa on related to
payments and other transfers of value to healthcare providers and ins tu ons as well as marke ng expenditures and pricing informa on.
The shi ing commercial compliance environment and the need to build and maintain robust systems to comply with different
compliance and/or repor ng requirements in mul ple jurisdic ons increase the possibility that a healthcare company may violate one or more
of the requirements. A viola on of any of such laws or any other applicable governmental regula ons may result in penal es, including, without
limita on, civil and criminal penal es, damages, fines, the curtailment or restructuring of our opera ons, exclusion from par cipa on in federal
and state healthcare programs, addi onal repor ng obliga ons and oversight if the government requires a corporate integrity agreement or
other agreement to resolve allega ons of non-compliance with these laws, and/or imprisonment.
Data Privacy and Security
Numerous state, federal and foreign laws, regula ons and standards govern the collec on, use, access to, confiden ality and security
of health-related and other personal informa on, and could apply now or in the future to our opera ons or the opera ons of our partners. In
the United States, numerous federal and state laws and regula ons, including data breach no fica on laws, health informa on privacy and
security laws and consumer protec on laws and regula ons govern the collec on, use, disclosure and protec on of health-related and other
personal informa on. In addi on, certain foreign laws govern the privacy and security of personal data, including health-related data. Privacy
and security laws, regula ons and other obliga ons are constantly evolving, may conflict with each other to complicate compliance efforts and
can result in inves ga ons, proceedings or ac ons that lead to significant civil or criminal penal es or both and restric ons on data processing.
Pharmaceu cal Coverage, Pricing and Reimbursement
In the United States and other countries, sales of UDENYCA, YUSIMRY, LOQTORZI and any other products for which we receive
regulatory approval for commercial sale will depend in part on the availability of coverage and reimbursement from third-party payers,
including government health administra ve authori es, managed care providers, private health insurers and other organiza ons. Third-
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party payers are increasingly examining the medical necessity and cost effec veness of medical products and services in addi on to safety and
efficacy and, accordingly, significant uncertainty exists as to the reimbursement status of newly approved therapeu cs. In addi on, the United
States government, state legislatures and foreign governments have con nued implemen ng cost-containment programs, including price
controls, restric ons on coverage and reimbursement and requirements for subs tu on of generic products. Adop on of price controls and
cost-containment measures and adop on of more restric ve policies in jurisdic ons with exis ng controls and measures could further limit our
net revenue and results. A significant por on of our sales are subject to substan al discounts to list price, including rebates we may be required
to pay to Medicaid agencies or discounts we may be required to pay to 340B covered en es. Decreases in third-party reimbursement for
UDENYCA, YUSIMRY, LOQTORZI or other products for which we receive regulatory approval or a decision by a third-party payer to not cover our
products could reduce physician u liza on of our products and have a material adverse effect on our sales, results of opera ons and financial
condi on.
Government Price Repor ng
Medicaid is a joint federal and state program for low-income and disabled beneficiaries. Medicare is a federal program that is
administered by the federal government covering individuals age 65 and over as well as those with certain disabili es. Under the Medicaid Drug
Rebate Program (“MDRP”), as a condi on of having federal funds available for our covered outpa ent drugs under Medicaid and under
Medicare Part B, we must enter into, and have entered into, an agreement with the Secretary of Health and Human Services to pay a rebate to
state Medicaid programs for each unit of our covered outpa ent drugs dispensed to a Medicaid beneficiary and paid for by the state Medicaid
program. Medicaid rebates are based on pricing data that we are required to report on a monthly and quarterly basis to the U.S. Centers for
Medicare & Medicaid Services (“CMS”), the federal agency that administers the MDRP and Medicare programs. For the MDRP, these data
include the average manufacturer price (“AMP”) for each drug and, in the case of innovator products, the Best Price, which represents the
lowest price available from us to any wholesaler, retailer, provider, health maintenance organiza on, nonprofit en ty, or governmental en ty in
the United States in any pricing structure, calculated to include all applicable sales and associated rebates, discounts and other price
concessions. In connec on with Medicare Part B, we must provide CMS with Average Sales Price (“ASP”) informa on on a quarterly basis. CMS
uses this informa on to compute Medicare Part B payment rates, which consist of ASP plus a specified percentage. If we become aware that
our MDRP submissions for a prior period were incorrect or have changed as a result of recalcula on of the pricing data, we must resubmit the
corrected data for up to three years a er those data originally were due. If we fail to provide informa on mely or are found to have knowingly
submi ed false informa on to CMS, we may be subject to civil monetary penal es and other sanc ons, including termina on from the MDRP.
Federal law requires that a manufacturer that par cipates in the MDRP also par cipate in the Public Health Service’s 340B drug pricing
program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B program is
administered by the Health Resources and Services Administra on (“HRSA”) and requires us to agree to charge statutorily defined covered
en es no more than the 340B “ceiling price” for our covered outpa ent drugs when used in an outpa ent se ng. 340B covered en es
include a variety of community health clinics and other en es that receive health services grants from the Public Health Service, as well as
hospitals that serve a dispropor onate share of low-income pa ents. The 340B ceiling price is calculated using a statutory formula, which is
based on the AMP and rebate amount for the covered outpa ent drug as calculated under the MDRP. In general, products subject to Medicaid
price repor ng and rebate liability are also subject to the 340B ceiling price requirement. We must report 340B ceiling prices to HRSA on a
quarterly basis, and HRSA publishes them to 340B covered en es. HRSA has finalized regula ons regarding the calcula on of the 340B ceiling
price and the imposi on of civil monetary penal es on manufacturers that knowingly and inten onally overcharge covered en es for 340B
eligible drugs. HRSA has also finalized an administra ve dispute resolu on process through which 340B covered en es may pursue claims
against par cipa ng manufacturers for overcharges.
In order to be eligible to have drug products paid for with federal funds under Medicaid and Medicare Part B and purchased by certain
federal agencies and grantees, a manufacturer must also par cipate in the U.S. Department of Veterans Affairs (“VA”) Federal Supply Schedule
(“FSS”) pricing program. Under the VA FSS program, we must report the Non-Federal Average Manufacturer Price (“Non-FAMP”) for our
covered drugs to the VA and charge certain federal agencies no more than the Federal Ceiling Price, which is calculated based on Non-FAMP
using a statutory formula. These four agencies are the VA, the U.S. Department of Defense, the U.S. Coast Guard, and the U.S. Public Health
Service (including the Indian Health Service). We must also pay rebates on products purchased by military personnel and dependents through
the TRICARE retail pharmacy program. If a manufacturer par cipa ng in the FSS program fails to provide mely informa on or is found to have
knowingly submi ed false informa on, the manufacturer may be subject to civil monetary penal es.
Individual states con nue to consider and have enacted legisla on to limit the growth of healthcare costs, including the cost of
prescrip on drugs and combina on products. A number of states have either implemented or are considering implementa on of drug price
transparency legisla on. Requirements under such laws include advance no ce of planned price increases, repor ng price increase amounts
and factors considered in taking such increases, wholesale acquisi on cost informa on disclosure to prescribers, purchasers, and
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state agencies, and new product no ce and repor ng. Such legisla on could limit the price or payment for certain drugs, and a number of
states are authorized to impose civil monetary penal es or pursue other enforcement mechanisms against manufacturers for the un mely,
inaccurate, or incomplete repor ng of drug pricing informa on or for otherwise failing to comply with drug price transparency requirements.
Healthcare Reform, including the IRA
The United States federal and state governments con nue to propose and pass legisla on designed to regulate the healthcare
industry, including legisla on that seeks to indirectly or directly regulate pharmaceu cal drug pricing. Most significantly, on August 16, 2022,
the IRA was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price nego a ons with Medicare
(beginning in 2026), with prices that can be nego ated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to
penalize price increases that outpace infla on (first due in 2023); and replaces the Part D coverage gap discount program with a new
discoun ng program (beginning in 2025). The IRA permits the Secretary of the Department of Health and Human Services (“HHS”) to
implement many of these provisions through guidance, as opposed to regula on, for the ini al years. On August 29, 2023, HHS announced the
list of the first ten drugs that will be subject to price nego a ons. HHS has issued and will con nue to issue guidance implemen ng the IRA,
although the Medicare drug price nego a on program is currently subject to legal challenges. While the impact of the IRA on our business and
the pharmaceu cal industry cannot yet be fully determined, it is likely to be significant. In par cular, if a product becomes subject to the IRA
nego a on provision and related price cap, that may significantly alter the economic ra onale for developing and commercializing a biosimilar.
Environment
We are subject to a number of laws and regula ons that require compliance with federal, state, and local regula ons for the
protec on of the environment. The regulatory landscape con nues to evolve, and we an cipate addi onal regula ons in the near future. Laws
and regula ons are implemented and under considera on to mi gate the effects of climate change mainly caused by greenhouse gas
emissions. Our business is not energy intensive. Therefore, we do not an cipate being subject to a cap and trade system, carbon emissions tax
or other mi ga on measure that would materially impact our capital expenditures, opera ons or compe ve posi on. The building where our
headquarters is located in Redwood City, California, has been awarded LEED Gold Cer fica on from the United States Green Building Council.
Human Capital Management
On March 3, 2023, we commi ed to a plan to reduce our workforce to focus resources on strategic priori es including the
commercializa on of our diversified product por olio and development of innova ve immuno-oncology product candidates. We ini ated a
reduc on in force impac ng approximately 50 full- me and part- me employees effec ve March 10, 2023 for most of these employees.
As of December 31, 2023, we had 306 full- me and part- me employees. All were located in the United States and none of our
employees were represented by a labor union. We have not experienced any work stoppages and believe we have good rela ons with our
employees and contractors. Our guiding principles are anchored on the goals of being able to recruit, incen vize, retain and integrate talented
employees who can develop, implement, and drive long-term value crea on strategies.
Compensa on and Benefits
We believe our base salaries are fair and compe ve with the external labor markets in which our employees work and are reviewed
on a regular basis. We offer incen ve programs that provide bonus opportuni es to encourage and reward par cipants for our achievement of
financial and other key performance metrics and strengthen the connec on between pay and performance. We also grant equity compensa on
awards that vest over me through our long-term incen ve plan to employees to align such employees’ incen ves with our long-term strategic
objec ves and the interests of our stockholders.
We also offer compe ve benefits to our employees, including paid vaca on and holidays, family leave, disability insurance, life
insurance, healthcare, dental and vision coverage, dependent care flexible spending accounts, a 401(k) plan with a company match, and an
Employee Stock Purchase Plan. Addi onally, we offer an Employee Assistance Program (“EAP”) that includes professional support for
employees to balance the stress of personal and professional demands.
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Inclusion and Diversity
People are a cri cal component of our efforts to drive growth and deliver value for stockholders. One of the ways we have put people
at the center of our business is by con nuing to work toward a more inclusive and diverse workplace where each person feels respected, valued
and seen and can be the best version of themselves. We believe that having a truly diverse workplace helps our company to achieve the best
results, including by striving for diversity in terms of gender, ethnicity, na onality, disability status, veteran status and other factors. We
launched our Diversity and Inclusion Program to our employees in 2020 and intend to con nue implementa on of the program in 2024. As of
December 31, 2023, ethnically diverse employees represented approximately 37% of our employees and women composed 49% of our
employees. We donate to non-profit organiza ons such as Life Science Cares, an organiza on focused on elimina ng the impact of poverty on
our neighbors. Our Chief Execu ve Officer also serves on the Board of Advisors of Life Science Cares.
Health and Safety
We are commi ed to a safe workplace for our employees and have implemented health and safety management processes, including
training and awareness, into our opera ons. In response to the COVID-19 pandemic, we implemented addi onal safety measures for the
protec on of our employees, including work-from-home measures for applicable employees and addi onal cleaning and protec ve measures.
We require that all employees are fully vaccinated for COVID-19 and recommend they get all booster shots recommended by the United States
Centers of Disease Control and Preven on. We react to emergencies on an ongoing basis to protect our employees.
Training, Development and Engagement
Through our online learning pla orm, we deliver a variety of required learning modules, including those modules ed to our Code of
Business Conduct, unlawful harassment and an -corrup on policies, which are completed periodically by all team members. We also have
Performance Management Training and Interview Training programs for our managers. We have a highly collabora ve, engaging company
environment.
Addi onal Informa on
We view our opera ons and measure our business as one reportable segment opera ng primarily in the United States. See “Note 1.
Organiza on and Significant Accoun ng Policies” in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual
Report on Form 10-K for addi onal informa on. Addi onal informa on required by this item is incorporated herein by reference to Part I,
Item 1A “Risk Factors.”
We were incorporated in Delaware in September 2010. We completed the ini al public offering of our common stock in
November 2014. Our common stock is currently listed on The Nasdaq Global Market under the symbol “CHRS.”
Our principal execu ve offices are located at 333 Twin Dolphin Drive, Suite 600, Redwood City, CA 94065, and our telephone number is
(650) 649-3530.
You may find electronic copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Sec on 13(a) or 15(d) of the Securi es Exchange Act of 1934 on our website at
h ps://www.coherus.com free of charge. We also periodically release and publicize press releases to the public that are also available on our
website’s sec on en tled “News” which we use as a recognized channel of distribu on for our investors and other people interested in our
company. The SEC maintains a website (h p://www.sec.gov) that contains reports, proxy and informa on statements and other informa on
regarding issuers that file electronically with the SEC. Such filings are placed on our website as soon as reasonably possible a er they are filed
with the SEC. Our most recent charter for our audit, compensa on, and nomina ng and corporate governance commi ees and our Code of
Business Conduct and Ethics are available on our website as well. Any waiver of our Code of Business Conduct and Ethics may be made only by
our board of directors. Any waiver of our Code of Business Conduct and Ethics for any of our directors or execu ve officers must be disclosed on
a Current Report on Form 8-K within four business days, or such shorter period as may be required under applicable law.
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Item 1A. Risk Factors
Risk Factor Summary
Below is a summary of the principal factors that make an investment in our common stock specula ve or risky. This summary does not
address all of the risks that we face. Addi onal discussion of the risks summarized in this risk factor summary, and other risks that we face, can
be found below under the heading “Risk Factors” and should be carefully considered, together with other informa on in this Annual Report on
Form 10-K, including our financial statements and related notes thereto, before making investment decisions regarding our common stock.
● We have a limited history of profitability, which we have not maintained and may not achieve again, and only three products that have
been approved and marketed, with mul ple products that are not approved and s ll in development.
● The commercial success of our exis ng products or any future products will depend upon the degree of market acceptance and
adop on by prescribing physicians, healthcare providers and the pa ents to whom our medicines are prescribed. Addi onally,
obtaining placement on na onal and/or local clinical guidelines/pathways, as well as coverage on third-party payor formularies, can
impact our short and long-term financial performance.
● As we have in-licensed development and/or commercial rights to LOQTORZI, we rely on prior and ongoing preclinical, clinical,
regulatory and manufacturing exper se of our collaborators in order to advance this product candidate through regulatory approvals
in the United States and other licensed territories.
● Our products and our product candidates, even if approved, will remain subject to regulatory scru ny.
● Disrup ons at the FDA and other government agencies caused by funding shortages, government shut-downs or global health
concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, and conduct inspec ons of
manufacturing facili es, or otherwise prevent new or modified products from being developed, or approved or commercialized in a
mely manner or at all, which could nega vely impact our business.
● Our biosimilar products face significant compe on from the reference products and from other biosimilar products or
pharmaceu cals approved for the same indica on as the originator products. LOQTORZI faces significant compe on from other
immuno-oncology biologics. If we fail to compete effec vely, we may not achieve significant market penetra on and expansion.
● We face intense compe on and rapid technological change and the possibility that our compe tors may develop therapies that are
similar, more advanced or more effec ve than ours, which may adversely affect our financial condi on and our ability to successfully
commercialize our product candidates.
● If an improved version of an originator product, such as Neulasta or Humira, is developed or if the market for the originator product
significantly declines, sales of our biosimilar products may suffer.
● Healthcare reform measures, including the IRA, may increase the difficulty and cost for us to obtain marke ng approval for and
commercialize our products, affect the prices we may set, and have a material adverse effect on our business and results of
opera ons.
● We are highly dependent on the services of our key execu ves and personnel, including our President and Chief Execu ve Officer,
Dennis M. Lanfear, and if we are not able to retain these members of our management or recruit addi onal management, clinical and
scien fic personnel, our business will suffer.
● We rely on third par es to conduct our nonclinical and clinical studies and perform other tasks for us. If these third par es do not
successfully carry out their contractual du es, meet expected deadlines or comply with regulatory requirements, we may not be able
to obtain regulatory approval for or commercialize our product candidates and our business could be substan ally harmed.
● We are subject to a mul tude of manufacturing risks and the risks of inaccurately forecas ng sales of our products. We also need to
make a determina on of excess or obsolete inventory that requires significant judgment and may result in write-downs of
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inventory, charges related to firm purchase commitments, or both. Any adverse developments affec ng the manufacturing opera ons
of our products and product candidates could substan ally increase our costs and limit supply for our products and product
candidates.
● The con nua on of the war between Russia and Ukraine and conflicts in the Middle East may exacerbate certain risks we face.
● Our products or our product candidates may cause undesirable side effects or have other proper es that could, as applicable, delay or
prevent their regulatory approval, limit the commercial profile of an approved label or result in significant nega ve consequences
following marke ng approval, if granted.
● If we infringe or are alleged to infringe intellectual property rights of third par es, our business could be harmed. Third-party claims of
intellectual property infringement may prevent or delay our development and commercializa on efforts.
● We are heavily dependent on the development, clinical success, regulatory approval and commercial success of our product
candidates. We cannot give any assurance that any of our product candidates will receive regulatory approval, which is necessary
before they can be commercialized.
Risk Factors
Inves ng in the common stock of a biopharmaceu cal company, including one with significant interna onal partnerships and mul ple
products in development, is a highly specula ve undertaking and involves a substan al degree of risk. You should carefully consider the risks and
uncertain es described below, together with all of the other informa on in this Annual Report on Form 10-K. If any of the following risks are
realized, our business, financial condi on, results of opera ons and prospects could be materially and adversely affected. The risks described
below are not the only risks facing us. Risks and uncertain es not currently known to us or that we currently deem to be immaterial also may
materially adversely affect our business, financial condi on, results of opera ons and/or prospects.
Risks Related to Our Financial Condi on and Capital Requirements
We have a limited history of profitability, which we have not maintained and may not achieve again, and only three products that
have been approved and marketed, with mul ple products that are not approved and s ll in development.
With the excep on of genera ng net income of $132.2 million and $89.8 million in 2020 and 2019, respec vely, we incurred net losses in
each year from our incep on in September 2010 through December 31, 2023, including net losses of $237.9 million, $291.8 million and $287.1
million in 2023, 2022 and 2021, respec vely. It is uncertain that we will be profitable in future periods as research and development is
expensive and risky. The amount of our future net losses or any future net income will depend, in part, on the amount of our future
expenditures offset by the amount of future product sales, including sales of our current products or any other products that may receive
regulatory approval. Biopharmaceu cal product development is a highly specula ve undertaking and involves a substan al degree of risk.
For example, as of December 31, 2023, we had an accumulated deficit of $1.6 billion. The losses and accumulated deficit were primarily
due to the substan al investments we made to iden fy, develop or license our product candidates, including conduc ng, among other things,
analy cal characteriza on, process development and manufacturing, formula on and clinical studies and providing general and administra ve
support for these opera ons.
We have incurred and an cipate we will con nue to incur certain development and commercial expenses for LOQTORZI, the an -PD-1
an body we licensed from Junshi Biosciences in 2021, and have agreed to pay up to $90.0 million for the achievement of certain regulatory
approvals and up to $290.0 million for the a ainment of certain sales thresholds. The recent launch of this product and future work to advance
our product candidates through clinical development will be expensive and could result in us con nuing to experience future net losses.
For YUSIMRY, UDENYCA and LOQTORZI which are launched products, and if we obtain regulatory approval to market any other product
candidate, our future revenue will depend upon the size of any markets in which our product candidates may receive approval and our ability to
achieve sufficient market acceptance, pricing, reimbursement from third-party payers, and adequate market share for our product candidates
which include all product candidates for which we obtained commercial rights, in those markets. However, even
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if addi onal product candidates in addi on to our current products gain regulatory approval and are commercialized, we may not remain
profitable.
Our expenses will increase substan ally if and as we:
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further develop our sales, marke ng and distribu on infrastructure for our current products and develop such infrastructure for
new products once they are launched;
establish a sales, marke ng and distribu on infrastructure to commercialize any of our product candidates for which we may
obtain marke ng approval;
make upfront, milestone, royalty or other payments under any license agreements;
con nue our nonclinical and clinical development of our product candidates;
ini ate addi onal nonclinical, clinical or other studies for our product candidates;
expand the scope of our current clinical studies for our product candidates;
advance our programs into more expensive clinical studies;
change or add contract manufacturers, clinical research service providers, tes ng laboratories, device suppliers, legal service
providers or other vendors or suppliers;
seek regulatory approvals for our product candidates that successfully complete clinical studies;
seek to iden fy, assess, acquire and/or develop other product candidates or products that may be complementary to our products;
seek to create, maintain, protect and expand our intellectual property por olio;
engage legal counsel and technical experts to help us evaluate and avoid infringing any valid and enforceable intellectual property
rights of third par es;
engage in li ga on, including patent li ga on, and Inter Partes Review (“IPR”) proceedings with originator companies or others
that may hold patents;
seek to a ract and retain skilled personnel;
create addi onal infrastructure to support our opera ons as a public company and our product development and planned future
commercializa on efforts; and
experience any delays or encounter issues with any of the above, including but not limited to failed studies, conflic ng results,
safety issues, manufacturing delays, li ga on or regulatory challenges that may require longer follow-up of exis ng studies,
addi onal major studies or addi onal suppor ve studies or analyses in order to pursue marke ng approval.
Further, the net loss or net income we achieve may fluctuate significantly from quarter-to-quarter and year-to-year such that a period-to-
period comparison of our results of opera ons may not be a good indica on of our future performance quarter-to-quarter and year-to-year
due to factors including the ming of clinical trials, any li ga on that we may ini ate or that may be ini ated against us as well as any
se lements or judgments from such li ga on, the execu on of collabora on, licensing or other agreements and the ming of any payments we
make or receive thereunder.
We con nue to be dependent on the ability to raise funds. This addi onal funding may not be available on acceptable terms or at all. Failure
to obtain this necessary capital when needed may force us to delay, limit or terminate our product development and commercializa on
efforts or other opera ons.
As of December 31, 2023, our cash, cash equivalents and marketable securi es were $117.7 million. We expect that our exis ng cash and
cash equivalents, investments and cash collected from our product sales will be sufficient to fund our current opera ons for the foreseeable
future. We have financed our opera ons primarily through the sale of equity securi es, conver ble notes, credit facili es, license agreements
and through recent product sales of our products.
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However, our opera ng or inves ng plans may change as a result of many factors that may currently be unknown to us, and we may need
to seek addi onal funds sooner than planned. Our future funding requirements will depend on many factors, including but not limited to:
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our ability to con nue to successfully commercialize our products;
the scope, rate of progress, results and cost of any clinical studies, nonclinical tes ng and other related ac vi es;
the cost of manufacturing clinical drug supplies and establishing commercial supplies, of our product candidates and any products
that we may develop;
the number and characteris cs of product candidates that we pursue;
the cost, ming and outcomes of regulatory approvals;
our ability to successfully integrate the business of Surface following consumma on of the Surface Acquisi on;
the cost and ming of establishing sales, marke ng and distribu on capabili es;
the terms and ming of any licensing or other arrangements to acquire intellectual property rights that we may establish, including
any milestone and royalty payments thereunder;
the ming of conversion in common shares or repayment in cash of our conver ble debt, or the ming of repayment in cash,
whether due or not, of our long-term debt; and
the cost, ming and outcomes of any li ga on that we may file against third par es or that may be filed against us by third par es.
Any addi onal fundraising efforts may divert our management from their day-to-day ac vi es, which may adversely affect our ability to
develop and commercialize our product candidates. In addi on, we cannot guarantee that future financing will be available in sufficient
amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our
stockholders, and the issuance of addi onal securi es, whether equity or debt, by us or the possibility of such issuance may cause the market
price of our shares to decline. The sale of addi onal equity or conver ble securi es, such as the sales from me to me through our sales
agreement dated November 8, 2022 (“Sales Agreement”) with Cowen and Company, LLC (“TD Cowen”) pursuant to which we may issue and sell
from me to me up to $150.0 million of our common stock through or to TD Cowen as our sales agent or principal in an at-the-market offering
(“ATM Offering”), may dilute the share ownership of our exis ng stockholders. The incurrence of indebtedness could result in increased fixed
payment obliga ons and we may be required to agree to certain restric ve covenants, such as those contained in the loan agreement we
entered into in January 2022 (as amended to date, the “Loan Agreement”) with BioPharma Credit PLC, (as the “Collateral Agent”), BPCR Limited
Partnership, (as a “Lender”) and Biopharma Credit Investments V (Master) LP, ac ng by its general partner, BioPharma Credit Investments V GP
LLC (as a “Lender”) that provides for a senior secured term loan facility of up to $300.0 million, including limita ons on our ability to incur
addi onal debt, limita ons on our ability to acquire, sell or license intellectual property rights and other opera ng restric ons that could
adversely impact our ability to conduct our business. For more informa on on our restric ve covenants please read the Loan Agreement, the
First Amendment to Loan Agreement, the Second Amendment and Waiver to Loan Agreement, and Consent, Par al Release and Third
Amendment dated February 5, 2024 (the “Consent and Amendment”) among us, the Collateral Agent and the Lenders filed as exhibits to our
public filings. We could also be required to seek funds through arrangements with collabora ve partners or otherwise at an earlier stage or for
a lower price than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates
or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, opera ng results and
prospects. Even if we believe we have sufficient funds for our current or future opera ng plans, we may seek addi onal capital if market
condi ons are favorable or for specific strategic considera ons.
We could also be required to seek funds through arrangements with collabora ve partners or otherwise at an earlier stage or for a lower
price than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or
otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, opera ng results and prospects.
Even if we believe we have sufficient funds for our current or future opera ng plans, we may seek addi onal capital if market condi ons are
favorable or for specific strategic considera ons.
If we are unable to obtain funding on a mely basis or at all, stay profitable or generate any net profits, we may be required to
significantly curtail, delay or discon nue one or more of our research or development programs or the commercializa on of any products or
product candidates or be unable to expand our opera ons or otherwise capitalize on our business opportuni es, as desired, which could
materially affect our financial condi on and results of opera ons.
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Risks Related to Launch and Commercializa on of our Products and our Product Candidates
We have a limited opera ng history in an emerging regulatory environment on which to assess our business.
We are a biopharmaceu cal company with a limited opera ng history in an emerging regulatory environment of biosimilar and immuno-
oncology products. Although we have received upfront payments, milestone and other con ngent payments and/or funding for development
from some of our collabora on and license agreements, our only approved products include UDENYCA, YUSIMRY and LOQTORZI which are
approved for commercializa on in the United States, and we have no products approved in any other territories.
Our ability to generate meaningful revenue and remain profitable depends on our ability, alone or with strategic collabora on partners,
to successfully market and sell our products, and to complete the development of, and obtain the regulatory approvals necessary to
commercialize, one or more of our product pipeline candidates, which include:
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CHS-1000
casdozokitug; and
CHS-114.
We may not be able to con nue to generate meaningful revenue from product sales, as this depends heavily on our success in many
areas, including but not limited to:
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our ability to con nue to successfully commercialize all three UDENYCA product presenta ons and LOQTORZI;
our ability to successfully commercialize YUSIMRY in a very compe ve adalimumab market;
compe ng against numerous current and future pegfilgras m, ranibizumab and adalimumab products with significant market
share;
healthcare providers, payers, and pa ents adop ng our products and product candidates once approved and launched;
our ability to procure and commercialize our in-licensed biosimilar candidates;
obtaining addi onal regulatory approvals for product candidates for which we complete clinical studies;
obtaining adequate third-party coverage and reimbursements for our products;
obtaining market acceptance of our products and product candidates as viable treatment op ons;
comple ng nonclinical and clinical development of our product candidates;
developing and tes ng of our product formula ons;
a rac ng, hiring and retaining qualified personnel;
developing a sustainable and scalable manufacturing process for our products and any approved product candidates and
establishing and maintaining supply and manufacturing rela onships with third par es that can conduct the process and provide
adequate (in amount and quality) products to support clinical development and the market demand for our products and product
candidates, if approved;
addressing any compe ng technological and market developments;
iden fying, assessing and developing (or acquiring/in-licensing on favorable terms) new product candidates;
nego a ng favorable terms in any collabora on, licensing or other arrangements into which we may enter;
maintaining, protec ng and expanding our por olio of intellectual property rights, including patents, trade secrets and know-how;
and
defending against any li ga on including patent or trade secret infringement lawsuits, which may be filed against us, or achieving
successful outcomes of IPR pe ons that we have filed, or may in the future file, against third par es.
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Even if one or more of the product candidates that we develop is approved for commercial sale, we an cipate incurring significant costs
to commercialize any such product. Our expenses could increase beyond our expecta ons if we are required by the FDA, the European Medical
Agency (the “EMA”), other regulatory agencies, domes c or foreign, or by any unfavorable outcomes in intellectual property li ga on filed
against us, to change our manufacturing processes or assays or to perform clinical, nonclinical or other types of studies in addi on to those that
we currently an cipate. In cases where we are successful in obtaining addi onal regulatory approvals to market one or more of our product
candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the
number of biosimilar or immuno-oncology compe tors in such markets, the accepted price for the product, the ability to get reimbursement at
any price, the nature and degree of compe on from originators and other biosimilar or immuno-oncology companies (including compe on
from large pharmaceu cal companies entering the biosimilar market or possessing large established posi ons in the immuno-oncology market
that may be able to gain advantages in the sale of biosimilar or immuno-oncology products based on brand recogni on and/or exis ng
rela onships with customers and payers) and whether we own (or have partnered with companies owning) the commercial rights for that
territory. If the market for our products and product candidates (or our share of that market) is not as significant as we expect, the price of our
products is not what we project, the indica on approved by regulatory authori es is narrower than we expect or the reasonably accepted
popula on for treatment is narrowed by compe on, physician choice or treatment guidelines, we may not generate significant revenue from
sales of such products, even if approved. If we are unable to successfully complete development and obtain addi onal regulatory approval for
our products, our business may suffer.
The commercial success of our exis ng products or any future products will depend upon the degree of market acceptance and adop on by
prescribing physicians, healthcare providers and the pa ents to whom our medicines are prescribed. Addi onally, obtaining placement on
na onal and/or local clinical guidelines/pathways, as well as coverage on third-party payor formularies, can impact our short and long-term
financial performance.
Even with the requisite approvals from the FDA and comparable foreign regulatory authori es, the commercial success of our products or
product candidates, if approved, will depend in part on the medical community, pa ents and third-party payers accep ng our products and
product candidates as medically useful, cost-effec ve and safe. Any product that we bring to the market may not gain market acceptance by
physicians, pa ents, third-party payers and others in the medical community. The degree of market acceptance of our recently launched
product, LOQTORZI, or any of our product candidates, if approved for commercial sale, will depend on a number of factors, including:
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the safety and efficacy of the product, as demonstrated in clinical studies, and poten al advantages over compe ng treatments;
the prevalence and severity of any side effects and any limita ons or warnings contained in a product’s approved labeling;
the clinical indica ons for which approval is granted;
for our immuno-oncology product candidates, our ability to compete in a compe ve immuno-oncology market that may differ
from the biosimilar market;
inclusion, in either parity or be er posi on, on commonly accepted clinical guidelines or pathways that influence prescribing
pa erns and/or affect reimbursement;
rela ve convenience, ease of administra on and any real or perceived benefit from administra on at home as opposed to in the
clinic;
prevalence of the disease or condi on for which the product is approved;
the cost of treatment, par cularly in rela on to compe ng treatments;
the willingness of the target pa ent popula on to try new therapies and of physicians to prescribe these therapies;
the strength of marke ng and distribu on support and ming of market introduc on of compe ve products;
the extent to which the product is approved for inclusion on formularies of hospitals, integrated delivery networks and managed
care organiza ons;
publicity concerning our products or compe ng products and treatments;
the extent to which third-party payers (including government and na onal/regional commercial plans) provide adequate third-
party coverage and reimbursement for our products and product candidates, if approved;
the price at which we sell our products;
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the poten al impact of the IRA on the pharmaceu cal industry and the market for biosimilars;
the ac ons taken by current and future compe tors to delay, restrict or block customer usage of the product; and
our ability to maintain compliance with regulatory requirements.
Market acceptance of any future product candidates, if approved, will not be fully known un l a er they are launched and may be
nega vely affected by a poten al poor safety experience and the track record of other biosimilar and immuno-oncology products and product
candidates. Further, con nued market acceptance of UDENYCA, LOQTORZI and YUSIMRY, and any future product candidates that may be
approved, depends on our efforts to educate the medical community and third-party payers on the benefits of our products and product
candidates and will require significant resources from us and we have significantly less resources compared to large, well-funded
pharmaceu cal en es. Given the resource disparity, our outreach may have li le success or may never be successful. If our products or any
future product candidates that are approved fail to achieve an adequate level of acceptance by physicians, pa ents, third-party payers and
others in the medical community, we will not be able to generate sufficient revenue to sustain profitability.
The third-party coverage and reimbursement status of our products are uncertain. Failure to obtain or maintain adequate coverage and
reimbursement for new or current products could limit our ability to market those products and decrease our ability to generate revenue.
Pricing, coverage and reimbursement of our products, or any of our product candidates, if approved, may not be adequate to support our
commercial infrastructure. The prices required to successfully compete may not con nue to be sufficient to recover our development and
manufacturing costs, and as a result, we may not be profitable in the future. Accordingly, the availability and adequacy of coverage and
reimbursement by governmental and commercial payers are essen al to enable provider/pa ent access to our products and our pa ent
support services must be sufficiently scaled to meet the needs of pa ents receiving our products. Sales will depend substan ally, both
domes cally and abroad, on the extent to which the costs of our products will be paid for by health maintenance, managed care, pharmacy
benefit and similar healthcare management organiza ons or reimbursed by government authori es, private health insurers and other third-
party payers. If coverage and reimbursement are not available, or are available only to limited levels, or become unavailable, we may not be
able to successfully commercialize our products or any of our product candidates, if approved. Even if coverage is provided, the approved
reimbursement amount may not be adequate to allow us to establish or maintain pricing sufficient to realize a return on our investment.
There is significant uncertainty related to third-party coverage and reimbursement of newly approved products. In the United States,
third-party payers, including private and governmental payers such as the Medicare and Medicaid programs, play an important role in
determining the extent to which new drugs and biologics will be covered and reimbursed. The Medicare program covers certain individuals
aged 65 or older or those who are disabled or suffering from end-stage renal disease. The Medicaid program, which varies from state to state,
covers certain individuals and families who have limited financial means. The Medicare and Medicaid programs increasingly are used as models
for how private payers and other governmental payers develop their coverage and reimbursement policies for drugs and biologics. It is difficult
to predict what third-party payers will decide with respect to the coverage and reimbursement for any newly approved product. In addi on, in
the United States, no uniform policy of coverage and reimbursement for biologics exists among third-party payers. Therefore, coverage and
reimbursement for biologics can differ significantly from payer to payer. As a result, the process for obtaining favorable coverage determina ons
o en is me-consuming and costly and may require us to provide scien fic and clinical support for the use of our products to each payer
separately, with no assurance that coverage and adequate reimbursement will be obtained.
Effec ve January 2019, CMS assigned a product specific Q-Code to UDENYCA, which is necessary to enable providers to separately bill for
UDENYCA to have its own reimbursement rate with Medicare or other third-party payers. However, reimbursement is not guaranteed, and rates
may vary based on product life cycle, site of care, type of payer, coverage decisions, and provider contracts. Furthermore, while payers have
adopted the Q-Codes assigned by CMS for UDENYCA, there remains uncertainty as to whether such payers will con nue to cover and pay
providers for the administra on and use of the product with each pa ent or may favor compe ng products. If our products or any of our future
product candidates, are not covered or adequately reimbursed by third-party payers, including Medicare, then the cost of the relevant product
may be absorbed by healthcare providers or charged to pa ents. If this is the case, our expecta ons of the pricing we expect to achieve for such
product and the related poten al revenue, may be significantly diminished.
Outside of the United States, pharmaceu cal businesses are generally subject to extensive governmental price controls and other market
regula ons. We believe the increasing emphasis on cost-containment ini a ves in Europe, Canada and other countries has and will con nue to
put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price
control mechanisms as part of na onal health systems. Other countries allow companies to fix their own prices for
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medical products but monitor and control company profits. Addi onal foreign price controls or other changes in pricing regula on could restrict
the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for
our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and
profits.
Increasing efforts by governmental and third-party payers in the United States and abroad to control healthcare costs may cause such
organiza ons to limit both coverage and the level of reimbursement for new products approved and, as a result, they may not cover or provide
adequate payment for our products or any of our product candidates. While cost containment prac ces generally benefit biosimilars, severe
cost containment prac ces may adversely affect our product sales. Furthermore, the impact of the IRA on our business and the pharmaceu cal
industry generally is currently unknown. We expect to experience pricing pressures in connec on with the sale of our products and any of our
product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organiza ons and addi onal
legisla ve changes.
Our products and our product candidates, even if approved, will remain subject to regulatory scru ny.
Our products and our product candidates, even If approved, will be subject to ongoing regulatory requirements for manufacturing,
labeling, packaging, storage, adver sing, promo on, sampling, record-keeping, conduct of post-marke ng studies and submission of safety,
efficacy and other post-market informa on, including both federal and state requirements in the United States and requirements of comparable
foreign regulatory authori es.
Manufacturers and manufacturers’ facili es are required to comply with extensive FDA, and comparable foreign regulatory authority,
requirements, including ensuring that quality control and manufacturing procedures conform to “cGMP” regula ons. As such, we and our
contract manufacturers will be subject to con nual review and inspec ons to assess compliance with cGMP and adherence to commitments
made in any NDA, original BLA submi ed under Sec on 351(a) of the Public Health Service Act PHSA, Sec on 351(k) BLA or MAA. Accordingly,
we and others with whom we work must con nue to spend me, money and effort in all areas of regulatory compliance, including
manufacturing, produc on and quality control.
Any regulatory approvals that we or our collabora on partners receive for our product candidates may be subject to limita ons on the
approved indicated uses for which the product may be marketed or to the condi ons of approval or may contain requirements for poten ally
costly addi onal clinical trials and surveillance to monitor the safety and efficacy of the product candidate. We will be required to report certain
adverse events and produc on problems, if any, to the FDA and comparable foreign regulatory authori es. Any new legisla on addressing drug
safety issues could result in delays in product development or commercializa on or increased costs to ensure compliance. We will have to
comply with requirements concerning adver sing and promo on for our products. Promo onal communica ons with respect to prescrip on
drugs are subject to a variety of legal and regulatory restric ons and must be consistent with the informa on in the product’s approved label.
As such, we may not promote our products for indica ons or uses for which they do not have approval. If our product candidates are approved,
we must submit new or supplemental applica ons and obtain approval for certain changes to the approved products, product labeling or
manufacturing process. We or our collabora on partners could also be asked to conduct post-marke ng clinical studies to verify the safety and
efficacy of our products in general or in specific pa ent subsets. If original marke ng approval is obtained via an accelerated biosimilar approval
pathway, we could be required to conduct a successful post-marke ng clinical study to confirm clinical benefit for our products. An unsuccessful
post-marke ng study or failure to complete such a study could result in the withdrawal of marke ng approval.
If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unan cipated severity or
frequency or problems with the facility where the product is manufactured or disagrees with the promo on, marke ng or labeling of a product,
such regulatory agency may impose restric ons on that product or us, including requiring withdrawal of the product from the market. If we fail
to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other possibili es:
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issue warning le ers;
impose civil or criminal penal es;
suspend or withdraw regulatory approval;
suspend any of our ongoing clinical studies;
refuse to approve pending applica ons or supplements to approved applica ons submi ed by us;
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impose restric ons on our opera ons, including closing our contract manufacturers’ facili es; or
seize or detain products or require a product recall.
Any government inves ga on of alleged viola ons of law could require us to expend significant me and resources in response and could
generate nega ve publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to
commercialize and generate revenue from our products. If regulatory sanc ons are applied or if regulatory approval is withdrawn, the value of
our company and our opera ng results will be adversely affected.
The FDA’s and other regulatory authori es’ policies may change, and addi onal government regula ons may be enacted that could
prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in exis ng requirements or
the adop on of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marke ng approval
that we may have obtained and we may not sustain profitability, which would adversely affect our business, prospects, financial condi on and
results of opera ons.
We also cannot predict the likelihood, nature or extent of government regula on that may arise from future legisla on or administra ve
or execu ve ac on, either in the United States, China or other foreign countries.
Disrup ons at the FDA and other government agencies caused by funding shortages, government shut-downs or global health concerns
could hinder their ability to hire, retain or deploy key leadership and other personnel, and conduct inspec ons of manufacturing facili es, or
otherwise prevent new or modified products from being developed, or approved or commercialized in a mely manner or at all, which could
nega vely impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and
funding levels, government shut-downs, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept
the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform rou ne func ons. Average review mes at
the FDA have fluctuated in recent years as a result. In addi on, government funding of other government agencies that fund research and
development ac vi es is subject to the poli cal process, which is inherently fluid and unpredictable. Disrup ons at the FDA and other agencies
may also slow the me necessary for new drugs and biologics or modifica ons to approved drugs and biologics to be reviewed and/or approved
by necessary government agencies, which would adversely affect our business. For example, over the last several years, the United States
government has periodically shut down and certain regulatory agencies, such as the FDA, had to furlough cri cal FDA employees and stop
cri cal ac vi es.
Separately, in response to the COVID-19 pandemic, the FDA postponed most inspec ons of domes c and foreign manufacturing facili es
at various points. Even though the FDA has since resumed standard inspec on opera ons, any resurgence of the virus or emergence of new
variants may lead to further administra ve or inspec onal delays. If a prolonged government shutdown occurs it could significantly impact the
ability of the FDA or other regulatory authori es to mely review and process our regulatory submissions, which could have a material adverse
effect on our business.
Risks Related to Compe ve Ac vity
Our biosimilar products face significant compe on from the reference products and from other biosimilar products or pharmaceu cals
approved for the same indica on as the originator products. Our product LOQTORZI and product candidate CHS-114, if approved, will face
significant compe on from other immuno-oncology biologics. If we fail to compete effec vely, we may not achieve significant market
penetra on and expansion.
We operate in highly compe ve pharmaceu cal markets. Successful compe tors in the pharmaceu cal market have demonstrated the
ability to effec vely discover molecules, obtain patents, develop, test and obtain regulatory approvals for products, as well as an ability to
effec vely commercialize, market and promote approved products. Numerous companies, universi es and other research ins tu ons are
engaged in developing, paten ng, manufacturing and marke ng of products compe ve with those that we are developing. Many of these
poten al compe tors are large, experienced mul na onal pharmaceu cal and biotechnology companies that enjoy significant compe ve
advantages, such as substan ally greater financial, research and development, legal, governmental affairs, manufacturing, personnel, and
marke ng resources, with addi onal benefits of mergers and acquisi ons.
LOQTORZI recently entered a compe ve market in the United States where a number of an -PD-1 or PD-L1 an body drugs have been
approved by the FDA including the following marketed products from several compe tors: Keytruda® (pembrolizumab) from Merck, Opdivo®
(nivolumab) from BMS, Tecentriq® (atezolizumab) from Genentech, Imfinzi® (durvalumab) from AstraZeneca, Bavencio®
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(avelumab) from EMD Serono Inc. and Pfizer, and Libtayo® (cemiplimab-rwlc) from Regeneron and Sanofi, and Jemperli (dostarlimab-gxly) from
GlaxoSmithKline. In addi on to LOQTORZI, mul ple other compe tors are seeking to develop and approve novel an -PD-1 or PD-L1 an body
drugs in the United States in the coming years, including but not limited to BeiGene, Ltd. (in collabora on with Novar s). As the only
immunotherapy approved by the FDA for the treatment of NPC, we believe LOQTORZI addresses a poten ally high unmet need.
CHS-114, if approved, faces compe on from programs in development specifically targe ng CCR8, including those by Bristol-Myers
Squibb Company, Gilead/Jounce, Shionogi, AbbVie, Bayer, LaNova and Immunophage;
UDENYCA faces compe on in the United States from Amgen, Viatris, Sandoz, Pfizer, and Spectrum, and is expected to face compe on
from Amneal and Fresenius, each of which has announced the approval of a pegfilgras m biosimilar and have launched their products for sale
in the United States.
YUSIMRY, following our launch in July 2023, faces compe on in the United States from AbbVie (the holder of rights to Humira), Amgen
(AmjevitaTM (adalimumab-a o)), Sandoz (HyrimozTM (adalimumab-adaz)), Samsung Bioepis (HadlimaTM (adalimumab-bwwd)), Pfizer
(AbriladaTM (adalimumab-afzb)), Boehringer Ingelheim (CyltezoTM (adalimumab-adbm)) as well as Viatris / Biocon (Hulio® (adalimumab- jp)),
Alvotech Holdings S.A. and Fresenius, each a company that has disclosed development plans for a Humira biosimilar candidate. As a result of
con nued expected compe on from Humira and a large number of poten al adalimumab (Humira) biosimilar compe tors, we may not be
able to achieve substan al topline sales for YUSIMRY in the United States.
These companies may also have greater brand recogni on and more experience in conduc ng preclinical tes ng and clinical trials of
product candidates, obtaining FDA and other regulatory approvals of products and marke ng and commercializing products once approved.
Addi onally, many manufacturers of originator products have increasingly used legisla ve, regulatory and other means, such as li ga on,
to delay regulatory approval and to seek to restrict compe on from manufacturers of biosimilars. These efforts may include or have included:
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se ling, or refusing to se le, patent lawsuits with biosimilar companies, resul ng in such patents remaining an obstacle for
biosimilar approval;
submi ng Ci zen Pe ons to request the FDA Commissioner to take administra ve ac on with respect to prospec ve and
submi ed biosimilar applica ons;
appealing denials of Ci zen Pe ons in United States federal district courts and seeking injunc ve relief to reverse approval of
biosimilar applica ons;
restric ng access to reference brand products for equivalence and biosimilarity tes ng that interferes with mely biosimilar
development plans;
a emp ng to influence poten al market share by conduc ng medical educa on with physicians, payers, regulators and pa ents
claiming that biosimilar products are too complex for biosimilar approval or are too dissimilar from originator products to be
trusted as safe and effec ve alterna ves;
implemen ng payer market access tac cs that benefit their brands at the expense of biosimilars;
seeking state law restric ons on the subs tu on of biosimilar products at the pharmacy without the interven on of a physician or
through other restric ve means such as excessive recordkeeping requirements or pa ent and physician no fica on;
seeking federal or state regulatory restric ons on the use of the same non-proprietary name as the reference brand product for a
biosimilar or interchangeable biologic;
seeking changes to the United States Pharmacopeia, an industry recognized compila on of drug and biologic standards;
obtaining new patents covering exis ng products or processes, which could extend patent exclusivity for a number of years or
otherwise delay the launch of biosimilars; and
influencing legislatures so that they a ach special patent extension amendments to unrelated federal legisla on.
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Our products and our product candidates, if approved, could face price compe on from other products or biosimilars of the same reference
products for the same indica on. This price compe on could exceed our capacity to respond, detrimentally affec ng our market share and
revenue as well as adversely affec ng the overall financial health and a rac veness of the market for the biosimilar.
Compe tors in the biosimilar market have the ability to compete on price through PBMs, payers and their third-party administrators,
IDNs and hospitals who exert downward pricing pressure on our product offerings. It is possible our biosimilar compe tors’ compliance with
price discoun ng demands in exchange for market share or volume requirements could exceed our capacity to respond in kind and reduce
market prices beyond our expecta ons. There could be similar price compe on in the immuno-oncology market that could adversely affect
our results in the future. Such prac ces may limit our ability to increase market share and may also impact profitability.
We face intense compe on and rapid technological change and the possibility that our compe tors may develop therapies that are similar,
more advanced, less costly, easier to administer or more effec ve than ours, which may adversely affect our financial condi on and our
ability to successfully commercialize our product candidates.
Many of our compe tors have substan ally greater financial, technical and other resources, such as larger research and development
staff and more experienced marke ng and manufacturing organiza ons. Addi onal mergers and acquisi ons in the pharmaceu cal industry
may result in even more resources being concentrated in our compe tors. As a result, these companies may obtain regulatory approval more
rapidly than we are able to and may be more effec ve in selling and marke ng their products. Smaller or early-stage companies may also prove
to be significant compe tors, par cularly through collabora ve arrangements with large, established companies. Our compe tors may succeed
in developing, acquiring or licensing on an exclusive basis, products that are more effec ve or less costly than any product candidate that we
may develop; they may also obtain patent protec on that could block our products; and they may obtain regulatory approval, product
commercializa on and market penetra on earlier than we do. Our compe tors may have products that are easier to administer than our
products, which could adversely affect our results, such as due to the observed trend that a large number of pa ents demonstrate a preference
to administer medica on at home due to COVID-19 or other factors. Biosimilar or immuno-oncology product candidates developed by our
compe tors may render our poten al product candidates uneconomical, less desirable or obsolete, and we may not be successful in marke ng
our product candidates against compe tors.
If other compe tors to LOQTORZI (in indica ons besides NPC), casdozokitug and CHS-114 are approved and successfully commercialized
before LOQTORZI (in indica ons besides NPC), casdozokitug and CHS-114, our business would suffer.
There are a number of companies that currently commercialize PD-1/PD-L1 blocking an bodies or are developing such compounds for
commercializa on in the United States. If other compe tors to LOQTORZI (in indica ons besides NPC), casdozokitug and CHS-114 are
successfully commercialized before LOQTORZI (in indica ons besides NPC), casdozokitug and CHS-114, we may never achieve meaningful
market share for these products, our revenue would be reduced and, as a result, our business, prospects and financial condi on could suffer.
If an improved version of an originator product, such as Neulasta or Humira, is developed or if the market for the originator product
significantly declines, sales of our biosimilar products may suffer.
Originator companies may develop improved versions of a reference product as part of a life cycle extension strategy and may obtain
regulatory approval of the improved version under a new or supplemental BLA submi ed to the applicable regulatory authority. Should the
originator company succeed in obtaining an approval of an improved biologic product, it may capture a significant share of the collec ve
reference product market in the applicable jurisdic on and significantly reduce the market for the reference product and thereby the poten al
size of the market for our biosimilar products. In addi on, the improved product may be protected by addi onal patent rights that may subject
our follow-on biosimilar to claims of infringement.
Biologic reference products may also face compe on as technological advances are made that may offer pa ents a more convenient
form of administra on or increased efficacy or as new products are introduced. External developments can also result in changing preferences
for convenient forms of administra on of products that may impact our business. As new products are approved that compete with the
reference product to our biosimilar products, sales of the reference originator product may be adversely impacted or rendered obsolete. If the
market for the reference product is impacted, we may lose significant market share for our approved biosimilar products. As a result of the
above factors, our business, prospects and financial condi on could suffer.
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Any product candidates for which we intend to seek approval as original biologic products may face compe on sooner than an cipated.
Our development of novel biologic product candidates, such as casdozokitug and CHS-114, subjects us to addi onal risks rela ng to
biosimilar compe on. In par cular, under the Biologics Price Compe on and Innova on Act of 2009 (“BPCIA”), an applica on for a biosimilar
product may not be submi ed to the FDA un l four years following the date that the reference product was first licensed by the FDA. In
addi on, the approval of a biosimilar product may not be made effec ve by the FDA un l 12 years from the date on which the reference
product was first licensed. During this 12-year period of exclusivity, another company may s ll market a compe ng version of the reference
product if the FDA approves a full BLA for the compe ng product containing the sponsor’s own preclinical data and data from adequate and
well-controlled clinical trials to demonstrate the safety, purity and potency of its product.
We believe that LOQTORZI and any of our future product candidates approved under an original BLA should qualify for the 12-year period
of exclusivity. However, there is a risk that this exclusivity could be shortened due to Congressional ac on or otherwise, or that the FDA will not
consider our product candidates to be reference products for compe ng products, poten ally crea ng the opportunity for generic compe on
sooner than an cipated. Moreover, the extent to which a biosimilar, once approved, could be subs tuted for any one of our reference products
in a way that is similar to tradi onal generic subs tu on for non-biological products will depend on a number of marketplace and regulatory
factors that are s ll developing.
Risks Related to Our Ability to Hire and Retain Highly Qualified Personnel
We are highly dependent on the services of our key execu ves and personnel, including our President and Chief Execu ve Officer, Dennis M.
Lanfear, and if we are not able to retain these members of our management or recruit addi onal management, product development and
scien fic personnel, our business will suffer.
We are highly dependent on the principal members of our management and scien fic and technical staff. The loss of service of any of our
management or key scien fic and technical staff could harm our business. In addi on, we are dependent on our con nued ability to a ract,
retain and mo vate highly qualified addi onal management, product development and scien fic personnel. If we are not able to retain our
management, par cularly our President and Chief Execu ve Officer, Mr. Lanfear, and to a ract, on acceptable terms, addi onal qualified
personnel necessary for the con nued development of our business, we may not be able to sustain our opera ons or grow.
Our future performance will also depend, in part, on our ability to successfully integrate newly hired execu ve officers into our
management team and our ability to develop an effec ve working rela onship among senior management. Our failure to integrate these
individuals and create effec ve working rela onships among them and other members of management could result in inefficiencies in the
development and commercializa on of our product candidates, harming future regulatory approvals, sales of our product candidates and our
results of opera ons. Addi onally, we do not currently maintain “key person” life insurance on the lives of our execu ves or any of our
employees.
We will need to expand and effec vely manage our managerial, scien fic, opera onal, financial, commercial and other resources in order
to successfully pursue our product development and commercializa on efforts. Our success also depends on our con nued ability to a ract,
retain and mo vate highly qualified management and technical personnel. We may not be able to a ract or retain qualified management and
scien fic and product development personnel in the future due to the intense compe on for qualified personnel among biotechnology,
pharmaceu cal and other businesses, par cularly those located in the San Francisco Bay Area. We also use equity compensa on as a part of a
comprehensive compensa on package for our personnel. The majority of our outstanding op ons have exercise prices that are above our
current stock price. If we are not able to a ract, retain and mo vate necessary personnel to accomplish our business objec ves, we may
experience constraints that will significantly impede the achievement of our development objec ves, our ability to raise addi onal capital and
our ability to implement our business strategy.
We may need to expand our organiza on, par cularly due to employee turnover, and we may experience difficul es in managing this
turnover, which could disrupt our opera ons.
As of December 31, 2023, we had 306 full- me and part- me employees. As our development and commercializa on plans and
strategies develop and evolve from me to me, and as we experience turnover, we may need to hire addi onal people in the future. Our
management may need to divert a dispropor onate amount of its a en on away from our day-to-day ac vi es and devote a substan al
amount of me to managing these hiring ac vi es. We may not be able to effec vely manage during a period of employee turnover, which
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may result in weaknesses in our infrastructure, opera onal mistakes, loss of business opportuni es, loss of employees and reduced produc vity
among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other
projects, such as the development of our current and poten al future product candidates. If our management is unable to effec vely manage
our turnover, our expenses may increase more than expected, our ability to generate and/or grow revenue could be reduced. Our future
financial performance and our ability to commercialize product candidates and compete effec vely will depend, in part, on our ability to
effec vely manage any future growth.
Risks Related to Reliance on Third Par es
We rely on third par es to conduct our nonclinical and clinical studies and perform other tasks for us. If these third par es do not successfully
carry out their contractual du es, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain
regulatory approval for or commercialize our product candidates and our business could be substan ally harmed.
We have relied upon and plan to con nue to rely upon third-party clinical research organiza ons (“CROs”) to monitor and manage data
for our ongoing nonclinical and clinical programs. We rely on these par es for execu on of our nonclinical and clinical studies and control only
certain aspects of their ac vi es. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the
applicable protocol, legal, regulatory and scien fic standards and our reliance on the CROs does not relieve us of our regulatory responsibili es.
We and our CROs and other vendors are required to comply with cGMP, GCP, and GLP, which are regula ons and guidelines enforced by the
FDA, the Competent Authori es of the Member States of the EEA and comparable foreign regulatory authori es for all of our product
candidates in clinical development. Regulatory authori es enforce these regula ons through periodic inspec ons or remote regulatory
assessments (“RRAs”) of study sponsors, principal inves gators, study sites and other contractors. If we, any of our CROs, service providers or
inves gators fail to comply with applicable regula ons or GCPs, the data generated in our nonclinical and clinical studies may be deemed
unreliable and the FDA, EMA or comparable foreign regulatory authori es may require us to perform addi onal nonclinical and clinical studies
before approving our marke ng applica ons. There can be no assurance that upon inspec on or conclusion of an RRA by a given regulatory
authority, such regulatory authority will determine that any of our clinical studies comply with GCP regula ons. In addi on, our clinical studies
must be conducted with product generated under cGMP regula ons. Failure to comply by any of the par cipa ng par es or ourselves with
these regula ons may require us to repeat clinical studies, which would delay the regulatory approval process. Moreover, our business may be
implicated if our CRO or any other par cipa ng par es violate federal or state fraud and abuse or false claims laws and regula ons or
healthcare privacy and security laws.
If any of our rela onships with these third-party CROs terminate, we may not be able to enter into arrangements with alterna ve CROs or
do so on commercially reasonable terms. In addi on, our CROs are not our employees, and except for remedies available to us under our
agreements with such CROs, we cannot control whether or not they devote sufficient me and resources to our on-going nonclinical and
clinical programs. If CROs do not successfully carry out their contractual du es or obliga ons or meet expected deadlines, if they need to be
replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our protocols, regulatory
requirements or for other reasons, our clinical studies may be extended, delayed or terminated and we may not be able to obtain regulatory
approval for or successfully commercialize our product candidates. CROs may also generate higher costs than an cipated. As a result, our
results of opera ons and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to
generate revenue could be delayed.
Switching or adding addi onal CROs involves addi onal cost and requires management me and focus. In addi on, a transi on period is
necessary when a new CRO commences work, which can materially impact our ability to meet our desired clinical development melines.
Though we strive to carefully manage our rela onships with our CROs, there can be no assurance that we will not encounter similar challenges
or delays in the future or that these delays or challenges will not have a material adverse impact on our business, prospects and financial
condi on.
We rely on third par es, and in some cases a single third party, to manufacture nonclinical, clinical and commercial drug supplies of our
product candidates and to store cri cal components of our product candidates for us. Our business could be harmed if those third par es fail
to provide us with sufficient quan es of product candidates or fail to do so at acceptable quality levels or prices.
We do not currently have the infrastructure or capability internally to manufacture supplies of our product candidates for use in our
nonclinical and clinical studies, and we lack the resources and the capability to manufacture any of our product candidates on a clinical or
commercial scale. We rely on third-party manufacturers to manufacture and supply us with our product candidates for our preclinical and
clinical studies as well as to establish commercial supplies of our product candidates. Successfully transferring complicated manufacturing
techniques to contract manufacturing organiza ons and scaling up these techniques for commercial quan es is me consuming and we
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may not be able to achieve such transfer or do so in a mely manner. Moreover, the availability of contract manufacturing services for protein-
based therapeu cs is highly variable and there are periods of rela vely abundant capacity alterna ng with periods in which there is li le
available capacity. If our need for contract manufacturing services increases during a period of industry-wide produc on capacity shortage, we
may not be able to produce our product candidates on a mely basis or on commercially viable terms. Although we will plan accordingly and
generally do not begin a clinical study unless we believe we have a sufficient supply of a product candidate to complete such study, any
significant delay or discon nua on in the supply of a product candidate for an ongoing clinical study due to the need to replace a third-party
manufacturer could considerably delay comple on of our clinical studies, product tes ng and poten al regulatory approval of our product
candidates, which could harm our business and results of opera ons.
Reliance on third-party manufacturers entails addi onal risks, including reliance on the third party for regulatory compliance and quality
assurance, the possible breach of the manufacturing agreement by the third party and the possible termina on or nonrenewal of the
agreement by the third party at a me that is costly or inconvenient for us. In addi on, third-party manufacturers may not be able to comply
with cGMP or similar regulatory requirements outside the United States. Our failure or the failure of our third-party manufacturers to comply
with applicable regula ons could result in sanc ons being imposed on us, including fines, injunc ons, civil penal es, delays, suspension or
withdrawal of approvals, license revoca on, seizures or recalls of products, opera ng restric ons and criminal prosecu ons, any of which could
significantly and adversely affect supplies of our product candidates or any other product candidates or products that we may develop. Any
failure or refusal to supply the components for our product candidates that we may develop could delay, prevent or impair our clinical
development or commercializa on efforts. If our contract manufacturers were to breach or terminate their manufacturing arrangements with
us, the development or commercializa on of the affected products or product candidates could be delayed, which could have an adverse effect
on our business. Any change in our manufacturers could be costly because the commercial terms of any new arrangement could be less
favorable and because the expenses rela ng to the transfer of necessary technology and processes could be significant.
If any of our product candidates are approved, in order to produce the quan es necessary to meet an cipated market demand, any
contract manufacturer that we engage may need to increase manufacturing capacity. If we are unable to build and stock our product candidates
in sufficient quan es to meet the requirements for the launch of these candidates or to meet future demand, our revenue and gross margins
could be adversely affected. Although we believe that we will not have any material supply issues, we cannot be certain that we will be able to
obtain long-term supply arrangements for our product candidates or materials used to produce them on acceptable terms, if at all. If we are
unable to arrange for third-party manufacturing, or to do so on commercially reasonable terms, we may not be able to complete development
of our product candidates or market them.
We are dependent on Junshi Biosciences and Orox for the commercializa on of our product candidates in certain markets and we intend to
seek addi onal commercializa on partners for major markets, and the failure to commercialize in those markets could have a material
adverse effect on our business and opera ng results.
We have exclusive licenses from Junshi Biosciences to develop and commercialize LOQTORZI in the United States and Canada. Our
licensors are responsible for supplying us with drug substance and final drug products.
Our exclusive licensee, Orox, is responsible for commercializa on of certain of our products and product candidates, including UDENYCA
and YUSIMRY in certain Caribbean and La n American countries (excluding Brazil, and in the case of UDENYCA, also excluding Argen na).
Our licenses with Junshi Biosciences, Bioeq, Orox, or other future license or collabora on agreements, may not result in posi ve
outcomes. Factors that may affect the success of our licenses and collabora ons include, but are not limited to, the following:
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our exis ng and poten al collabora on partners may fail to provide sufficient amounts of commercial products, including because
of import restric ons, or they may be ineffec ve in doing so;
our exis ng and poten al collabora on partners may fail regulatory inspec ons or RRAs which may preclude or delay the delivery
of commercial products;
our exis ng and poten al collabora on partners may fail to exercise commercially reasonable efforts to market and sell our
products in their respec ve licensed jurisdic ons or they may be ineffec ve in doing so;
our exis ng and poten al licensees and collabora on partners may incur financial, legal or other difficul es that force them to limit
or reduce their par cipa on in our joint projects;
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our exis ng and poten al licensees and collabora on partners may terminate their licenses or collabora ons with us, which could
make it difficult for us to a ract new partners or adversely affect percep on of us in the business and financial communi es; and
our exis ng and poten al licensees and collabora on partners may choose to pursue alterna ve, higher priority programs, which
could affect their commitment to us.
Moreover, any disputes with our licensees and collabora on partners will substan ally divert the a en on of our senior management
from other business ac vi es and will require us to incur substan al costs associated with li ga on or arbitra on proceedings. If we cannot
maintain successful license and collabora on arrangements, our business, financial condi on and opera ng results may be adversely affected.
Risks Related to Manufacturing and Supply Chain
We are subject to a mul tude of manufacturing risks and the risks of inaccurately forecas ng sales of our products. We also need to make a
determina on of excess or obsolete inventory that requires significant judgment and may result in write-downs of inventory, charges related
to firm purchase commitments, or both. Any adverse developments affec ng the manufacturing opera ons of our products and product
candidates could substan ally increase our costs and limit supply for our products and product candidates.
The process of manufacturing our product candidates is complex, highly regulated and subject to several risks, including but not limited
to:
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product loss due to contamina on, equipment failure or improper installa on or opera on of equipment or vendor or operator
error;
equipment failures, labor shortages, natural disasters, power failures and numerous other factors associated with the
manufacturing facili es in which our product candidates are produced, and poten ally exacerbated by climate change; and
disrup on of supply chains for cri cal and specialized raw materials, delays in regulatory inspec ons of manufacturing and tes ng
facili es, and reduced manufacturing capaci es created by global events such as the COVID-19 pandemic and the ongoing conflict
in Ukraine.
We have experienced reduced produc on yields, product defects and other supply disrup ons. For example, we have experienced
failures with respect to the manufacturing of certain lots of each of our product candidates resul ng in delays prior to our taking correc ve
ac on. Addi onally, if microbial, viral or other contamina ons are discovered in our product candidates or in the manufacturing facili es in
which our product candidates are made, such manufacturing facili es may need to be closed for an extended period of me to inves gate and
remedy the contamina on.
Any adverse developments affec ng manufacturing opera ons for our products and product candidates, including due to sudden or long-
term changes in weather pa erns or conflicts in par cular geographic areas, may result in shipment delays, inventory shortages, lot failures,
withdrawals or recalls or other interrup ons in the supply of our product candidates. We also need to make a determina on of excess or
obsolete inventory that requires significant judgment and includes considera on of many factors, such as es mates of future product demand,
current and future market condi ons, product expira on informa on and poten al product obsolescence, among others. Although we believe
that the assump ons we use in es ma ng poten al inventory write-downs are reasonable, if actual market condi ons are less favorable than
projected by us, write-downs of inventory, charges related to firm purchase commitments, or both may be required which would be recorded
as cost of goods sold in our consolidated statements of opera ons. Adverse developments affec ng our assump ons of the level and ming of
demand for our products include those that are outside of our control such as the ac ons taken by compe tors and customers, the direct or
indirect effects of the COVID-19 pandemic, and other factors. We may have to take inventory write-downs and incur other charges and
expenses, such as charges related to firm purchase commitments, for products that are manufactured in reliance on a forecast that proves to be
inaccurate because we do not sell as many units as forecasted. For example, during the third quarter of 2022, we recorded a $26.0 million
write-down of UDENYCA inventory that was at risk of expira on and during the fourth quarter of 2023, we recorded a $47.0 million charge for
the write-down of slow moving YUSIMRY inventory and the related par al recogni on of certain firm purchase commitments. Although we
believe that the assump ons that we use in es ma ng inventory write-downs are reasonable, addi onal write-downs of inventory may be
required in the future if actual market condi ons are less favorable than our projec ons, which could materially and adversely impact our
financial results. In addi on to such write-downs, we may also have to incur charges and expenses related to firm purchase commitments or for
product candidates that fail to meet specifica ons, undertake costly remedia on efforts or seek costlier manufacturing alterna ves.
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We currently engage single suppliers for manufacture, clinical trial services, formula on development and product tes ng of our product
candidates. The loss of any of these suppliers or vendors could materially and adversely affect our business.
For our products and our product candidates, we currently engage a dis nct vendor or service provider for each of the principal ac vi es
suppor ng our manufacture and development of these products, such as manufacture of the biological substance present in each of the
products, manufacture of the final filled and finished presenta on of these products, as well as laboratory tes ng, formula on development
and clinical tes ng of these products. Because we currently have engaged a limited number of back-up suppliers or vendors for these single-
sourced services, and although we believe that there are alternate sources that could fulfill these ac vi es, we cannot assure you that
iden fying and establishing rela onships with alternate suppliers and vendors would not result in significant delay in the development of our
product candidates. Addi onal delays or cost increases could occur due to the direct or indirect effects of the COVID-19 pandemic and the
ongoing conflict in Ukraine. Addi onally, we may not be able to enter into arrangements with alterna ve service providers on commercially
reasonable terms or at all. A delay in the development of our product candidates, or having to enter into a new agreement with a different third
party on less favorable terms than we have with our current suppliers, could have a material adverse impact on our business.
We and our collabora on partners and contract manufacturers are subject to significant regula on with respect to manufacturing our
product candidates. The manufacturing facili es on which we rely may not con nue to meet regulatory requirements or may not be able to
meet supply demands.
All en es involved in the prepara on of therapeu cs for clinical studies or commercial sale, including our exis ng contract
manufacturers for our product candidates, are subject to extensive regula on. Components of a finished therapeu c product approved for
commercial sale or used in clinical studies must be manufactured in accordance with cGMP. These regula ons govern manufacturing processes
and procedures (including record keeping) and the implementa on and opera on of quality systems to control and assure the quality of
inves ga onal products and products approved for sale. Poor control of produc on processes can lead to the introduc on of contaminants or
to inadvertent changes in the proper es or stability of our product candidates that may not be detectable in final product tes ng. We, our
collabora on partners, or our contract manufacturers must supply all necessary documenta on in support of a Sec on 351(k) BLA, original BLA,
NDA or MAA on a mely basis and must adhere to GLP and cGMP regula ons enforced by the FDA and other regulatory agencies through their
facili es inspec on program. Some of our contract manufacturers may have never produced a commercially approved pharmaceu cal product
and therefore have not obtained the requisite regulatory authority approvals to do so. The facili es and quality systems of some or all of our
collabora on partners and third-party contractors must pass a pre-approval inspec on for compliance with the applicable regula ons as a
condi on of regulatory approval of our product candidates or any of our other poten al products. In addi on, the regulatory authori es may, at
any me, audit or inspect a manufacturing facility involved with the prepara on of our product candidates or our other poten al products or
the associated quality systems for compliance with the regula ons applicable to the ac vi es being conducted. Although we oversee the
contract manufacturers, we cannot control the manufacturing process of, and are completely dependent on, our contract manufacturing
partners for compliance with the regulatory requirements. If these facili es do not pass a pre-approval plant inspec on, regulatory approval of
the products may not be granted or may be substan ally delayed un l any viola ons are corrected to the sa sfac on of the regulatory
authority, if ever.
The regulatory authori es also may, at any me following approval of a product for sale, inspect, audit or ini ate an RRA of the
manufacturing facili es of our collabora on partners and third-party contractors. If any such inspec on, audit or RRA iden fies a failure to
comply with applicable regula ons or if a viola on of our product specifica ons or applicable regula ons occurs independent of such an
inspec on, audit or RRA, we or the relevant regulatory authority may require remedial measures that may be costly and/or me consuming for
us or a third party to implement and that may include the temporary or permanent suspension of a clinical study or commercial sales or the
temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third par es with whom we contract could
materially harm our business.
If we, our collabora on partners or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA or other
applicable regulatory authority can impose regulatory sanc ons including, among other things, refusal to approve a pending applica on for a
new product candidate, withdrawal of an approval or suspension of produc on. As a result, our business, financial condi on and results of
opera ons may be materially harmed.
Addi onally, if supply from one approved manufacturer is interrupted, an alterna ve manufacturer would need to be qualified through a
PAS, NDA supplement or MAA varia on or equivalent foreign regulatory filing, which could result in further delay. The regulatory agencies may
also require addi onal studies if a new manufacturer is relied upon for commercial produc on. Switching manufacturers may involve
substan al costs and is likely to result in a delay in our desired clinical and commercial melines.
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These factors could cause us to incur addi onal costs and could cause the delay or termina on of clinical studies, regulatory submissions,
required approvals or commercializa on of our product candidates. Furthermore, if our suppliers fail to meet contractual requirements and we
are unable to secure one or more replacement suppliers capable of produc on at a substan ally equivalent cost, our clinical studies may be
delayed or we could lose poten al revenue.
The structure of complex proteins used in protein-based therapeu cs is inherently variable and highly dependent on the processes and
condi ons used to manufacture them. If we are unable to develop manufacturing processes that achieve a requisite degree of biosimilarity
to the originator drug, and within a range of variability considered acceptable by regulatory authori es, we may not be able to obtain
regulatory approval for our biosimilar products.
Protein-based therapeu cs are inherently heterogeneous and their structures are highly dependent on the produc on process and
condi ons. Products from one produc on facility can differ within an acceptable range from those produced in another facility. Similarly,
physicochemical differences can also exist among different lots produced within a single facility. The physicochemical complexity and size of
biologic therapeu cs create significant technical and scien fic challenges in the context of their replica on as biosimilar products.
The inherent variability in protein structure from one produc on lot to another is a fundamental considera on with respect to
establishing biosimilarity to an originator product to support regulatory approval requirements. For example, the glycosyla on of the protein,
meaning the manner in which sugar molecules are a ached to the protein backbone of a therapeu c protein when it is produced in a living cell,
is cri cal to therapeu c efficacy, half-life, efficacy and even safety of the therapeu c and is therefore a key considera on for biosimilarity.
Defining and understanding the variability of an originator molecule in order to match its glycosyla on profile requires significant skill in cell
biology, protein purifica on and analy cal protein chemistry. Furthermore, manufacturing proteins with reliable and consistent glycosyla on
profiles at scale is challenging and highly dependent on the skill of the cell biologist and process scien st.
There are extraordinary technical challenges in developing complex protein-based therapeu cs that not only must achieve an acceptable
degree of similarity to the originator molecule in terms of characteris cs such as the unique glycosyla on pa ern, but also the ability to
develop manufacturing processes that can replicate the necessary structural characteris cs within an acceptable range of variability sufficient
to sa sfy regulatory authori es.
Given the challenges caused by the inherent variability in protein produc on, we may not be successful in developing our biosimilar
products if regulators conclude that we have not achieved a sufficient level of biosimilarity to the originator product, or that the processes we
use are unable to generate our products within an acceptable range of variability.
Risks Related to Adverse Events
Our products or our product candidates may cause undesirable side effects or have other proper es that could, as applicable, delay or
prevent their regulatory approval, limit the commercial profile of an approved label or result in significant nega ve consequences following
marke ng approval, if granted.
As with most pharmaceu cal products, use of our products or our product candidates could be associated with side effects or adverse
events, which can vary in severity (from minor reac ons to death) and frequency (infrequent or prevalent). Side effects or adverse events
associated with the use of our product candidates may be observed at any me, including in clinical trials or when a product is commercialized.
Undesirable side effects caused by our product candidates could cause us or regulatory authori es to interrupt, delay or halt clinical studies and
could result in a more restric ve label or the delay or denial of regulatory approval by the FDA or other comparable foreign authori es. Results
of our studies could reveal a high and unacceptable severity and prevalence of side effects such as toxicity or other safety issues and could
require us or our collabora on partners to perform addi onal studies or halt development or sale of these product candidates or expose us to
product liability lawsuits, which will harm our business. In such an event, we may be required by regulatory agencies to conduct addi onal
animal or human studies regarding the safety and efficacy of our product candidates, which we have not planned or an cipated or our studies
could be suspended or terminated, and the FDA or comparable foreign regulatory authori es could order us to cease further development of or
deny or withdraw approval of our product candidates for any or all targeted indica ons. There can be no assurance that we will resolve any
issues related to any product-related adverse events to the sa sfac on of the FDA or any other regulatory agency in a mely manner, if ever,
which could harm our business, prospects and financial condi on.
Addi onally, product quality characteris cs have been shown to be sensi ve to changes in process condi ons, manufacturing techniques,
equipment or sites and other such related considera ons, hence any manufacturing process changes we implement prior to or a er regulatory
approval could impact product safety and efficacy.
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Drug-related side effects could affect pa ent recruitment for clinical trials, the ability of enrolled pa ents to complete our studies or
result in poten al product liability claims. We currently carry product liability insurance and we are required to maintain product liability
insurance pursuant to certain of our license agreements. We believe our product liability insurance coverage is sufficient in light of our current
clinical programs; however, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us
against losses due to liability. A successful product liability claim or series of claims brought against us could adversely affect our results of
opera ons and business. In addi on, regardless of merit or eventual outcome, product liability claims may result in impairment of our business
reputa on, withdrawal of clinical study par cipants, costs due to related li ga on, distrac on of management’s a en on from our primary
business, ini a on of inves ga ons by regulators, substan al monetary awards to pa ents or other claimants, the inability to commercialize
our product candidates and decreased demand for our product candidates, if approved for commercial sale.
Addi onally, if one or more of our product candidates receives marke ng approval, and we or others later iden fy undesirable side
effects caused by such products, a number of poten ally significant nega ve consequences could result, including but not limited to:
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regulatory authori es may withdraw approvals of such product;
regulatory authori es may require addi onal warnings on the label;
we may be required to create a REMS plan, which could include a medica on guide outlining the risks of such side effects for
distribu on to pa ents, a communica on plan for healthcare providers and/or other elements to assure safe use;
we could be sued and held liable for harm caused to pa ents; and
our reputa on may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the par cular product candidate, if approved,
and could significantly harm our business, results of opera ons and prospects.
If we receive approval for our product candidates, regulatory agencies including the FDA and foreign regulatory agencies, regula ons
require that we report certain informa on about adverse medical events if those products may have caused or contributed to those adverse
events. The ming of our obliga on to report would be triggered by the date we become aware of the adverse event as well as the nature of
the event. We may fail to report adverse events we become aware of within the prescribed meframe. We may also fail to appreciate that we
have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is
unexpected or removed in me from the use of our products. If we fail to comply with our repor ng obliga ons, the FDA or foreign regulatory
agencies could take ac on including criminal prosecu on, the imposi on of civil monetary penal es, seizure of our products or extended delay
in approval or clearance of future products.
Adverse events involving an originator product, or other biosimilars of such originator product, may nega vely affect our business.
In the event that use of an originator product, or other biosimilar for such originator product, results in unan cipated side effects or
other adverse events, it is likely that our biosimilar product will be viewed comparably and may become subject to the same scru ny and
regulatory sanc ons as the originator product or other biosimilar, as applicable. Accordingly, we may become subject to regulatory
supervisions, clinical holds, product recalls or other regulatory ac ons for ma ers outside of our control that affect the originator product, or
other biosimilar, as applicable, if and un l we are able to demonstrate to the sa sfac on of our regulators that our biosimilar product is not
subject to the same issues leading to the regulatory ac on as the originator product or other biosimilar, as applicable.
Risks Related to Intellectual Property
If we infringe or are alleged to infringe intellectual property rights of third par es, our business could be harmed. Third-party claims of
intellectual property infringement may prevent or delay our development and commercializa on efforts.
Our commercial success depends in large part on avoiding infringement of the patents and proprietary rights of third par es. There have
been many lawsuits and other proceedings involving patent and other intellectual property rights in the pharmaceu cal industry, including
patent infringement lawsuits, interferences, opposi ons and reexamina on proceedings before the USPTO and corresponding foreign patent
offices. Numerous United States and foreign issued patents and pending patent applica ons, which are owned by third par es, exist in the
fields in which we are developing product candidates. As the pharmaceu cal industry expands and more patents are issued, the risk increases
that our product candidates may be subject to claims of infringement of the patent rights of third par es.
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Our research, development and commercializa on ac vi es may infringe or otherwise violate or be claimed to infringe or otherwise
violate patents owned or controlled by other par es. The companies that originated the products for which we introduced biosimilar versions,
such as Amgen, AbbVie and Genentech, as well as other compe tors (including other companies developing biosimilars) have developed, and
are con nuing to develop, worldwide patent por olios of varying sizes and breadth, many of which are in fields rela ng to our business, and it
may not always be clear to industry par cipants, including us, which patents cover various types of products or methods of use.
Third par es may assert that we are employing their proprietary technology without authoriza on. We are aware of third-party patents
or patent applica ons with claims, for example, to composi ons, formula ons, methods of manufacture or methods for treatment related to
the use or manufacture of our product candidates. While we have conducted freedom to operate analyses with respect to our products and our
product candidates, including our in-licensed biosimilar candidates, as well as our pipeline candidates, we cannot guarantee that any of our
analyses are complete and thorough, nor can we be sure that we have iden fied each patent and pending applica on in the United States and
abroad that is relevant or necessary to the commercializa on of our product candidates. Moreover, because patent applica ons can take many
years to issue, there may be currently pending patent applica ons that may later result in issued patents covering our product candidates. With
respect to products we are evalua ng for inclusion in our future product pipeline, our freedom to operate analyses, including our research on
the ming of poten ally relevant patent expira ons, are ongoing.
There may also be patent applica ons that have been filed but not published and if such applica ons issue as patents, they could be
asserted against us. For example, in most cases, a patent filed today would not become known to industry par cipants for at least 18 months
given patent rules applicable in most jurisdic ons, which do not require publica on of patent applica ons un l 18 months a er filing.
Moreover, some United States patents may issue without any prior publica on in cases where the patent applicant does not also make a
foreign filing. We may also face claims from non-prac cing en es that have no relevant product revenue and against whom our own patent
por olio may have no deterrent effect. In addi on, coverage of patents is subject to interpreta on by the courts, and the interpreta on is not
always uniform. If we are sued for patent infringement, we would need to demonstrate that our product candidates, products or methods
either do not infringe the patent claims of the relevant patent or that the patent claims are invalid and/or unenforceable, and we may not be
able to do this. Proving that a patent is invalid or unenforceable is difficult. For example, in the United States, proving invalidity requires a
showing of clear and convincing evidence to overcome the presump on of validity enjoyed by issued patents. Also, in proceedings before
courts in Europe, the burden of proving invalidity of the patent usually rests on the party alleging invalidity. Even if we are successful in these
proceedings, we may incur substan al costs and the me and a en on of our management and scien fic personnel could be diverted in
pursuing these proceedings, which could have a material adverse effect on us. In addi on, we may not have sufficient resources to bring these
ac ons to a successful conclusion.
Third par es could bring claims against us that would cause us to incur substan al expenses and, if successful against us, could cause us
to pay substan al monetary damages. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay
research, development, manufacturing or sales of the product or product candidate that is the subject of the suit. Ul mately, we could be
prevented from commercializing a product or be forced to cease some aspect of our business opera ons, if, as a result of actual or threatened
patent infringement claims, we are unable to enter into licenses on commercially acceptable terms or at all. If, as a result of patent
infringement claims or to avoid poten al claims, we choose or are required to seek licenses from third par es, these licenses may not be
available on acceptable terms or at all. Even if we are able to obtain a license, the license may obligate us to pay substan al license fees or
royal es or both, and the rights granted to us might be nonexclusive, which could result in our compe tors gaining access to the same
intellectual property. Par es making claims against us may obtain injunc ve or other equitable relief, which could effec vely block our ability to
further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would likely
involve substan al li ga on expense and would likely be a substan al diversion of employee resources from our business. In the event of a
successful claim of infringement against us, we may, in addi on to being blocked from the market, have to pay substan al monetary damages,
including treble damages and a orneys’ fees for willful infringement, pay royal es, redesign our infringing products or obtain one or more
licenses from third par es, which may be impossible or require substan al me and monetary expenditure.
On May 10, 2017, Amgen Inc. and Amgen Manufacturing Inc. filed an ac on against us in the United States District Court for the District
of Delaware alleging infringement of one or more claims of Amgen’s US patent 8,273,707 (the “‘707 patent”) under 35 U.S.C. § 271. The
complaint seeks injunc ve relief, monetary damages and a orney fees. On December 7, 2017, the United States Magistrate Judge issued under
seal a Report and Recommenda on to the District Court recommending that the District Court grant, with prejudice, our pending mo on to
dismiss Amgen’s complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). On March 26, 2018, Judge Stark of
the District Court adopted the United States Magistrate Judge’s Report and Recommenda on to grant our mo on pursuant to Federal Rule of
Civil Procedure 12(b)(6) to dismiss with prejudice the patent infringement complaint alleging infringement of the ‘707 patent on the grounds
that such complaint failed to state a claim upon which relief may be granted. In May 2018, Amgen filed a No ce of Appeal in the United States
Court of Appeals for the Federal Circuit. We and Amgen filed briefs in this ma er and oral argument
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was held on May 8, 2019. On July 29, 2019, the Federal Circuit issued a preceden al opinion affirming the District Court’s judgment in our favor.
The Federal Circuit held that the doctrine of prosecu on history estoppel barred Amgen from succeeding on its infringement claim and affirmed
the District Court’s dismissal. In a Joint Status Report, dated September 20, 2019, Amgen stated that it does not intend to further appeal the
Federal Circuit’s decision. On October 11, 2019, we filed a Mo on for A orneys’ Fees with the District Court. Amgen filed its Answering Brief in
Opposi on on November 8, 2019. On November 22, 2019, we filed our Reply Brief with the District Court. On November 30, 2020, the District
Court issued an order denying our mo on.
On January 24, 2019, we entered into se lement and license agreements with AbbVie, which grant us global, royalty-bearing, non-
exclusive license rights under AbbVie’s intellectual property to commercialize YUSIMRY. The global se lements resolved all the pending disputes
between the par es related to YUSIMRY. Under the United States se lement, our license period in the United States commenced on July 1,
2023.
In addi on to infringement claims against us, we may become a party to other patent li ga on and other proceedings, including
interference, IPR, deriva on or post-grant proceedings declared or granted by the USPTO and similar proceedings in foreign countries, regarding
intellectual property rights with respect to our current or future products. An unfavorable outcome in any such proceeding could require us to
cease using the related technology or to a empt to license rights to it from the prevailing party or could cause us to lose valuable intellectual
property rights. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms, if any
license is offered at all. Li ga on or other proceedings may fail and, even if successful, may result in substan al costs and distract our
management and other employees. We may also become involved in disputes with others regarding the ownership of intellectual property
rights. For example, we jointly develop intellectual property with certain par es, and disagreements may therefore arise as to the ownership of
the intellectual property developed pursuant to these rela onships. If we are unable to resolve these disputes, we could lose valuable
intellectual property rights.
Third par es may submit applica ons for patent term extensions in the United States or other jurisdic ons where similar extensions are
available and/or Supplementary Protec on Cer ficates in the E.U. states and Switzerland seeking to extend certain patent protec on, which, if
approved, may interfere with or delay the launch of one or more of our products.
The cost to us of any patent li ga on or other proceeding, even if resolved in our favor, could be substan al. Patent li ga on and other
proceedings may fail, and even if successful, may result in substan al costs and distract our management and other employees. The companies
that originated the products for which we intend to introduce biosimilar versions, as well as other compe tors (including other biosimilar
companies) may be able to sustain the costs of such li ga on or proceedings more effec vely than we can because of their substan ally greater
financial resources. Uncertain es resul ng from the ini a on and con nua on of patent li ga on or other proceedings could impair our ability
to compete in the marketplace.
We do not know whether any of our pending patent applica ons will result in the issuance of any patents or whether the rights granted
under any patents issuing from these applica ons will prevent any of our compe tors from marke ng similar products that may be compe ve
with our own. Moreover, even if we do obtain issued patents, they will not guarantee us the right to use our patented technology for
commercializa on of our product candidates. Third par es may have blocking patents that could prevent us from commercializing our own
products, even if our products use or embody our own, patented inven ons.
The validity and enforceability of patents are generally uncertain and involve complex legal and factual ques ons. Any patents that may
be issued on our pending applica ons may be challenged, invalidated or circumvented, which could limit our ability to stop compe tors from
marke ng products similar to ours. Furthermore, our compe tors may develop similar or alterna ve technologies not covered by any patents
that may issue to us.
For technologies for which we do not seek patent protec on, we may rely on trade secrets to protect our proprietary posi on. However,
trade secrets are difficult to protect. We seek to protect our technology and product candidates, in part, by entering into confiden ality
agreements with those who have access to our confiden al informa on, including our employees, consultants, advisors, contractors or
collaborators. We also seek to preserve the integrity and confiden ality of our proprietary technology and processes by maintaining physical
security of our premises and physical and electronic security of our informa on technology systems. While we have confidence in these
individuals, organiza ons and systems, agreements or security measures may be breached, and we may not have adequate remedies for any
breach. In addi on, our trade secrets may otherwise become known or be independently discovered by compe tors. To the extent that our
employees, consultants, advisors, contractors and collaborators use intellectual property owned by others in their work for us, disputes may
arise as to the rights in related or resul ng know-how and inven ons.
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We may be involved in lawsuits or IPR proceedings to protect or enforce our patents, which could be expensive, me consuming and
unsuccessful.
We may discover that compe tors are infringing our issued patents. Expensive and me-consuming li ga on may be required to abate
such infringement. We may not prevail in any lawsuits that we ini ate and the damages or other remedies awarded, if any, may not be
commercially meaningful. If we or one of our collabora on partners were to ini ate legal proceedings against a third party to enforce a patent
covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or
unenforceable. In patent li ga on in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace.
Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including but not limited to lack of
novelty, obviousness or non-enablement. Grounds for an unenforceability asser on could include an allega on that someone involved in the
prosecu on of the patent withheld relevant or material informa on related to the patentability of the inven on from the USPTO or made a
misleading statement during prosecu on. The outcome following legal asser ons of invalidity and unenforceability is unpredictable.
Interference proceedings provoked by third par es or brought by us or declared by the USPTO may be necessary to determine the
priority of inven ons with respect to our patents or patent applica ons. An unfavorable outcome could require us to cease using the related
technology or to a empt to license rights to it from the prevailing party. Our business could be harmed if we cannot obtain a license from the
prevailing party on commercially reasonable terms. Third par es may request an IPR of our patents in the USPTO. An unfavorable decision may
result in the revoca on of our patent or a limita on to the scope of the claims of our patents. Our defense of li ga on, interference or IPR
proceedings may fail and, even if successful, may result in substan al costs and distract our management and other employees. In addi on, the
uncertain es associated with li ga on could have a material adverse effect on our ability to raise the funds necessary to con nue our clinical
trials, con nue our research programs, license necessary technology from third par es or enter into development partnerships that would help
us bring our product candidates to market.
Furthermore, because of the substan al amount of discovery required in connec on with intellectual property li ga on, there is a risk
that some of our confiden al informa on could be compromised by disclosure during any li ga on we ini ate to enforce our patents. There
could also be public announcements of the results of hearings, mo ons or other interim proceedings or developments. If securi es analysts or
investors perceive these results to be nega ve, it could have a material adverse effect on the price of our common stock.
We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confiden al
informa on of third par es or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
We employ individuals, retain independent contractors and consultants and members on our board of directors or scien fic advisory
board who were previously employed at universi es or other pharmaceu cal companies, including our compe tors or poten al compe tors.
For example, our Chief Execu ve Officer, Dennis M. Lanfear, is a former employee of Amgen. Mr. Lanfear was employed at Amgen during
periods when Amgen’s opera ons included the development and commercializa on of Neulasta. Senior members of our commercial team and
medical affairs team who were responsible for the launch of addi onal presenta ons of UDENYCA formerly held posi ons at Amgen. Our board
of directors and scien fic advisory board include members who were former employees of Genentech, Amgen and Abbo Laboratories.
Although we have procedures in place to try to ensure that our employees, consultants and independent contractors do not use the proprietary
informa on or know-how of others in their work for us, we may be subject to claims that we or our employees or consultants have
inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary informa on, of a former
employer or other third par es. Li ga on may be necessary to defend against these claims. If we fail in defending any such claims, in addi on
to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if
we are successful in defending against such claims, li ga on could result in substan al costs and be a distrac on to management and other
employees.
On March 3, 2017, Amgen filed an ac on against us, KBI Biopharma, our employee Howard S. Weiser and Does 1-20 in the Superior Court
of the State of California, County of Ventura. The complaint, which was amended, alleged that we engaged in unfair compe on and
improperly solicited and hired certain former Amgen employees in order to acquire and access trade secrets and other confiden al informa on
belonging to Amgen. The complaint, as amended, sought injunc ve relief and monetary damages. On May 2, 2019, we and Amgen se led the
trade secret ac on brought by Amgen. The details of the se lement are confiden al, but we will con nue to market UDENYCA and began
paying a mid-single digit royalty to Amgen for five years star ng on July 1, 2019.
If we fail to comply with our obliga ons in the agreements under which we license intellectual property and other rights from third par es
or otherwise experience disrup ons to our business rela onships with our licensors, we could lose license rights that are important to our
business.
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We are a party to certain non-exclusive intellectual property license agreements with certain vendors (pertaining to mammalian cell lines)
and with AbbVie (pertaining to AbbVie’s intellectual property related to YUSIMRY) that are important to our business, and we expect to enter
into addi onal license agreements in the future. Our exis ng license agreements impose, and we expect that future license agreements will
impose, various diligence, milestone payment, royalty and other obliga ons on us. If we fail to comply with our obliga ons under these
agreements or we are subject to a bankruptcy, we may be required to make certain payments to the licensor, we may lose the license or the
licensor may have the right to terminate the license, in which event we would not be able to develop or market products covered by the
license. Addi onally, the milestone and other payments associated with these licenses will make it less profitable for us to develop our product
candidates.
In the event we breach any of our obliga ons related to such agreements, we may incur significant liability to our licensing partners.
Disputes may arise regarding intellectual property subject to a licensing agreement, including but not limited to:
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the scope of rights granted under the license agreement and other interpreta on-related issues;
the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the
licensing agreement;
the sublicensing of patents and other rights;
our diligence obliga ons under the license agreement and what ac vi es sa sfy those diligence obliga ons;
the ownership of inven ons and know-how resul ng from the joint crea on or use of intellectual property by our licensors and us
and our collaborators; and
the priority of inven on of patented technology.
If disputes over intellectual property and other rights that we have licensed prevent or impair our ability to maintain our current licensing
arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates and that
could have a material adverse effect on our business.
We may not be successful in obtaining or maintaining necessary rights to our products and product candidates through acquisi ons and in-
licenses.
We currently have rights to certain intellectual property, through licenses from third par es and under patent applica ons that we own,
to develop and commercialize our products and product candidates. Because we may find that our programs require the use of proprietary
rights held by third par es, the growth of our business may depend in part on our ability to acquire, in-license or use these proprietary rights.
We may be unable to acquire or in-license composi ons, methods of use, processes or other third-party intellectual property rights from third
par es that we iden fy as necessary for our product candidates. The licensing and acquisi on of third-party intellectual property rights is a
compe ve area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual
property rights that we may consider a rac ve. These established companies may have a compe ve advantage over us due to their size,
financial resources and greater clinical development and commercializa on capabili es. In addi on, companies that perceive us to be a
compe tor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights
on terms that would allow us to make an appropriate return on our investment. We may also get into disputes or li ga on with third par es
from whom we license intellectual property rights necessary for the sale of our products. For example, on June 6, 2023 we received a no ce
le er from AbbVie alleging that we breached our se lement and license agreement with AbbVie (the “AbbVie Agreement”), which grants us a
royalty-bearing, non-exclusive license under AbbVie’s intellectual property rights to commercialize YUSIMRY in the United States commencing
on July 1, 2023, because of our announcement on June 1, 2023 of our pricing agreement with Mark Cuban Cost Plus Drug Company, PBC and its
plans to offer YUSIMRY to its customers beginning in July 2023. The par es engaged in discussions to resolve the dispute and on June 14, 2023
entered into a s pula on resolving our mo on for temporary restraining order, whereby AbbVie agreed that it will not seek to terminate the
AbbVie Agreement based on its June 6, 2023 no ce and that it will not terminate the AbbVie Agreement unless it first serves a new no ce of
breach and affords us an opportunity to cure any alleged breach. While we remain in discussion with AbbVie, the li ga on is ongoing and there
can be no guarantee we will reach resolu on.
If we are unable to successfully obtain required third-party intellectual property rights or maintain the exis ng intellectual property rights
we have, we may have to abandon development of that program and our business and financial condi on could suffer.
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Our ability to market our biosimilar products in the United States may be significantly delayed or prevented by the BPCIA patent dispute
resolu on mechanism.
The BPCIA created an elaborate and complex patent dispute resolu on mechanism for biosimilars that, if we choose to implement it,
could prevent us from launching our product candidates in the United States or could substan ally delay such launches. However, even if we
elect not to implement this mechanism, the launch of our products in the United States could s ll be prevented or substan ally delayed by
intellectual property disputes with originator companies that market the reference products on which our biosimilar products are based.
The BPCIA establishes a patent disclosure and briefing process between the biosimilar applicant and the originator that is demanding and
me-sensi ve. While certain aspects of this process are s ll being tested in the federal courts, the United States Supreme Court, as discussed
further below, ruled in 2017 that this process is not mandatory, such that a biosimilar applicant may elect to engage in this process, but is not
required to do so. The following is an overview of the patent exchange and patent briefing procedures established by the BPCIA for biosimilar
applicants that elect to employ them:
1. Disclosure of the Biosimilar Applica on. Within 20 days a er the FDA publishes a no ce that its applica on has been accepted
for review, a Sec on 351(k) biosimilar applicant may elect to provide a copy of its applica on to the originator if it chooses to
engage in the BPCIA patent exchange mechanism.
2.
3.
4.
5.
6.
Iden fica on of Per nent Patents. Within 60 days of the date of receipt of the applica on the originator must iden fy patents
owned or controlled by the originator, which it believes could be asserted against the biosimilar applicant.
Statement by the Biosimilar Applicant. Following the receipt of the originator’s patent list, the biosimilar applicant must state
either that it will not market its product un l the relevant patents have expired or alterna vely provide its arguments that the
patents are invalid, unenforceable or would not be infringed by the proposed biosimilar product candidate. The biosimilar
applicant may also provide the originator with a list of patents it believes the brand-name firm could assert against the
reference product.
Statement by the Originator. In the event the biosimilar applicant has asserted that the patents are invalid, unenforceable or
would not be infringed by the proposed follow-on product, the originator must provide the biosimilar applicant with a response
within 60 days. The response must provide the legal and factual basis of the opinion that such patent will be infringed by the
commercial marke ng of the proposed biosimilar.
Patent Resolu on Nego a ons. If the originator provides its detailed views that the proposed biosimilar would infringe valid
and enforceable patents, then the par es are required to engage in good faith nego a ons to iden fy which of the discussed
patents will be the subject of a patent infringement ac on. If the par es agree on the patents to be li gated, the brand-name
firm must bring an ac on for patent infringement within 30 days.
Simultaneous Exchange of Patents. If those nego a ons do not result in an agreement within 15 days, then the biosimilar
applicant must no fy the originator of how many patents (but not the iden ty of those patents) that it wishes to li gate. Within
five days, the par es are then required to exchange lists iden fying the patents to be li gated. The number of patents iden fied
by the originator may not exceed the number provided by the biosimilar applicant. However, if the biosimilar applicant
previously indicated that no patents should be li gated, then the originator may iden fy one patent.
7. Commencement of Patent Li ga on. The originator must then commence patent infringement li ga on within 30 days. That
li ga on will involve all of the patents on the originator’s list and all of the patents on the follow-on applicant’s list. The follow-
on applicant must then no fy the FDA of the li ga on. The FDA must then publish a no ce of the li ga on in the Federal
Register.
8. No ce of Commercial Marke ng. The BPCIA requires the biosimilar applicant to provide no ce to the originator 180 days in
advance of its first commercial marke ng of its proposed follow-on biologic. The originator is allowed to seek a preliminary
injunc on blocking such marke ng based upon any patents that either party had preliminarily iden fied but were not subject to
the ini al phase of patent li ga on. The li gants are required to “reasonably cooperate to expedite such further discovery as is
needed” with respect to the preliminary injunc on mo on. The federal courts have not yet se led the issue as to when, or
under what circumstances, the biosimilar applicant must provide the 180-day no ce of commercial marke ng provided in the
BPCIA.
On June 12, 2017, the Supreme Court issued its decision in Amgen v. Sandoz, holding that (i) the “patent dance” is op onal; and (ii) the
180-day pre-marke ng no fica on may be given either before or a er receiving FDA approval of the biosimilar product. The Supreme Court
declined to rule whether a state injunc ve remedy may be available to the originator and remanded that ques on to the Federal
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Circuit for further considera on. On December 14, 2017, the Federal Circuit decided that state law claims are preempted by the BPCIA on both
field and conflict grounds.
A significant legal risk for a biosimilar applicant that pursues regulatory approval under the Sec on 351(k) regulatory approval route and
also elects to engage in the above-described BPCIA patent exchange mechanism, is that the process could result in the ini a on of patent
infringement li ga on prior to FDA approval of a Sec on 351(k) applica on, and such li ga on could result in blocking the market entry of the
biosimilar product. However, even if biosimilar applicants opt out of the BPCIA patent exchange process, originators will s ll have the right to
assert patent infringement as a basis to enjoin a biosimilar product launch. Thus, whether or not we engage in the BPCIA patent exchange
process, there is risk that patent infringement li ga on ini ated by originators could prevent us indefinitely from launching our biosimilar
products.
The legal and strategic considera ons weighing for or against a decision to voluntarily engage in the BPCIA patent exchange process are
complex and will differ on a product-by-product basis. If we decide to engage in the BPCIA patent exchange process, preparing for and
conduc ng the patent exchange, briefing and nego a on process outlined above will require extraordinarily sophis cated legal counseling and
extensive planning, all under extremely ght deadlines. Moreover, it may be difficult for us to secure or retain such legal support if large, well-
funded originators have already entered into engagements with highly qualified law firms or if the most highly qualified law firms choose not to
represent biosimilar applicants due to their long-standing rela onships with originators.
Under the complex, and uncertain rules of the BPCIA patent provisions, coupled with the inherent uncertainty surrounding the legal
interpreta on of any originator patents that might be asserted against us in this new process, we see substan al risk that the BPCIA process
may significantly delay or defeat our ability to market our biosimilar products in the United States, or may result in us incurring substan al legal
se lement costs.
Risks Related to the Discovery and Development of Our Product Candidates
We are heavily dependent on the development, clinical success, regulatory approval and commercial success of our product candidates. We
cannot give any assurance that any of our product candidates will receive regulatory approval, which is necessary before they can be
commercialized.
We invested substan ally all of our efforts and financial resources to iden fy, acquire and develop our product candidates. Our future
success is dependent on our ability to develop, obtain regulatory approval for, and then commercialize and obtain adequate third-party
coverage and reimbursement for one or more of our product candidates. We currently have three approved products: UDENYCA, YUSIMRY and
LOQTORZI.
Our product candidates are in varying stages of development and will require addi onal clinical development, management of
nonclinical, clinical and manufacturing ac vi es, regulatory approval, adequate manufacturing supplies, commercial organiza on and
significant marke ng efforts before we generate any revenue from product sales. Other than certain pharmacokine c bridging studies, we have
not ini ated phase 3 clinical trials for other product candidates in our pipeline. It may be some me before we file for market approval with the
relevant regulatory agencies for these product candidates.
We cannot be certain that any of our product candidates will be successful in clinical trials or receive regulatory approval. Further, our
product candidates may not receive regulatory approval even if they are successful in clinical trials. If we and our exis ng or future collabora on
partners do not receive regulatory approvals for our product candidates, we may not be able to con nue our opera ons.
We, together with our collabora on partners, generally plan to seek regulatory approval to commercialize our product candidates in the
United States, the E.U., and addi onal foreign countries where we or our partners have commercial rights. To obtain regulatory approval, we
and our collabora on partners must comply with numerous and varying regulatory requirements of such countries regarding safety, efficacy,
chemistry, manufacturing and controls, clinical studies, commercial sales, and pricing and distribu on of our product candidates. Even if we and
our collabora on partners are successful in obtaining approval in one jurisdic on, we cannot ensure that we will obtain approval in any other
jurisdic ons. If we and our collabora on partners are unable to obtain approval for our product candidates in mul ple jurisdic ons, our
revenue and results of opera ons could be nega vely affected.
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The regulatory approval processes of the FDA, EMA and comparable foreign authori es are lengthy, me consuming and inherently
unpredictable, and the regulatory approval requirements for biosimilars are evolving. If we and our collabora on partners are ul mately
unable to obtain regulatory approval for our product candidates, our business will be substan ally harmed.
The research, development, tes ng, manufacturing, labeling, packaging, approval, promo on, adver sing, storage, marke ng,
distribu on, post-approval monitoring and repor ng and export and import of biologic and biosimilar products are subject to extensive
regula on by the FDA and other regulatory authori es in the United States, by the EMA and EEA Competent Authori es in the European
Economic Area (“EEA”), and by other regulatory authori es in other countries, where regula ons differ from country to country. Neither we nor
any exis ng or future collabora on partners are permi ed to market our product candidates in the United States un l we and our collabora on
partners receive approval from the FDA, or in the EEA un l we and our collabora on partners receive EC or EEA Competent Authority approvals.
The me required to develop new products or obtain approval for new products by the FDA and comparable foreign authori es is
unpredictable, may take many years following the comple on of clinical studies and depends upon numerous factors. Further, applica ons to
the Human Gene c Resources Administra on of China (HGRAC) required for any ac vi es, including development ac vi es and data sharing
with our partners in China, may result in product development delays. In addi on, approval policies, regula ons or the type and amount of
clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among
jurisdic ons, which may cause delays in the approval or the decision not to approve an applica on. Neither we nor any collabora on partner
has obtained regulatory approval for any of our products and product candidates, other than UDENYCA, which has received approval from the
FDA and EMA, YUSIMRY, which has received approval from the FDA, and LOQTORZI, which has received approval from the FDA and is also
approved for use in China, and it is possible that none of our other current or future product candidates will ever obtain addi onal regulatory
approvals.
Applica ons for our product candidates could fail to receive regulatory approval for many reasons, including but not limited to the
following:
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the data collected from clinical studies of our product candidates may not be sufficient to support the submission of an original
BLA, an NDA, a Sec on 351(k) BLA, a biosimilar marke ng authoriza on under Ar cle 6 of Regula on (EC) No. 726/2004 and/or
Ar cle 10(4) of Direc ve 2001/83/EC in the EEA or other submission or to obtain regulatory approval in the United States, the EEA
or elsewhere;
the FDA or comparable foreign regulatory authori es may disagree with the design or implementa on of our clinical studies;
the FDA may determine that the popula on studied in the clinical program may not be sufficiently broad or representa ve to
assure safety and efficacy in the full popula on for which we seek approval, or that conclusions of clinical trials conducted in a
single country or region outside the United States may not be generalizable to the pa ent popula on in the United States;
the FDA or comparable foreign regulatory authori es may disagree with our interpreta on of data from analy cal and bioanaly cal
studies, nonclinical studies or clinical studies;
we may be unable to demonstrate to the FDA or comparable foreign regulatory authori es that a product candidate’s risk-benefit
ra o for its proposed indica on is acceptable;
the FDA or comparable foreign regulatory authori es may fail to approve the manufacturing processes, test procedures and
specifica ons or facili es of our collaborators or third-party manufacturers with which we contract for clinical and commercial
supplies; and
the approval policies or regula ons of the FDA or comparable foreign regulatory authori es may significantly change in a manner
rendering our clinical data insufficient for approval.
This approval process, as well as the unpredictability of the results of clinical studies, may result in our failure to obtain regulatory
approval to market any of our product candidates, which would significantly harm our business. Any delays in the commencement or
comple on of clinical tes ng could significantly impact our product development costs and could result in the need for addi onal financing.
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Clinical drug development involves a lengthy and expensive process and we may encounter substan al delays in our clinical studies or may
fail to demonstrate safety and efficacy to the sa sfac on of applicable regulatory authori es.
Before obtaining marke ng approval from regulatory authori es for the sale of our product candidates, we or our collabora on partners,
or both, as the case may be, must conduct clinical studies to demonstrate the safety and efficacy of the product candidates in humans.
Clinical tes ng is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any me
during the clinical study process. The results of preclinical studies and early clinical studies of our product candidates may not be predic ve of
the results of later-stage clinical studies. Product candidates that have shown promising results in early-stage clinical studies may s ll suffer
significant setbacks in subsequent registra on clinical studies. There is a high failure rate for product candidates proceeding through clinical
studies, and product candidates in later stages of clinical studies may fail to show the desired safety and efficacy traits despite having
progressed through preclinical studies and ini al clinical studies. A number of companies in the biopharmaceu cal industry have suffered
significant setbacks in advanced clinical studies due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier
studies. Nonclinical and clinical data are also o en suscep ble to varying interpreta ons and analyses. We do not know whether any clinical
studies we may conduct for our product candidates will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval.
Furthermore, biosimilar clinical studies must use originator products as comparators, and such supplies may not be available on a mely basis
to support such trials.
We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. A failure of one or more
clinical studies can occur at any stage of tes ng, and our future clinical studies may not be successful. Events that may prevent successful or
mely comple on of clinical development include but are not limited to:
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inability to generate sufficient preclinical, toxicology or other in vivo or in vitro data to support the ini a on of human clinical
studies;
delays in reaching a consensus with regulatory agencies on study design;
delays in reaching agreement on acceptable terms with prospec ve CROs, and clinical study sites, the terms of which can be
subject to extensive nego a on and may vary significantly among different CROs and clinical study sites;
delays in obtaining required IRB approval at each clinical study site;
imposi on of a clinical hold by regulatory agencies, a er review of an IND or amendment or equivalent applica on or amendment,
or an inspec on of our clinical study opera ons or study sites or as a result of adverse events reported during a clinical trial;
delays in recrui ng suitable pa ents to par cipate in our clinical studies sponsored by us or our partners;
difficulty collabora ng with pa ent groups and inves gators;
failure by our CROs, other third par es or us to adhere to clinical study requirements;
failure to perform in accordance with the FDA’s good clinical prac ces requirements or applicable regulatory guidelines in other
countries;
delays in pa ents comple ng par cipa on in a study or return for post-treatment follow-up, or pa ents dropping out of a study;
occurrence of adverse events associated with the product candidate that are viewed to outweigh its poten al benefits;
changes in regulatory requirements and guidance that require amending or submi ng new clinical protocols;
the cost of clinical studies of our product candidates being greater than we an cipate;
clinical studies of our product candidates producing nega ve or inconclusive results, which may result in us deciding or regulators
requiring us to conduct addi onal clinical studies or abandon product development programs; and
delays in manufacturing, tes ng, releasing, valida ng or impor ng/expor ng and/or distribu ng sufficient stable quan es of our
product candidates and originator products for use in clinical studies or the inability to do any of the foregoing.
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Any inability to successfully complete nonclinical and clinical development could result in addi onal costs to us or impair our ability to
generate revenue. In addi on, if we make manufacturing or formula on changes to our product candidates, we may need to conduct addi onal
studies to bridge our modified product candidates to earlier versions.
If we encounter difficul es enrolling pa ents in our clinical trials, our clinical development ac vi es could be delayed or otherwise adversely
affected.
Pa ent enrollment is a significant factor in the ming of clinical trials, and the ming of our clinical trials will depend, in part, on the
speed at which we can recruit pa ents to par cipate in our trials, as well as comple on of required follow-up periods. We may not be able to
ini ate or con nue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible pa ents to
par cipate in these trials to such trial’s conclusion as required by the FDA or other comparable regulatory authori es. Some of the condi ons
for which we may plan to evaluate our product candidates are rare diseases with limited pa ent pools from which to draw for clinical trials. The
eligibility criteria of our clinical trials, once established, may further limit the pool of available trial par cipants.
Pa ent enrollment in clinical trials may be affected by other factors, including:
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size and nature of the targeted pa ent popula on;
severity of the disease or condi on under inves ga on;
availability and efficacy of approved therapies for the disease or condi on under inves ga on;
pa ent eligibility criteria for the trial in ques on as defined in the protocol;
perceived risks and benefits of the product candidate under study;
clinicians’ and pa ents’ percep ons as to the poten al advantages of the product candidate being studied in rela on to other
available therapies, including any products that may be approved for, or any product candidates under inves ga on for, the
indica ons we are inves ga ng;
efforts to facilitate mely enrollment in clinical trials;
pa ent referral prac ces of physicians;
the ability to monitor pa ents adequately during and a er treatment;
proximity and availability of clinical trial sites for prospec ve pa ents;
con nued enrollment of prospec ve pa ents by clinical trial sites; and
the risk that pa ents enrolled in clinical trials will drop out of such trials before comple on.
Addi onally, other pharmaceu cal companies targe ng these same diseases are recrui ng clinical trial pa ents from these pa ent
popula ons, which may make it more difficult to fully enroll any clinical trials. We also rely on, and will con nue to rely on, CROs and clinical
trial sites to ensure proper and mely conduct of our clinical trials and preclinical studies. Though we have entered into agreements governing
their services, we will have limited influence over their actual performance. Our inability to enroll a sufficient number of pa ents for our clinical
trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials
may result in increased development costs for our product candidates and jeopardize our ability to obtain regulatory approval for the sale of
our product candidates.
The development, manufacture and commercializa on of biosimilar products under various global regulatory pathways pose unique risks.
We and our collabora on partners intend to pursue market authoriza on globally. In the United States, an abbreviated pathway for
approval of biosimilar products was established by the BPCIA, enacted on March 23, 2010, as part of the ACA. The BPCIA established this
abbreviated pathway under Sec on 351(k) of the PHSA. Subsequent to the enactment of the BPCIA, the FDA issued guidance documents
regarding the demonstra on of biosimilarity and interchangeability as well as the submission and review of biosimilar applica ons. Moreover,
market acceptance of biosimilar products in the United States is unclear. Numerous states are considering or have already enacted laws that
regulate or restrict the subs tu on by state pharmacies of biosimilars for originator products already licensed by the FDA. Market success of
biosimilar products will depend on demonstra ng to pa ents, physicians, payers and relevant authori es that such products are similar in
quality, safety and efficacy as compared to the reference product.
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We will con nue to analyze and incorporate into our biosimilar development plans any final regula ons issued by the FDA, pharmacy
subs tu on policies enacted by state governments and other applicable requirements established by relevant authori es. The costs of
development and approval will be dependent upon the applica on of any laws and regula ons issued by the relevant regulatory authori es.
Biosimilar products may also be subject to extensive originator-controlled patent por olios and patent infringement li ga on, which may
delay and could prevent the commercial launch of a product. Moreover, the BPCIA prohibits the FDA from accep ng an applica on for a
biosimilar candidate to a reference product within four years of the reference product’s licensure by the FDA. In addi on, the BPCIA provides
innova ve biologics with 12 years of exclusivity from the date of their licensure, during which me the FDA cannot approve any applica on for
a biosimilar candidate to the reference product.
Under current E.U. regula ons, an applica on for regulatory approval of a biosimilar drug cannot be submi ed in the E.U. un l expira on
of an eight-year data exclusivity period for the reference (originator) product, measured from the date of the reference product’s ini al
marke ng authoriza on. Furthermore, once approved, the biosimilar cannot be marketed un l expira on of a ten-year period following the
ini al marke ng authoriza on of the reference product, such ten-year period being extendible to 11 years if the reference product received
approval of an addi onal therapeu c indica on, within the first eight years following its ini al marke ng authoriza on, represen ng a
significant clinical benefit in comparison with exis ng therapies.
In Europe, the approval of a biosimilar for marke ng is based on an opinion issued by the EMA and a decision issued by the EC. Therefore,
the marke ng approval will cover the en re EEA. However, subs tu on of a biosimilar for the originator is a decision that is made at the
na onal level. Addi onally, a number of countries do not permit the automa c subs tu on of biosimilars for the originator product. Therefore,
even if we obtain marke ng approval for the en re EEA, we may not receive subs tu on in one or more European na ons, thereby restric ng
our ability to market our products in those jurisdic ons.
Other regions, including Canada, Japan and South Korea, also have their own legisla on outlining a regulatory pathway for the approval
of biosimilars. In some cases, other countries have either adopted European guidance (Singapore and Malaysia) or are following guidance
issued by the World Health Organiza on (Cuba and Brazil). While there is overlap in the regulatory requirements across regions, there are also
some areas of non-overlap. Addi onally, we cannot predict whether countries that we may wish to market in which do not yet have an
established or tested regulatory framework could decide to issue regula ons or guidance and/or adopt a more conserva ve viewpoint than
other regions. Therefore, it is possible that even if we obtain agreement from one health authority to an accelerated or op mized development
plan, we will need to defer to the most conserva ve view to ensure global harmoniza on of the development plan. Also, for regions where
regulatory authori es do not yet have sufficient experience in the review and approval of a biosimilar product, these authori es may rely on
the approval from another region (e.g., the United States or the E.U.), which could delay our approval in that region. Finally, it is possible that
some countries will not approve a biosimilar without clinical data from their popula on or may require that the biosimilar product be
manufactured within their region, or some countries may require both.
If other biosimilars of pegfilgras m (Neulasta) or adalimumab (Humira) are determined to be interchangeable and our biosimilar products
are not, our business could suffer.
The FDA or other relevant regulatory authori es may determine that a proposed biosimilar product is “interchangeable” with a reference
product, meaning that the biosimilar product may be subs tuted for the reference product without the interven on of the health care provider
who prescribed the reference product, if the applica on includes sufficient informa on to show that the product is biosimilar to the reference
product and that it can be expected to produce the same clinical result as the reference product in any given pa ent. If the biosimilar product
may be administered more than once to a pa ent, the applicant must demonstrate that the risk in terms of safety or diminished efficacy of
alterna ng or switching between the biosimilar product and the reference product is not greater than the risk of using the reference product
without such alterna on or switch. To make a final determina on of interchangeability, regulatory authori es may require addi onal
confirmatory informa on beyond what we plan to ini ally submit in our applica ons for approval, such as more in-depth analy cal
characteriza on, animal tes ng or further clinical studies. Provision of sufficient informa on for approval may prove difficult and expensive.
We cannot predict whether any of our biosimilar products and product candidates will meet regulatory authority requirements for
approval not only as a biosimilar product but also as an interchangeable product in any jurisdic on. Furthermore, legisla on governing
interchangeability could differ by jurisdic on on a state or na onal level worldwide.
The labelling of “interchangeability” is important because, in the United States for example, the first biosimilar determined to be
interchangeable with a par cular reference, or originator, product for any condi on of use is eligible for a period of market exclusivity that
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delays an FDA determina on that a second or subsequent biosimilar product is interchangeable with that originator product for any condi on
of use un l the earlier of: (1) one year a er the first commercial marke ng of the first interchangeable product; (2) 18 months a er resolu on
of a patent infringement suit ins tuted under 42 U.S.C. § 262(l)(6) against the applicant that submi ed the applica on for the first
interchangeable product, based on a final court decision regarding all of the patents in the li ga on or dismissal of the li ga on with or without
prejudice; (3) 42 months a er approval of the first interchangeable product, if a patent infringement suit ins tuted under 42 U.S.C. § 262(l)(6)
against the applicant that submi ed the applica on for the first interchangeable product is s ll ongoing; or (4) 18 months a er approval of the
first interchangeable product if the applicant that submi ed the applica on for the first interchangeable product has not been sued under
42 U.S.C. § 262(l)(6). Thus, a determina on that another company’s product is interchangeable with the originator biologic before we obtain
approval of our corresponding biosimilar product candidates may delay the poten al determina on that our products are interchangeable with
the originator product, which could materially adversely affect our results of opera ons and delay, prevent or limit our ability to generate
revenue.
Failure to obtain regulatory approval in any targeted regulatory jurisdic on would prevent us from marke ng our products to a larger
pa ent popula on and reduce our commercial opportuni es.
We are marke ng LOQTORZI, UDENYCA and YUSIMRY in the United States, and subject to product approvals and relevant patent and
se lement agreement expira ons, we intend to market our other biosimilar products in the United States and outside the United States on our
own or with future collabora on partners. We entered into a distribu on agreement with our licensee Orox for the commercializa on of
biosimilar versions of etanercept (Enbrel) (for which we discon nued development), rituximab (Rituxan) (for which we discon nued
development), adalimumab (Humira) and pegfilgras m (Neulasta) in certain Caribbean and La n American countries. We intend to market our
products in the United States and may seek to partner commercially all products outside the United States.
In order to market our products in the E.U., the United States and other jurisdic ons, we and our collabora on partners must obtain
separate regulatory approvals and comply with numerous and varying regulatory requirements. The EMA is responsible for the centralized
procedure for the regula on and approval of human medicines. This procedure results in a single marke ng authoriza on that is valid in all E.U.
countries, as well as in Iceland, Liechtenstein and Norway. The me required to obtain approval abroad may differ from that required to obtain
FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval and we may not
obtain foreign regulatory approvals on a mely basis, if at all. Approval by the FDA does not ensure approval by regulatory authori es in other
countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authori es in other foreign countries or by
the FDA. We or our collabora on partners may not be able to file for regulatory approvals and may not receive necessary approvals to
commercialize our products in any market. Failure to obtain these approvals would materially and adversely affect our business, financial
condi on and results of opera ons.
We may not be successful in our efforts to iden fy, develop or commercialize addi onal product candidates.
Although a substan al amount of our effort will focus on the con nued clinical tes ng, poten al approval and commercializa on of our
exis ng product candidates, the success of our business also depends upon our ability to iden fy, develop and commercialize addi onal
product candidates. Research programs to iden fy new product candidates require substan al technical, financial and human resources. We
may focus our efforts and resources on poten al programs or product candidates that ul mately prove to be unsuccessful. Our development
efforts may fail to yield addi onal product candidates suitable for clinical development and commercializa on for a number of reasons,
including but not limited to the following:
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we may not be successful in iden fying poten al product candidates that pass our strict screening criteria;
we may not be able to overcome technological hurdles to development or a product candidate may not be capable of producing
commercial quan es at an acceptable cost or at all;
we may not be able to assemble sufficient resources to acquire or discover addi onal product candidates;
our product candidates may not succeed in nonclinical or clinical tes ng;
our poten al product candidates may fail to show sufficient biosimilarity to originator molecules; and
compe tors may develop alterna ves that render our product candidates obsolete or less a rac ve or the market for a product
candidate may change such that a product candidate may not jus fy further development.
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If any of these events occur, we may be forced to abandon our development efforts for a program or programs or we may not be able to
iden fy, develop or commercialize addi onal product candidates, which would have a material adverse effect on our business and could
poten ally cause us to cease opera ons.
Risks Related to Our Compliance with Applicable Laws
Healthcare reform measures, including the IRA, may increase the difficulty and cost for us to obtain marke ng approval for and
commercialize our products, affect the prices we may set, and have a material adverse effect on our business and results of opera ons.
In the United States, there have been and con nue to be a number of legisla ve ini a ves to contain healthcare costs. For example, in
March 2010, the ACA, was passed, which substan ally changed the way health care is financed by both governmental and private insurers and
has impacted and con nues to impact the United States pharmaceu cal industry. The ACA, among other things, modified the AMP defini on
under the MDRP for drugs that are inhaled, infused, ins lled, implanted or injected and not generally distributed through the retail channel;
expanded rebate payments under the MDRP to include u liza on by individuals enrolled in Medicaid managed care organiza ons; added a
provision to increase the Medicaid rebate for line extension drugs; established annual fees and taxes on manufacturers of certain branded
prescrip on drugs; expanded the en es eligible for discounts under the Public Health Service 340B drug pricing program; and established the
Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off nego ated prices of
applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condi on for the manufacturer’s outpa ent drugs to be
covered under Medicare Part D.
Since its enactment, there have been judicial, execu ve and Congressional challenges to certain aspects of the ACA. On June 17, 2021,
the United States Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on
the cons tu onality of the ACA.
In addi on, other legisla ve changes have been proposed and adopted in the United States since the ACA was enacted. These changes
include the American Rescue Plan Act of 2021, which eliminated the statutory cap on the Medicaid drug rebate beginning January 1, 2024. The
rebate was previously capped at 100% of a drug’s AMP.
Most significantly, on August 16, 2022, the IRA was signed into law. Among other things, the IRA requires manufacturers of certain drugs
to engage in price nego a ons with Medicare (beginning in 2026), with prices that can be nego ated subject to a cap; imposes rebates under
Medicare Part B and Medicare Part D to penalize price increases that outpace infla on (first due in 2023); and replaces the Part D coverage gap
discount program with a new discoun ng program (beginning in 2025). The IRA permits the Secretary of HHS to implement many of these
provisions through guidance, as opposed to regula on, for the ini al years. HHS has and will con nue to issue and update guidance as these
programs are implemented. On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to price nego a ons,
although the Medicare drug price nego a on program is currently subject to legal challenges. For that and other reasons, the impact of the IRA
on our business and the pharmaceu cal industry cannot yet be fully determined. If a product becomes subject to the IRA nego a on provision
and related price cap, that may significantly alter the economic ra onale for developing and commercializing a biosimilar. Addi onally, in
response to the Biden administra on’s October 2022 execu ve order, on February 14, 2023, HHS released a report outlining three new models
for tes ng by the Center for Medicare and Medicaid Innova on which will be evaluated on their ability to lower the cost of drugs, promote
accessibility, and improve quality of care. It is unclear whether the models will be u lized in any health reform measures in the future.
The cost of prescrip on pharmaceu cals in the United States is likely to remain the subject of considerable discussion. There have been
several Congressional inquiries and proposed and enacted legisla on designed to, among other things, reform government program
reimbursement methodologies. The likelihood of implementa on of these and other reform ini a ves is uncertain. In the coming years,
addi onal legisla ve and regulatory changes could be made to governmental health programs that could significantly impact pharmaceu cal
companies and the success of our product candidates. We expect that healthcare reform measures that may be adopted in the future may
result in more rigorous coverage criteria, new payment methodologies and addi onal downward pressure on the price that we receive for any
approved product. Any reduc on in reimbursement from Medicare or other government programs may result in a similar reduc on in
payments from private payors. The implementa on of cost containment measures or other healthcare reforms may prevent us from being able
to generate revenue, a ain profitability or commercialize our product candidates.
Individual states in the United States have also proposed and enacted legisla on and implemen ng regula ons designed to control
pharmaceu cal product pricing, including price or pa ent reimbursement constraints, discounts, restric ons on certain product access,
marke ng cost disclosure and other transparency measures, and, in some cases, measures designed to encourage importa on from other
countries and bulk purchasing. We expect that addi onal state and federal healthcare reform measures will be adopted in the future, any
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of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in
reduced demand for our product candidates or addi onal pricing pressures, such as a single reimbursement code for biosimilar products.
We expect that healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria, new
payment methodologies and addi onal downward pressure on the price that we receive for any approved product. Any reduc on in
reimbursement from Medicare or other government programs may result in a similar reduc on in payments from private payors. The
implementa on of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, a ain
profitability or commercialize our product candidates.
In the E.U., similar poli cal, economic and regulatory developments may affect our ability to profitably commercialize our product
candidates, if approved. In addi on to con nuing pressure on prices and cost containment measures, legisla ve developments at the E.U. or
member state level may result in significant addi onal requirements or obstacles that may increase our opera ng costs. The delivery of
healthcare in the E.U., including the establishment and opera on of health services and the pricing and reimbursement of medicines, is almost
exclusively a ma er for na onal, rather than E.U., law and policy. Na onal governments and health service providers have different priori es
and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the
healthcare budgetary constraints in most E.U. member states have resulted in restric ons on the pricing and reimbursement of medicines by
relevant health service providers. Coupled with ever-increasing E.U. and na onal regulatory burdens on those wishing to develop and market
products, this could prevent or delay marke ng approval of our product candidates, restrict or regulate post-approval ac vi es and affect our
ability to commercialize our product candidates, if approved. In markets outside of the United States and E.U., reimbursement and healthcare
payment systems vary significantly by country, and many countries have ins tuted price ceilings on specific products and therapies.
We may be subject, directly or indirectly, to federal and state healthcare laws, including fraud and abuse, false claims and physician
payment transparency laws. If we are unable to comply or have not fully complied with such laws, we could face substan al penal es.
Our opera ons are directly or indirectly through our customers subject to various federal and state fraud and abuse laws, including,
without limita on, the federal An -Kickback Statute, the federal False Claims Act and physician sunshine laws and regula ons. These laws
impact, among other things, sales, marke ng and educa on programs. The laws that may affect our ability to operate include:
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the federal An -Kickback Statute, which prohibits, among other things, persons from knowingly and willfully solici ng, receiving,
offering or paying remunera on, directly or indirectly, in cash or in kind, to induce or in return for the purchase, recommenda on,
order or furnishing of an item or service reimbursable, in whole or in part, under a federal healthcare program, such as the
Medicare and Medicaid programs. A person or en ty does not need to have actual knowledge of the federal An -Kickback Statute
or specific intent to violate it to have commi ed a viola on;
federal civil and criminal false claims laws, including the False Claims Act, which prohibit, among other things, individuals or
en es from knowingly presen ng or causing to be presented claims for payment from Medicare, Medicaid or other third-party
payers that are false or fraudulent and which may apply to en es that provide coding and billing advice to customers. In addi on,
the government may assert that a claim including items or services resul ng from a viola on of the federal An -Kickback Statute
cons tutes a false or fraudulent claim for purposes of the False Claims Act;
federal civil monetary penal es laws, which impose civil fines for, among other things, the offering or transfer of remunera on to a
Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s
selec on of a par cular provider, prac oner, or supplier of services reimbursable by Medicare or a state healthcare program,
unless an excep on applies;
HIPAA, which created new federal criminal statutes that prohibit execu ng a scheme to defraud any healthcare benefit program
and making false statements rela ng to healthcare ma ers. Similar to the federal An -Kickback Statute, a person or en ty does not
need to have actual knowledge of the statute or specific intent to violate it to have commi ed a viola on;
federal and state consumer protec on and unfair compe on laws, which broadly regulate marketplace ac vi es and ac vi es
that poten ally harm consumers;
the federal physician “sunshine” requirements under the ACA, which requires certain manufacturers of drugs, devices, biologics
and medical supplies to report annually to the Centers for Medicare & Medicaid Services informa on related to payments and
other transfers of value made by such manufacturers to physicians (defined to include doctors, den sts, optometrists, podiatrists,
chiropractors, and certain non-physician prac oners (physician assistants, nurse prac oners,
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clinical nurse specialists, cer fied nurse anesthe sts, anesthesiologist assistants and cer fied nurse midwives)), and teaching
hospitals and ownership and investment interests held by physicians and their immediate family members; and
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state and foreign law equivalents of each of the above federal laws, such as an -kickback and false claims laws that may apply to
items or services reimbursed by any third-party payer, including commercial insurers, state laws that require pharmaceu cal
companies to comply with the pharmaceu cal industry’s voluntary compliance guidelines and the relevant compliance guidance
promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other
poten al referral sources; and state laws that require drug manufacturers to report informa on related to payments and other
transfers of value to physicians and other healthcare providers or marke ng expenditures and pricing informa on.
Because of the breadth of these laws and the narrowness of the statutory excep ons and safe harbors available, it is possible that some
of our business ac vi es could be subject to challenge under one or more of such laws. In addi on, recent health care reform legisla on has
strengthened these laws.
Efforts to ensure that our opera ons and business arrangements with third par es will comply with applicable healthcare laws and
regula ons will involve substan al costs. If we are found to be in viola on of any of the laws described above or any other governmental
regula ons that apply to us, we may be subject to penal es, including civil and criminal penal es, damages, fines, exclusion from par cipa on
in government health care programs, such as Medicare and Medicaid, imprisonment, addi onal repor ng obliga ons and oversight if we
become subject to a corporate integrity agreement or other agreement to resolve allega ons of non-compliance with these laws and the
curtailment or restructuring of our opera ons, any of which could adversely affect our ability to operate our business and our results of
opera ons. Further, defending against any such ac ons can be costly, me-consuming and may require significant personnel resources.
Therefore, even if we are successful in defending against any such ac ons that may be brought against us, our business may be impaired.
If we fail to comply with our repor ng and payment obliga ons under the Medicaid Drug Rebate Program or other governmental pricing
programs in the United States, we could be subject to addi onal reimbursement requirements, penal es, sanc ons and fines which could
have a material adverse effect on our business, financial condi on, results of opera ons and growth prospects.
We par cipate in governmental programs that impose drug price repor ng, payment, and other compliance obliga ons on
pharmaceu cal manufacturers. Medicaid is a joint federal and state program for low-income and disabled beneficiaries. Medicare is a federal
program that is administered by the federal government covering individuals age 65 and over as well as those with certain disabili es. Medicare
Part B reimburses physicians who administer our products. Under the MDRP, as a condi on of having federal funds available for our covered
outpa ent drugs under Medicaid and under Medicare Part B, we must enter into, and have entered into, an agreement with the Secretary of
Health and Human Services to pay a rebate to state Medicaid programs for each unit of our covered outpa ent drugs dispensed to a Medicaid
beneficiary and paid for by the state Medicaid program. Medicaid rebates are based on pricing data that we are required to report on a
monthly and quarterly basis to CMS, the federal agency that administers the MDRP and Medicare programs. For the MDRP, these data include
the AMP for each drug and, in the case of innovator products, the Best Price, which represents the lowest price available from us to any
wholesaler, retailer, provider, health maintenance organiza on, nonprofit en ty, or governmental en ty in the United States in any pricing
structure, calculated to include all applicable sales and associated rebates, discounts and other price concessions. In connec on with Medicare
Part B, we must provide CMS with ASP informa on on a quarterly basis. CMS uses this informa on to compute Medicare Part B payment rates,
which consist of ASP plus a specified percentage. If we become aware that our MDRP submissions for a prior period were incorrect or have
changed as a result of recalcula on of the pricing data, we must resubmit the corrected data for up to three years a er those data originally
were due. Pursuant to the IRA, the AMP and ASP figures we report will also be used to compute rebates under Medicare Part D and Medicare
Part B triggered by price increases that outpace infla on. If we fail to provide informa on mely or are found to have knowingly submi ed false
informa on to CMS, we may be subject to civil monetary penal es and other sanc ons, including termina on from the MDRP.
Federal law requires that any company that par cipates in the MDRP also par cipate in the Public Health Service’s 340B drug pricing
program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B program is
administered by the HRSA and requires us to agree to charge statutorily defined covered en es no more than the 340B “ceiling price” for our
covered drugs when used in an outpa ent se ng. These 340B covered en es include a variety of community health clinics and other en es
that receive health services grants from the Public Health Service, as well as hospitals that serve a dispropor onate share of low-income
pa ents. The 340B ceiling price is calculated using a statutory formula, which is based on the AMP and rebate amount for the covered
outpa ent drug as calculated under the MDRP. In general, products subject to Medicaid price repor ng and rebate liability are also subject to
the 340B ceiling price requirement. We must report 340B ceiling prices to HRSA on a quarterly basis, and HRSA publishes them to 340B covered
en es. HRSA has finalized regula ons regarding the calcula on of the 340B ceiling price and the imposi on of civil
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monetary penal es on manufacturers that knowingly and inten onally overcharge covered en es for 340B eligible drugs. HRSA has also
finalized an administra ve dispute resolu on process through which 340B covered en es may pursue claims against par cipa ng
manufacturers for overcharges.
In order to be eligible to have drug products paid for with federal funds under Medicaid and Medicare Part B and purchased by certain
federal agencies and grantees, a pharmaceu cal manufacturer must also par cipate in VA FSS pricing program. Under the VA FSS program, we
must report the Non-FAMP for our covered drugs to the VA and charge certain federal agencies no more than the Federal Ceiling Price, which is
calculated based on Non FAMP using a statutory formula. These four agencies are the VA, the U.S. Department of Defense, the U.S. Coast
Guard, and the U.S. Public Health Service (including the Indian Health Service). We must also pay rebates on products purchased by military
personnel and dependents through the TRICARE retail pharmacy program. If a manufacturer par cipa ng in the FSS program fails to provide
mely informa on or is found to have knowingly submi ed false informa on, the manufacturer may be subject to civil monetary penal es.
Individual states con nue to consider and have enacted legisla on to limit the growth of healthcare costs, including the cost of
prescrip on drugs and combina on products. A number of states have either implemented or are considering implementa on of drug price
transparency legisla on that may prevent or limit our ability to take price increases at certain rates or frequencies. Requirements under such
laws include advance no ce of planned price increases, repor ng price increase amounts and factors considered in taking such increases,
wholesale acquisi on cost informa on disclosure to prescribers, purchasers, and state agencies, and new product no ce and repor ng. Such
legisla on could limit the price or payment for certain drugs, and a number of states are authorized to impose civil monetary penal es or
pursue other enforcement mechanisms against manufacturers for the un mely, inaccurate, or incomplete repor ng of drug pricing informa on
or for otherwise failing to comply with drug price transparency requirements. If we are found to have violated state law requirements, we may
become subject to penal es or other enforcement mechanisms, which could have a material adverse effect on our business.
Pricing and rebate calcula ons vary across products and programs, are complex, and are o en subject to interpreta on by us,
governmental or regulatory agencies, and the courts, which can change and evolve over me. Such pricing calcula ons and repor ng, along
with any necessary restatements and recalcula ons, could increase costs for complying with the laws and regula ons governing the MDRP and
other governmental programs, and under the MDRP could result in an overage or underage in Medicaid rebate liability for past quarters. Price
recalcula ons under the MDRP also may affect the ceiling price at which we are required to offer products under the 340B program. Civil
monetary penal es can be applied if we are found to have knowingly submi ed any false price or product informa on to the government, if we
are found to have made a misrepresenta on in the repor ng of ASP, if we fail to submit the required price data on a mely basis, or if we are
found to have charged 340B covered en es more than the statutorily mandated ceiling price. CMS could also terminate our Medicaid drug
rebate agreement, in which case federal payments may not be available under Medicaid or Medicare Part B for our covered outpa ent drugs.
We cannot assure you that our submissions will not be found by CMS or other governmental agencies to be incomplete or incorrect.
Risks Related to Ownership of Our Common Stock
The market price of our common stock may be highly vola le, and purchasers of our common stock could incur substan al losses.
The market price of our common stock has been highly vola le since our Ini al Public Offering (“IPO”) and the intraday sales price per
share has ranged from $1.43 to $38.10 per share during the period from November 6, 2014 through December 31, 2023 and could be subject
to wide fluctua ons in response to various factors, some of which are beyond our control. These factors include those discussed in the “Risk
Factors” sec on of this Annual Report on Form 10-K and others such as:
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adverse results or delays in preclinical or clinical studies;
the risk of deteriora on in our financial condi ons, such as reduced collec on of cash and increased costs in the future;
any inability to obtain addi onal funding;
any delay in filing an IND, NDA, BLA, Sec on 351(k) BLA or other regulatory submission for any of our product candidates and any
adverse development or perceived adverse development with respect to the applicable regulatory agency’s review of that IND,
NDA, BLA, Sec on 351(k) BLA or other regulatory submission;
the percep on of limited market sizes or pricing for our products and product candidates;
failure to successfully develop and commercialize our product candidates;
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post-marke ng safety issues rela ng to our product candidates or biosimilars generally;
failure to maintain our exis ng strategic collabora ons or enter into new collabora ons;
failure by us or our licensors and strategic collabora on partners to prosecute, maintain or enforce our intellectual property rights;
changes in laws or regula ons applicable to our products;
future outbreaks of COVID-19 and other viral pandemics;
any inability to obtain adequate product supply for our product candidates or the inability to do so at acceptable prices;
adverse regulatory decisions;
introduc on of new products, services or technologies by our compe tors;
failure to meet or exceed financial projec ons we may provide to the public;
failure to meet or exceed the financial projec ons of the investment community;
the percep on of the pharmaceu cal industry by the public, legislatures, regulators and the investment community;
announcements of significant acquisi ons, disposi ons, strategic partnerships, joint ventures or capital commitments by us, our
strategic collabora on partners or our compe tors;
disputes or other developments rela ng to proprietary rights, including patents, li ga on ma ers and our ability to obtain patent
protec on for our technologies;
addi ons or departures of key scien fic or management personnel;
lawsuits, including but not limited to complaints ini ated by stockholders, customers and collabora on partners, and li ga on filed
by us or filed against us pertaining to patent infringement or other viola ons of intellectual property rights;
the outcomes of any ci zen pe ons filed by par es seeking to restrict or limit the approval of biosimilar products;
if securi es or industry analysts do not publish research or reports about our business or if they issue an adverse or misleading
opinion regarding our stock;
changes in the market valua ons of similar companies;
general market or macroeconomic condi ons, including rising interest rates and infla on;
sales of our common stock by us or our stockholders in the future;
trading volume of our common stock;
issuance of patents to third par es that could prevent our ability to commercialize our product candidates;
reduc ons in the prices of originator products that could reduce the overall market opportunity for our product candidates
intended as biosimilars to such originator products; and
changes in biosimilar regulatory requirements that could make it more difficult for us to develop our product candidates.
In addi on, biopharmaceu cal companies in par cular have experienced extreme price and volume fluctua ons that have o en been
unrelated or dispropor onate to the opera ng performance of these companies. Broad market and industry factors may nega vely affect the
market price of our common stock, regardless of our actual opera ng performance.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over
ma ers subject to stockholder approval.
As of December 31, 2023, our execu ve officers, directors, five percent stockholders and their affiliates beneficially owned approximately
30.6% of our vo ng stock (assuming no exercise of outstanding op ons or conversion of our outstanding conver ble notes). These stockholders
have the ability to influence us through their ownership posi ons, which may prevent or discourage unsolicited acquisi on proposals or offers
for our common stock that you may believe are in your best interest as one of our stockholders.
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Our indebtedness could adversely affect our financial condi on, our ability to raise addi onal capital to fund our opera ons, our ability to
operate our business, our ability to react to changes in the economy or our industry and our ability to pay our debts and could divert our
cash flow from opera ons for debt payments.
Our leverage and debt service obliga ons could adversely impact our business, including by:
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impairing our ability to generate cash sufficient to pay interest or principal, including periodic principal payments;
increasing our vulnerability to general adverse economic and industry condi ons;
increasing our need to meet minimum net sales requirements when our future sales are uncertain;
requiring the dedica on of a por on of our cash flow from opera ons to service our debt, thereby reducing the amount of our
cash flow available for other purposes, including funds for clinical development or to pursue future business opportuni es;
requiring us to sell debt or equity securi es or to sell some of our core assets, possibly on unfavorable terms, to meet payment
obliga ons;
limi ng our flexibility in planning for, or reac ng to, changes in our business and the industries in which we compete; and
placing us at a possible compe ve disadvantage with less leveraged compe tors and compe tors that may have be er access to
capital resources.
Any of the foregoing factors could have nega ve consequences on our financial condi on and results of opera ons.
This indebtedness could be due sooner upon the triggering of certain covenants in our debt agreements and or upon the occurrence of
an event of default. If and when our indebtedness becomes due, if we do not have sufficient cash or access to capital to pay such indebtedness,
we will default on our obliga ons which will adversely harm our business. We entered into a Loan Agreement that contains affirma ve and
nega ve covenants that restrict our opera ons, including, among other restric ons, the requirement to maintain minimum trailing twelve-
month net sales in an amount that began at $200.0 million in the first quarter of 2022 and increases to $210.0 million for the quarter ended
March 31, 2024. Beginning in the second quarter of 2024 and con nuing through the quarter ended December 31, 2026, the requirement is to
maintain minimum trailing twelve-month net sales of $125.0 million. In addi on, there is a requirement to maintain a minimum trailing twelve-
month net sales for LOQTORZI tested quarterly at the end of each quarter commencing with the quarter ended December 31, 2024. Further,
the Loan Agreement includes certain other affirma ve covenants and nega ve covenants, including, covenants and restric ons that among
other things, restrict our ability to incur liens, incur addi onal indebtedness, make investments, engage in certain mergers and acquisi ons or
asset sales, and declare dividends or redeem or repurchase capital stock. We may need to request addi onal waivers from me to me with
respect to the Loan Agreement and if we are unable to obtain a waiver that we need it could materially impact our business and financial
results.
Sales of a substan al number of shares of our common stock in the public market could cause our stock price to fall.
If our exis ng stockholders sell or indicate an inten on to sell substan al amounts of our common stock in the public market the market
price of our common stock could decline. In addi on, we may authorize our sales agent to sell our common stock from me to me as part of
the ATM Offering. As of December 31, 2023, there were 112.2 million shares of common stock outstanding.
In addi on, as of December 31, 2023, approximately 30.6 million shares of common stock that are either subject to outstanding op ons
and restricted stock units or reserved for future issuance under our equity incen ve plans were eligible or may become eligible for sale in the
public market to the extent permi ed by the provisions of various ves ng schedules and Rule 144 and Rule 701 under the Securi es Act.
Certain of our outstanding op ons have exercise prices that are above our current stock price. See the tables describing our outstanding stock
op ons in Note 12. Stock-Based Compensa on and Employee Benefits to our financial statements included in this report. If these addi onal
shares of common stock are sold or if it is perceived that they will be sold in the public market, the market price of our common stock could
decline.
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Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incen ve plans and
conver ble notes, could result in addi onal dilu on of the percentage ownership of our stockholders and could cause our stock price to fall.
We have needed and an cipate we will need addi onal capital in the future to con nue our planned opera ons. To the extent that we
raise addi onal capital by issuing equity securi es, our stockholders may experience substan al dilu on. Similar to prior or ongoing financing
transac ons like the ATM Offering or the exchange of our shares for shares of outstanding stock of Surface as part of the acquisi on of Surface,
we may sell common stock, conver ble securi es or other equity securi es in one or more transac ons at prices and in a manner we determine
from me to me. If we sell common stock, conver ble securi es or other equity securi es in more than one transac on, investors may be
materially diluted by subsequent sales. These sales may also result in material dilu on to our exis ng stockholders, and new investors could
gain rights superior to our exis ng stockholders. In addi on, if we raise addi onal funds through licensing arrangements, it may be necessary to
grant poten ally valuable rights to our product candidates or grant licenses on terms that are not favorable to us.
Pursuant to our 2014 Equity Incen ve Award Plan (the “2014 Plan”), our management is authorized to grant stock op ons and other
equity-based awards to our employees, directors and consultants. The number of shares available for future grant under the 2014 Plan will be
increased by (i) the number of shares pursuant to outstanding awards under the 2010 Plan that are forfeited or lapse unexercised and which
following the effec ve date are not issued under the 2010 Plan and (ii) an annual increase on the first day of each fiscal year beginning in 2015
and ending in 2024, equal to 4% of the shares of stock outstanding as of the last day of the preceding fiscal year, or such smaller number of
shares as determined by our board of directors. Pursuant to our 2014 Employee Stock Purchase Plan (“ESPP”), eligible employees are able to
acquire shares of our common stock at a discount to the prevailing market price, and an aggregate of 320,000 shares are ini ally available for
issuance under the ESPP. The number of shares available for issuance under the ESPP will automa cally increase on the first day of each fiscal
year beginning in 2015 and ending in 2024, equal to 1% of the shares of common stock outstanding on the last day of the immediately
preceding fiscal year or such smaller number of shares as determined by our board of directors. If our board of directors elects to increase the
number of shares available for future grant under the 2014 Plan or the ESPP, our stockholders may experience addi onal dilu on, which could
cause our stock price to fall. Pursuant to our 2016 Employment Commencement Incen ve Plan (the “2016 Plan”), our management is
authorized to grant stock op ons and other equity-based awards to our new employees. The 2016 Plan is designed to comply with the
inducement exemp on contained in Nasdaq’s Rule 5635(c)(4), which provides for the grant of non-qualified stock op ons, restricted stock
units, restricted stock awards, performance awards, dividend equivalents, deferred stock awards, deferred stock units, stock payment and stock
apprecia on rights to a person not previously an employee or director, or following a bona fide period of non-employment, as an inducement
material to the individual’s entering into employment with us. As of December 31, 2023, we reserved for future issuance under the 2016 Plan a
total of 1.8 million shares of common stock for new employees. The 2016 Plan does not provide for any annual increases in the number of
shares available.
In April 2020, we issued and sold $230.0 million aggregate principal amount of our 1.5% senior conver ble notes due April 2026 (the
“2026 Conver ble Notes”). The holders may convert their 2026 Conver ble Notes at their op on at any me prior to the close of business on
the second scheduled trading day immediately before April 15, 2026. Upon conversion of the 2026 Conver ble Notes by a holder, the holder
will receive shares of our common stock, together, if applicable, with cash in lieu of any frac onal share. Since incep on, the conversion price
has been 51.9224 shares of common stock per $1,000 principal amount of the 2026 Conver ble Notes, which represents a conversion price of
approximately $19.26 per share of common stock.
Adverse developments affec ng the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-
performance by financial ins tu ons or transac onal counterpar es, could adversely affect our business opera ons, financial condi on,
results of opera ons and prospects.
Our cash and cash equivalents are deposited or invested with several banks and other financial ins tu ons. Actual events involving
reduced or limited liquidity, defaults, non-performance or other adverse developments that affect financial ins tu ons or other companies in
the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the
past and may in the future lead to market-wide liquidity problems. For example, in March 2023, Silicon Valley Bank was closed and taken over
by the Federal Deposit Insurance Corpora on (“FDIC”) and subsequently had all of its customer deposits and other liabili es and substan ally
all loans and other assets acquired by First-Ci zens Bank & Trust Company. We had approximately $117.7 million of cash, cash equivalents and
marketable securi es as of December 31, 2023 with the majority held by custodians or in money market mutual funds that are not bank
deposits. Our bank deposits are primarily held in accounts at three large banks that we believe to be stable at this me. Actual and perceived
stability of banks can change from me to me and adverse percep ons by customers or investors about the banks where we deposit money
could result in a material and adverse effect on our ability to access necessary cash. Investor concerns regarding the U.S. or interna onal
financial systems could result in less favorable commercial financing terms, including
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higher interest rates or costs and ghter financial and opera ng covenants, or systemic limita ons on access to credit and liquidity sources,
thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash
and liquidity resources, could, among other risks, adversely impact our ability to access funds for our basic opera ng expenses, financial
obliga ons, payroll or fulfill our other important obliga ons. Any of these impacts, or any other impacts resul ng from the factors described
above or other related or similar factors not described above, could have material adverse impacts on our liquidity, business opera ons,
financial condi on, results of opera ons and prospects.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We have never declared or paid any cash dividends on our common stock. We currently an cipate that we will retain any future earnings
for the development, opera on and expansion of our business and do not an cipate declaring or paying any cash dividends for the foreseeable
future. Any return to stockholders will therefore be limited to any apprecia on of their stock.
Provisions in our amended and restated cer ficate of incorpora on and amended and restated bylaws, as well as provisions of Delaware
law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our
stockholders or remove our current management.
Our amended and restated cer ficate of incorpora on, amended and restated bylaws and Delaware law contain provisions that may have
the effect of delaying or preven ng a change in control of us or changes in our management. Our amended and restated cer ficate of
incorpora on and bylaws include provisions that:
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authorize “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may
contain vo ng, liquida on, dividend and other rights superior to our common stock;
create a classified board of directors whose members serve staggered three-year terms;
specify that special mee ngs of our stockholders can be called only by our corporate secretary pursuant to a resolu on adopted by
a majority of our board of directors;
prohibit stockholder ac on by wri en consent;
establish an advance no ce procedure for stockholder approvals to be brought before an annual mee ng of our stockholders,
including proposed nomina ons of persons for elec on to our board of directors other than nomina ons made by or at the
direc on of the board of directors or a commi ee of the board of directors;
provide that our directors may be removed only for cause or without cause by the holders of 66 2/3% of the vo ng power of all
then outstanding shares of vo ng stock;
provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a
quorum;
specify that no stockholder is permi ed to cumulate votes at any elec on of directors;
expressly authorize our board of directors to modify, alter or repeal our amended and restated bylaws; and
require holders of 66 2/3% of the vo ng power of all then outstanding shares of vo ng stock to amend specified provisions of our
amended and restated cer ficate of incorpora on except for the provision making it possible for our board of directors to issue
“blank check” preferred stock, and amended and restated bylaws.
These provisions, alone or together, could delay, deter or prevent hos le takeovers and changes in control or changes in our
management.
In addi on, because we are incorporated in Delaware, we are governed by the provisions of Sec on 203 of the Delaware General
Corpora on Law, which limits the ability of stockholders owning in excess of 15% of our outstanding vo ng stock to merge or combine with us.
Any provision of our amended and restated cer ficate of incorpora on or amended and restated bylaws or Delaware law that has the
effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our
common stock and could also affect the price that some investors are willing to pay for our common stock.
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General Risk Factors
The interna onal aspects of our business expose us to business, regulatory, poli cal, opera onal, financial and economic risks associated
with doing business outside of the United States.
We currently have limited interna onal opera ons of our own and have and may have in the future a number of interna onal
collabora ons, including our significant collabora on with Junshi Biosciences in China. Doing business interna onally involves a number of risks,
including but not limited to:
● mul ple, conflic ng and changing laws and regula ons such as privacy regula ons, tax laws, export and import restric ons,
employment laws, regulatory requirements and other governmental approvals, permits and licenses, including those that affect our
work with a collabora on partner in China;
● failure by us or our collabora on partners to obtain and maintain regulatory approvals for the use of our products in various
countries;
● addi onal poten ally relevant third-party patent rights;
● complexi es and difficul es in obtaining protec on and enforcing our intellectual property;
● difficul es in staffing and managing foreign opera ons by us or our collabora on partners;
● complexi es associated with managing mul ple payer reimbursement regimes, government payers or pa ent self-pay systems by our
collabora on partners;
● limits in our or our collabora on partners’ ability to penetrate interna onal markets;
● financial risks, such as longer payment cycles, difficulty collec ng accounts receivable, the impact of local and regional financial crises
on demand and payment for our products and exposure to foreign currency exchange rate fluctua ons;
● natural disasters, poli cal and economic instability, including wars, terrorism and poli cal unrest, outbreak of disease, boyco s,
curtailment of trade and other business restric ons;
● certain expenses including, among others, expenses for travel, transla on and insurance;
● expose us to sanc ons, such as the sanc ons levied by United States, E.U. and Russian regulatory bodies in connec on with Russia’s
invasion of Ukraine in February 2022; and
● regulatory and compliance risks that relate to maintaining accurate informa on and control over sales and ac vi es that may fall
within the purview of the United States Foreign Corrupt Prac ces Act, its books and records provisions or its an -bribery provisions.
Investors’ expecta ons of our performance rela ng to environmental, social and governance factors may impose addi onal costs and expose
us to new risks.
There is an increasing focus from certain investors, employees, regulators and other stakeholders concerning corporate responsibility,
specifically related to environmental, social and governance (or “ESG”) factors. Some investors and investor advocacy groups may use these
factors to guide investment strategies and, in some cases, investors may choose not to invest in our company if they believe our policies rela ng
to corporate responsibility are inadequate. Third-party providers of corporate responsibility ra ngs and reports on companies have increased to
meet growing investor demand for measurement of corporate responsibility performance, and a variety of organiza ons currently measure the
performance of companies on such ESG topics, and the results of these assessments are widely publicized. Investors, par cularly ins tu onal
investors, use these ra ngs to benchmark companies against their peers and if we are perceived as lagging with respect to ESG ini a ves,
certain investors may engage with us to improve ESG disclosures or performance and may also make vo ng decisions, or take other ac ons, to
hold us and our board of directors accountable. In addi on, the criteria by which our corporate responsibility prac ces are assessed may
change, which could result in greater expecta ons of us and cause us to undertake
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costly ini a ves to sa sfy such new criteria. If we elect not to or are unable to sa sfy such new criteria, investors may conclude that our policies
with respect to corporate responsibility are inadequate. We may face reputa onal damage in the event that our corporate responsibility
procedures or standards do not meet the standards set by various cons tuencies. We also face significant costs from complying with new ESG
regula ons, for example, the SEC’s proposed climate disclosure rule would result in significant costs of compliance if it is approved as proposed
in the future.
We may face reputa onal damage in the event our corporate responsibility ini a ves or objec ves do not meet the standards set by our
investors, stockholders, lawmakers, lis ng exchange or other cons tuencies, or if we are unable to achieve an acceptable ESG or sustainability
ra ng from third-party ra ng services. A low ESG or sustainability ra ng by a third-party ra ng service could also result in the exclusion of our
common stock from considera on by certain investors who may elect to invest with our compe on instead. Ongoing focus on corporate
responsibility ma ers by investors and other par es as described above may impose addi onal costs or expose us to new risks. Any failure or
perceived failure by us in this regard could have a material adverse effect on our reputa on and on our business, share price, financial
condi on, or results of opera ons, including the sustainability of our business over me.
Our reliance on third par es requires us to share our trade secrets, which increases the possibility that a compe tor will discover them or
that our trade secrets will be misappropriated or disclosed.
Because we rely on third par es to develop and manufacture our product candidates, we must, at mes, share trade secrets with them.
We seek to protect our proprietary technology in part by entering into confiden ality agreements and, if applicable, material transfer
agreements, collabora ve research agreements, consul ng agreements or other similar agreements with our collabora on partners, advisors,
employees and consultants prior to beginning research or disclosing proprietary informa on. These agreements typically limit the rights of the
third par es to use or disclose our confiden al informa on, such as trade secrets. Despite the contractual provisions employed when working
with third par es, the need to share trade secrets and other confiden al informa on increases the risk that such trade secrets become known
by our compe tors, are inadvertently incorporated into the technology of others or are disclosed or used in viola on of these agreements.
Given that our proprietary posi on is based, in part, on our know-how and trade secrets, a compe tor’s discovery of our trade secrets or other
unauthorized use or disclosure would impair our compe ve posi on and may have a material adverse effect on our business.
So called “submarine” patents may be granted to our compe tors that may significantly alter our launch ming expecta ons, reduce our
projected market size, cause us to modify our product or process or block us from the market altogether.
The term “submarine” patent has been used in the pharmaceu cal industry and in other industries to denote a patent issuing from an
applica on that was not published, publicly known or available prior to its grant. Submarine patents add substan al risk and uncertainty to our
business. Submarine patents may issue to our compe tors covering our pipeline candidates and thereby cause significant market entry delay,
defeat our ability to market our products or cause us to abandon development and/or commercializa on of a molecule.
Examples of submarine patents include Brockhaus, et al., United States patents 8,063,182 and 8,163,522 (controlled by Amgen), which
are directed to the fusion protein in Enbrel. On July 1, 2020, the United States Court of Appeals for the Federal Circuit issued a decision that
affirmed the lower court’s decision upholding the validity of these patents. As a result, we discon nued the development of CHS-0214 (our
etanercept (Enbrel) biosimilar candidate).
The issuance of one or more submarine patents may harm our business by causing substan al delays in our ability to introduce a
biosimilar candidate into the United States market.
We may not iden fy relevant patents or may incorrectly interpret the relevance, scope or expira on of a patent, which might adversely
affect our ability to develop and market our products.
We cannot guarantee that any of our patent searches or analyses, including but not limited to the iden fica on of relevant patents, the
scope of patent claims or the expira on of relevant patents, are complete and thorough, nor can we be certain that we have iden fied each and
every patent and pending applica on in the United States and abroad that is relevant to or necessary for the commercializa on of our product
candidates in any jurisdic on.
The scope of a patent claim is determined by an interpreta on of the law, the wri en disclosure in a patent and the patent’s prosecu on
history. Our interpreta on of the relevance or the scope of a patent or a pending applica on may be incorrect, which may nega vely impact our
ability to market our products or pipeline molecules. We may incorrectly determine that our products are not covered by a third-party patent.
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Many patents may cover a marketed product, including but not limited to the composi on of the product, methods of use, formula ons,
cell line constructs, vectors, growth media, produc on processes and purifica on processes. The iden fica on of all patents and their
expira on dates relevant to the produc on and sale of an originator product is extraordinarily complex and requires sophis cated legal
knowledge in the relevant jurisdic on. It may be impossible to iden fy all patents in all jurisdic ons relevant to a marketed product. Our
determina on of the expira on date of any patent in the United States or abroad that we consider relevant may be incorrect, which may
nega vely impact our ability to develop and market our products.
Our failure to iden fy and correctly interpret relevant patents may nega vely impact our ability to develop and market our products.
If we are unable to obtain and maintain effec ve patent rights for our product candidates or any future product candidates, we may not
be able to prevent compe tors from using technologies we consider important in our successful development and commercializa on of our
product candidates, resul ng in loss of any poten al compe ve advantage our patents may have otherwise afforded us.
While our principal focus in ma ers rela ng to intellectual property is to avoid infringing the valid and enforceable rights of third par es,
we also rely upon a combina on of patents, trade secret protec on and confiden ality agreements to protect our own intellectual property
related to our product candidates and development programs. Our ability to enjoy any compe ve advantages afforded by our own intellectual
property depends in large part on our ability to obtain and maintain patents and other intellectual property protec on in the United States and
in other countries with respect to various proprietary elements of our product candidates, such as, for example, our product formula ons and
processes for manufacturing our products and our ability to maintain and control the confiden ality of our trade secrets and confiden al
informa on cri cal to our business.
We have sought to protect our proprietary posi on by filing patent applica ons in the United States and abroad related to our products
that are important to our business. This process is expensive and me consuming, and we may not be able to file and prosecute all necessary or
desirable patent applica ons at a reasonable cost or in a mely manner. It is also possible that we will fail to iden fy patentable aspects of our
research and development output before it is too late to obtain patent protec on. There is no guarantee that any patent applica on we file will
result in an issued patent having claims that protect our products. Addi onally, while the basic requirements for patentability are similar across
jurisdic ons, each jurisdic on has its own specific requirements for patentability. We cannot guarantee that we will obtain iden cal or similar
patent protec on covering our products in all jurisdic ons where we file patent applica ons.
The patent posi ons of biopharmaceu cal companies generally are highly uncertain and involve complex legal and factual ques ons. As
a result, the patent applica ons that we own or license may fail to result in issued patents with claims that cover our product candidates in the
United States or in other foreign countries for many reasons. There is no assurance that all poten ally relevant prior art rela ng to our patents
and patent applica ons has been found, considered or cited during patent prosecu on, which can be used to invalidate a patent or prevent a
patent from issuing from a pending patent applica on. Even if patents do successfully issue, and even if such patents cover our product
candidates, third par es may challenge their validity, enforceability or scope, which may result in such patent claims being narrowed, found
unenforceable or invalidated. Our patents and patent applica ons, even if they are unchallenged, may not adequately protect our intellectual
property, provide exclusivity for our product candidates or prevent others from designing around our claims. Any of these outcomes could
impair our ability to prevent compe tors from using the technologies claimed in any patents issued to us, which may have an adverse impact
on our business.
In addi on, changes to United States patent laws provide addi onal procedures for third par es to challenge the validity of issued
patents based on patent applica ons filed a er March 15, 2013. If the breadth or strength of protec on provided by the patents and patent
applica ons we hold or pursue with respect to our current or future product candidates is challenged, then it could threaten our ability to
prevent compe ve products using our proprietary technology. Further, because patent applica ons in the United States and most other
countries are confiden al for a period of me, typically for 18 months a er filing, we cannot be certain that we were the first to either (i) file
any patent applica on related to our product candidates or (ii) invent any of the inven ons claimed in our patents or patent applica ons.
Furthermore, for applica ons filed before March 16, 2013 or patents issuing from such applica ons, an interference proceeding can be
provoked by a third party or ins tuted by the USPTO to determine who was the first to invent any of the subject ma er covered by the patent
claims of our applica ons and patents. As of March 16, 2013, the United States transi oned to a “first-to-file” system for deciding which party
should be granted a patent when two or more patent applica ons claiming the same inven on are filed by different par es. A third party that
files a patent applica on in the USPTO before we do, could therefore be awarded a patent covering an inven on of ours even if we had made
the inven on before it was made by the third party. The change to “first-to-file” from ”first-to-invent” is one of the changes to the patent laws
of the United States resul ng from the Leahy-Smith America Invents Act (the “Leahy-Smith Act”), signed into law on September 16, 2011.
Among some of the other significant changes to the patent laws are changes that limit
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where a patentee may file a patent infringement suit and provide opportuni es for third par es to challenge any issued patent in the USPTO. It
is not yet clear what, if any, impact the Leahy-Smith Act will have on the opera on of our business. However, the Leahy-Smith Act and its
implementa on could increase the uncertain es and costs surrounding the prosecu on of our patent applica ons and the enforcement or
defense of our issued patents, all of which could have a material adverse effect on our business and financial condi on.
Patents granted by the European Patent Office may be opposed by any person within nine months from the publica on of their grant
and, in addi on, may be challenged before na onal courts at any me. If the breadth or strength of protec on provided by the patents and
patent applica ons we hold, license or pursue with respect to our product candidates is threatened, it could threaten our ability to prevent
third par es from using the same technologies that we use in our product candidates.
We have issued patents and have filed patent applica ons, which are currently pending, covering various aspects of our product
candidates. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patent or whether any issued
patents will be found invalid and unenforceable or will be threatened or infringed by third par es. Any successful ac ons by third par es to
challenge the validity or enforceability of any patents, which may issue to us could deprive us of the ability to prevent others from using the
technologies claimed in such issued patents. Further, if we encounter delays in regulatory approvals, the period of me during which we could
market a product candidate under patent protec on could be reduced.
While our biosimilar business is based primarily on the ming of our biosimilar product launches to occur a er the expira on of relevant
patents and on avoiding infringing valid and enforceable rights of third par es, we have filed a number of patent applica ons seeking patents
that cover various proprietary elements of our product candidates when we have believed securing such patents may afford a compe ve
advantage. Our patent por olio includes pending patent applica ons and issued patents, in the United States and globally, covering our
biosimilar products and methods of making them. We cannot guarantee that our proprietary technologies will avoid infringement of third-party
patents. Moreover, because compe tors may be able to develop their own proprietary technologies, it is uncertain whether any of our issued
patents or pending patent applica ons directed to etanercept and adalimumab would cover the etanercept and adalimumab products of any
compe tors. The product and patent landscape is highly uncertain and we cannot predict whether our patent filings will afford us a compe ve
advantage against third par es or if our etanercept and adalimumab products will avoid infringement of third-party patents.
We do not consider it necessary for us or our compe tors to obtain or maintain a proprietary patent posi on in order to engage in the
business of biosimilar development and commercializa on. Hence, while our ability to secure patent coverage on our own proprietary
developments may improve our compe ve posi on with respect to the product candidates we intend to commercialize, we do not view our
own patent filings as a necessary or essen al requirement for conduc ng our business nor do we rely on our own patent filings or the poten al
for any commercial advantage they may provide us as a basis for our success.
Obtaining and maintaining our patent protec on depends on compliance with various procedural requirements, document submissions, fee
payment and other requirements imposed by governmental patent agencies. Our patent protec on could be reduced or eliminated for non-
compliance with these requirements.
The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee
payment and other provisions during the patent process. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other
means in accordance with the applicable rules. However, there are situa ons in which noncompliance can result in abandonment or lapse of a
patent or patent applica on, resul ng in par al or complete loss of patent rights in the relevant jurisdic on. In such an event, compe tors
might be able to enter the market earlier than would otherwise have been the case.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecu ng, defending and enforcing patents on product candidates in all countries throughout the world would be prohibi vely
expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United
States. In addi on, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in
the United States. Further, licensing partners may choose not to file patent applica ons in certain jurisdic ons in which we may obtain
commercial rights, thereby precluding the possibility of later obtaining patent protec on in these countries. Consequently, we may not be able
to prevent third par es from prac cing our inven ons in all countries outside the United States or impor ng products made using our
inven ons into the United States or other jurisdic ons. Compe tors may use our technologies in jurisdic ons where we have not obtained
patent protec on to develop their own products and may also export infringing products to territories where we have patent protec on, but
the ability to enforce our patents is not as strong as that in the United States. These products may compete with our products and our patents
or other intellectual property rights may not be effec ve or sufficient to prevent them from compe ng.
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Many companies have encountered significant problems in protec ng and defending intellectual property rights in foreign jurisdic ons.
The legal systems of certain countries, par cularly certain developing countries, do not favor the enforcement of patents, trade secrets and
other intellectual property protec on, which could make it difficult for us to stop the infringement of our patents or marke ng of compe ng
products in viola on of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdic ons, whether or not
successful, could result in substan al costs and divert our efforts and a en on from other aspects of our business, could put our patents at risk
of being invalidated or interpreted narrowly and our patent applica ons at risk of not issuing and could provoke third par es to assert claims
against us. We may not prevail in any lawsuits that we ini ate, and the damages or other remedies awarded, if any, may not be commercially
meaningful. Governments of foreign countries may force us to license our patents to third par es on terms that are not commercially
reasonable or acceptable to us. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to
obtain a significant commercial advantage from the intellectual property that we develop or license.
If we are unable to maintain effec ve (non-patent) proprietary rights for our product candidates or any future product candidates, we may
not be able to compete effec vely in our markets.
While we have filed patent applica ons to protect certain aspects of our own proprietary formula on and process developments, we
also rely on trade secret protec on and confiden ality agreements to protect proprietary scien fic, business and technical informa on and
know-how that is not or may not be patentable or that we elect not to patent. However, confiden al informa on and trade secrets can be
difficult to protect. Moreover, the informa on embodied in our trade secrets and confiden al informa on may be independently and
legi mately developed or discovered by third par es without any improper use of or reference to informa on or trade secrets. We seek to
protect the scien fic, technical and business informa on suppor ng our opera ons, as well as the confiden al informa on rela ng specifically
to our product candidates by entering into confiden ality agreements with par es to whom we need to disclose our confiden al informa on,
for example, our employees, consultants, scien fic advisors, board members, contractors, poten al collaborators and investors. However, we
cannot be certain that such agreements have been entered into with all relevant par es. We also seek to preserve the integrity and
confiden ality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our
informa on technology systems, but it is possible that these security measures could be breached. While we have confidence in these
individuals, organiza ons and systems, agreements or security measures may be breached, and we may not have adequate remedies for any
breach. Our confiden al informa on and trade secrets thus may become known by our compe tors in ways we cannot prove or remedy.
Although we expect all of our employees and consultants to assign their inven ons to us, and all of our employees, consultants, advisors
and any third par es who have access to our proprietary know-how, informa on or technology to enter into confiden ality agreements, we
cannot provide any assurances that all such agreements have been duly executed. We cannot guarantee that our trade secrets and other
confiden al proprietary informa on will not be disclosed or that compe tors will not otherwise gain access to our trade secrets or
independently develop substan ally equivalent informa on and techniques. For example, any of these par es may breach the agreements and
disclose our proprietary informa on, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.
Misappropria on or unauthorized disclosure of our trade secrets could impair our compe ve posi on and may have a material adverse effect
on our business. Addi onally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse
against third par es for misappropria ng the trade secret. We cannot guarantee that our employees, former employees or consultants will not
file patent applica ons claiming our inven ons. Because of the “first-to-file” laws in the United States and the EU, such unauthorized patent
applica on filings may defeat our a empts to obtain patents on our own inven ons.
We may be subject to claims challenging the inventorship of our patent filings and other intellectual property.
Although we are not currently aware of any claims challenging the inventorship of our patent applica ons or ownership of our
intellectual property, we may in the future be subject to claims that former employees, collaborators or other third par es have an interest in
our patent applica ons or patents we may be granted or other intellectual property as an inventor or co-inventor. For example, we may have
inventorship or ownership disputes arise from conflic ng obliga ons of consultants or others who are involved in developing our product
candidates. Li ga on may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending
any such claims, in addi on to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of or
right to use valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in
defending against such claims, li ga on could result in substan al costs and be a distrac on to management and other employees.
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We or the third par es upon whom we depend on may be adversely affected by earthquakes or other natural disasters and our business
con nuity and disaster recovery plans may not adequately protect us from a serious disaster.
Our corporate headquarters and laboratory are located in the San Francisco Bay Area and in Southern California (Camarillo), respec vely.
These loca ons have in the past experienced severe earthquakes, floods and other natural disasters. We do not carry earthquake insurance.
Earthquakes or other natural disasters could severely disrupt our opera ons or those of our collabora on partners and have a material adverse
effect on our business, results of opera ons, financial condi on and prospects. If a natural disaster, power outage or other event occurred that
prevented us from using all or a significant por on of our headquarters, that damaged cri cal infrastructure (such as the manufacturing
facili es of our third-party contract manufacturers) or that otherwise disrupted opera ons, it may be difficult or, in certain cases, impossible for
us to con nue our business for a substan al period of me. The disaster recovery and business con nuity plans we have in place currently are
limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substan al expenses as a result of
the limited nature of our disaster recovery and business con nuity plans, which, par cularly when taken together with our lack of earthquake
insurance, could have a material adverse effect on our business.
The con nua on of the war in Ukraine and conflicts in the Middle East may exacerbate certain risks we face.
The war between Russia and Ukraine and the global response, including the imposi on of sanc ons by the United States and other
countries, could create or exacerbate risks facing our business. Conflicts in the Middle East may also increase the risks facing our business. We
have evaluated our opera ons and partner contracts, and we currently do not expect either conflict to directly have a significant effect on our
financial condi on or results of opera ons. However, if the war between Russia and Ukraine or conflicts in the Middle East escalate or expand,
risks that we have iden fied in this Annual Report on Form 10-K may be materially increased. For example, if our supply arrangements or
clinical opera ons are disrupted due to expanded sanc ons or involvement of, and adverse impacts on, countries where we have opera ons or
rela onships, our business could be materially disrupted. Further, the use of cybera acks could expand as part of the ongoing conflicts, which
could adversely affect our ability to maintain or enhance our cyber security measures. These and other risks are described more fully in this
“Risk Factors” sec on.
We incur significant increased costs as a result of opera ng as a public company, and our management is required to devote substan al me
to compliance ini a ves. We may fail to comply with the rules that apply to public companies, including Sec on 404 of the Sarbanes-Oxley
Act of 2002, which could result in sanc ons or other penal es that would harm our business.
We incur significant legal, accoun ng and other expenses as a public company, including costs resul ng from public company repor ng
obliga ons under the Securi es Exchange Act, and regula ons regarding corporate governance prac ces. The lis ng requirements of The
Nasdaq Global Market require that we sa sfy certain corporate governance requirements rela ng to director independence, distribu ng annual
and interim reports, stockholder mee ngs, approvals and vo ng, solici ng proxies, conflicts of interest and a code of conduct. Our
management and other personnel must devote a substan al amount of me to ensure that we maintain compliance with all of these
requirements. Moreover, the repor ng requirements, rules and regula ons have increased our legal and financial compliance costs and make
some ac vi es more me consuming and costly. Any changes we have made, and may make in the future to comply with these obliga ons may
not be sufficient to allow us to sa sfy our obliga ons as a public company on a mely basis, or at all. These repor ng requirements, rules and
regula ons, coupled with the increase in poten al li ga on exposure associated with being a public company, may also make it more difficult
for us to a ract and retain qualified persons to serve on our board of directors or board commi ees or to serve as execu ve officers, or to
obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms.
We are subject to Sec on 404 of The Sarbanes-Oxley Act of 2002 (“Sec on 404”), and the related rules of the SEC, which generally
require our management and independent registered public accoun ng firm to report on the effec veness of our internal control over financial
repor ng. During the course of our review and tes ng, we may iden fy deficiencies and be unable to remediate them before we must provide
the required reports. Furthermore, if we have a material weakness in our internal controls over financial repor ng, we may not detect errors on
a mely basis and our financial statements may be materially misstated. We or our independent registered public accoun ng firm may not be
able to conclude on an ongoing basis that we have effec ve internal control over financial repor ng, which could harm our opera ng results,
cause investors to lose confidence in our reported financial informa on and cause the trading price of our stock to fall. In addi on, as a public
company we are required to file accurate and mely quarterly and annual reports with the SEC under the Exchange Act. Any failure to report
our financial results on an accurate and mely basis could result in sanc ons, lawsuits, delis ng of our shares from The Nasdaq Global Market
or other adverse consequences that would materially harm our business.
Stockholder ac vism, the current poli cal environment and the current high level of government interven on and regulatory reform may
also lead to substan al new regula ons and disclosure obliga ons, which may lead to addi onal compliance costs and impact the
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manner in which we operate our business in ways we cannot currently an cipate. For example, the SEC’s proposed climate disclosure rule
would result in significant costs of compliance if final rules that are similar to the proposed rules are approved in the future. Our management
and other personnel will need to devote a substan al amount of me to these compliance ini a ves. Moreover, these rules and regula ons will
increase our legal and financial compliance costs and will make some ac vi es more me consuming and costly. For example, we expect these
rules and regula ons to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be
required to incur substan al costs to maintain our current levels of such coverage.
Our informa on technology systems, or those used by our third-party CROs or other contractors or consultants, may fail or suffer security
breaches and geopoli cal tensions or conflicts, such as the ongoing war in Ukraine or conflicts in the Middle East, may create a heightened
risk of cybera acks.
We collect and maintain informa on in digital form that is necessary to conduct our business, and we are increasingly dependent on
informa on technology systems and infrastructure to operate our business. In the ordinary course of our business, we collect, store and
transmit large amounts of confiden al informa on, including intellectual property, proprietary business informa on, preclinical and clinical trial
data, and personal informa on (collec vely, “Confiden al Informa on”) of customers and our employees and contractors. It is cri cal that we
do so in a secure manner to maintain the confiden ality and integrity of such Confiden al Informa on.
Despite the implementa on of security measures, our informa on technology systems as well as those of our third-party collaborators,
consultants, contractors, suppliers, and service providers, may be vulnerable to damage from physical or electronic break-ins, computer viruses,
misconfigura ons, “bugs” or other vulnerabili es, “phishing” a acks, malware, ransomware, denial of service and other cybera acks or
disrup ve incidents that could result in unauthorized access to, use or disclosure of, corrup on of, or loss of Confiden al Informa on and could
subject us to significant liabili es and regulatory and enforcement ac ons, and reputa onal damage. In addi on, geopoli cal tensions or
conflicts, such as the war between Russia and Ukraine or conflicts in the Middle East, may create a heightened risk of cybera acks. We have
also outsourced elements of our informa on technology infrastructure, and as a result a number of third-party vendors may or could have
access to our Confiden al Informa on. If we or any of our third-party collaborators or service providers were to experience any material failure
or security breach, it could result in a material disrup on of our development programs, reputa on, and business opera ons. For example, the
loss of clinical study data from completed or ongoing clinical studies could result in delays in any regulatory approval or clearance efforts and
significantly increase our costs to recover or reproduce the data, and subsequently commercialize the product.
We and certain of our service providers are from me to me subject to cybera acks and security incidents. While we do not believe
that we have experienced any significant system failure, accident or security breach to date, if we or our third-party collaborators, consultants,
contractors, suppliers, or service providers were to suffer an a ack or breach, for example, that resulted in the unauthorized access to or use or
disclosure of Confiden al Informa on, we may have to no fy individuals, collaborators, government authori es, and the media, and may be
subject to inves ga ons, civil penal es, administra ve and enforcement ac ons, and li ga on, any of which could harm our business and
reputa on. Likewise, we rely on our third-party CROs and other third par es to conduct clinical studies, and similar events rela ng to their
computer systems could also have a material adverse effect on our business. There can also be no assurance that our and our service providers’
cybersecurity risk management program and processes, including policies, controls or procedures, will be fully implemented, complied with or
effec ve in protec ng our systems, networks and Confiden al Informa on.
A acks upon informa on technology systems are increasing in their frequency, levels of persistence, sophis ca on and intensity, and are
being conducted by sophis cated and organized groups and individuals with a wide range of mo ves and exper se. Further, the con nued
hybrid working environment has generally increased the a ack surface available to criminals, as more companies and individuals work online
and work remotely, and as such, the risk of a cybersecurity incident poten ally occurring, and our investment in risk mi ga ons against such an
incident, is increasing. Because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and o en are
not recognized un l launched against a target, we may be unable to an cipate these techniques or implement adequate preventa ve
measures. We may also experience security breaches that may remain undetected for an extended period. Even if iden fied, we may be unable
to adequately inves gate or remediate incidents or breaches due to a ackers increasingly using tools and techniques that are designed to
circumvent controls, to avoid detec on, and to remove or obfuscate forensic evidence.
To the extent that any disrup on or security breach were to result in a loss of, or damage to, our data or systems, or inappropriate or
unauthorized access to or disclosure or use of Confiden al Informa on, we could incur liability and suffer reputa onal harm, and the
development and commercializa on of our products could be delayed. Federal, state and interna onal laws and regula ons can expose us to
enforcement ac ons and inves ga ons by regulatory authori es, and poten ally result in regulatory penal es, fines and significant legal
liability, if our informa on technology security efforts fail. We may also be exposed to a risk of loss or li ga on and poten al liability, which
could materially and adversely affect our business, results of opera ons or financial condi on. Our insurance policies may not be
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adequate to compensate us for the poten al losses arising from such disrup ons, failure, or security breach. In addi on, such insurance may
not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us
and defending a suit, regardless of its merit, could be costly, divert management a en on, and harm our reputa on.
We are subject to governmental regula on and other legal obliga ons related to privacy, data protec on and informa on security.
Compliance with these requirements could result in addi onal costs and liabili es to us or inhibit our ability to collect and process data, and
the failure to comply with such requirements could have a material adverse effect on our business, financial condi on or results of
opera ons.
The global data protec on landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws,
requirements and regula ons governing the collec on, use, disclosure, reten on, and security of personal informa on, such as informa on that
we may collect in connec on with clinical trials in the U.S. and abroad. Implementa on standards and enforcement prac ces are likely to
remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regula ons, standards, or percep on of their
requirements may have on our business. This evolu on may create uncertainty in our business, affect our ability to operate in certain
jurisdic ons or to collect, store, transfer use and share personal informa on, necessitate the acceptance of more onerous obliga ons in our
contracts, result in liability or impose addi onal costs on us. Compliance with these privacy and data security requirements is rigorous and
me-intensive and may increase our cost of doing business. Any failure or perceived failure by us to comply with federal, state or foreign laws
or regula ons, our internal policies and procedures or our contracts governing our processing of personal informa on could result in nega ve
publicity, fines and penal es, li ga on and reputa onal harm, which could materially and adversely affect our business, financial condi on and
results of opera ons.
In the United States, we and our partners may be subject to numerous federal and state laws and regula ons, including state data breach
no fica on laws, state health informa on privacy laws, and federal and state consumer protec on laws and regula ons, that govern the
collec on, use, disclosure, and protec on of health-related and other personal informa on could apply to our opera ons or the opera ons of
our partners. In addi on, we may obtain health informa on from third par es (including research ins tu ons from which we obtain clinical trial
data) that are subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996, as amended,
or HIPAA. Depending on the facts and circumstances, we could be subject to criminal penal es if we knowingly obtain, use, or disclose
individually iden fiable health informa on maintained by a HIPAA covered en ty in a manner that is not authorized or permi ed by HIPAA.
Even when HIPAA does not apply, according to the Federal Trade Commission (“FTC”), failing to take appropriate steps to keep
consumers’ personal informa on secure cons tutes unfair acts or prac ces in or affec ng commerce in viola on of Sec on 5(a) of the Federal
Trade Commission Act. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensi vity and
volume of consumer informa on it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce
vulnerabili es. The FTC has authority to ini ate enforcement ac ons against en es that make decep ve statements about privacy and data
sharing in privacy policies, fail to limit third-party use of personal health informa on, fail to implement policies to protect personal health
informa on or engage in other unfair prac ces that harm customers or that may violate Sec on 5(a) of the FTC Act. Addi onally, federal and
state consumer protec on laws are increasingly being applied by the FTC and states’ a orneys general to regulate the collec on, use, storage,
and disclosure of personal or personally iden fiable informa on, through websites or otherwise, and to regulate the presenta on of website
content.
In addi on, state laws govern the privacy and security of health informa on in certain circumstances, many of which differ from each
other in significant ways and may not have the same requirements, thus complica ng compliance efforts. By way of example, California enacted
the California Consumer Privacy Act (the “CCPA”) on June 28, 2018, which went into effect on January 1, 2020. The CCPA creates individual
privacy rights for California consumers and increases the privacy and security obliga ons of en es handling certain personal informa on. The
CCPA provides for civil penal es for viola ons, as well as a private right of ac on for data breaches that has increased the likelihood of, and risks
associated with, data breach li ga on. Further, the California Privacy Rights Act (“CPRA”) generally went into effect on January 1, 2023, and
significantly amends the CCPA. It imposes addi onal data protec on obliga ons on covered businesses, including addi onal consumer rights
processes, limita ons on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensi ve data. It also creates a
new California data protec on agency authorized to issue substan ve regula ons and could result in increased privacy and informa on security
enforcement. Addi onal compliance investment and poten al business process changes may also be required. Similar laws have passed in
other states and are con nuing to be proposed at the state and federal level, reflec ng a trend toward more stringent privacy legisla on in the
United States. The enactment of such laws could have poten ally conflic ng requirements that would make compliance challenging. In the
event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domes c privacy and data protec on laws, any liability from
failure to comply with the requirements of these laws could adversely affect our financial condi on.
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In addi on, the regulatory framework for the receipt, collec on, processing, use, safeguarding, sharing and transfer of personal and
confiden al data is rapidly evolving and is likely to remain uncertain for the foreseeable future as new global privacy rules are being enacted
and exis ng ones are being updated and strengthened. For example, on May 25, 2018, the General Data Protec on Regula on (“GDPR”) took
effect. The GDPR is applicable in each EEA member state and applies to companies established in the EEA as well as companies that collect and
use personal data to offer goods or services to, or monitor the behavior of, individuals in the EEA, including, for example, through the conduct
of clinical trials. GDPR introduces more stringent data protec on obliga ons for processors and controllers of personal data. Among other
things, the GDPR requires the establishment of a lawful basis for the processing of data, includes requirements rela ng to the consent of the
individuals to whom the personal data relates, including detailed no ces for clinical trial subjects and inves gators, as well as requirements
regarding the security of personal data and no fica on of data processing obliga ons or security incidents to appropriate data protec on
authori es or data subjects. The GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to
provide adequate protec on to such personal data, including the United States; and the efficacy and longevity of current transfer mechanisms
between the EEA and the United States remains uncertain. Case law from the Court of Jus ce of the European Union (“CJEU”) states that
reliance on the standard contractual clauses - a standard form of contract approved by the European Commission as an adequate personal data
transfer mechanism - alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis.
On July 10, 2023, the European Commission adopted its Adequacy Decision in rela on to the new EU-US Data Privacy Framework (“DPF”)
rendering the DPF effec ve as a GDPR transfer mechanism to U.S. en es self-cer fied under the DPF. We expect the exis ng legal complexity
and uncertainty regarding interna onal personal data transfers to con nue. In par cular, we expect the DPF Adequacy Decision to be
challenged and interna onal transfers to the United States and to other jurisdic ons more generally to con nue to be subject to enhanced
scru ny by regulators. As a result, we may have to make certain opera onal changes and we will have to implement revised standard
contractual clauses and other relevant documenta on for exis ng data transfers within required me frames. Penal es and fines for failure to
comply with GDPR are significant, including fines of up to €20 million or 4% of total worldwide annual turnover, whichever is higher. In addi on
to fines, a breach of the GDPR may result in regulatory inves ga ons, reputa onal damage, orders to cease/ change our data processing
ac vi es, enforcement no ces, assessment no ces (for a compulsory audit) and/ or civil claims (including class ac ons).
Further, since the beginning of 2021, we have also been subject to the United Kingdom General Data Protec on Regula on and Data
Protec on Act 2018, which imposes separate but similar obliga ons to those under the GDPR and comparable penal es, including fines of up to
£17.5 million or 4% of a noncompliant company’s global annual revenue for the preceding financial year, whichever is greater. On October 12,
2023, the UK Extension to the DPF came into effect (as approved by the UK government), as a UK GDPR data transfer mechanism from the U.K.
to U.S. en es self-cer fied under the DPF. Other foreign jurisdic ons are increasingly implemen ng or developing their own privacy regimes
with complex and onerous compliance obliga ons and robust regulatory enforcement powers. As we con nue to expand into other foreign
countries and jurisdic ons, we may be subject to addi onal laws and regula ons that may affect how we conduct business.
Although we work to comply with applicable laws, regula ons and standards, our contractual obliga ons and other legal obliga ons,
these requirements are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdic on to another, and
may conflict with one another or other legal obliga ons with which we must comply. Any failure or perceived failure by us or our employees,
representa ves, contractors, consultants or other third par es to comply with such requirements or adequately address privacy and security
concerns, even if unfounded, could result in addi onal cost and liability to us, damage our reputa on, and have a material adverse effect on our
business, financial condi on and results of opera ons.
We may be nega vely impacted by con nued infla on.
We may be adversely impacted by con nued increases in infla on. Current and future infla on may be driven by the following factors:
supply chain disrup ons, increased costs of transporta on, increased input costs such as the cost of fuel, shortages, and governmental s mulus
or fiscal policies. Con nuing increases in infla on could impact the overall demand for our products, our costs for labor and materials and the
size of any margins we are able to realize on our revenues. This would have a material and adverse impact on our business, financial posi on,
results of opera ons and cash flows. Infla on may also result in higher interest rates, which in turn would result in higher interest expense
related to our variable rate indebtedness.
If we fail to comply with environmental, health and safety laws and regula ons, we could become subject to fines or penal es or incur costs
that could have a material adverse effect on the success of our business.
Our research and development ac vi es and our third-party manufacturers’ and suppliers’ ac vi es involve the controlled storage,
use and disposal of hazardous materials, including the components of our product candidates and other hazardous compounds.
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We and our manufacturers and suppliers are subject to laws and regula ons governing the use, manufacture, storage, handling and disposal of
these hazardous materials. In some cases, these hazardous materials and various wastes resul ng from their use are stored at our and our
manufacturers’ facili es pending their use and disposal. We cannot eliminate the risk of contamina on, which could cause an interrup on of
our commercializa on efforts, research and development efforts and business opera ons, environmental damage resul ng in costly cleanup
and liabili es under applicable laws and regula ons governing the use, storage, handling and disposal of these materials and specified waste
products. Although we believe that the safety procedures u lized by us and our third-party manufacturers for handling and disposing of these
materials generally comply with the standards prescribed by these laws and regula ons, we cannot guarantee that this is the case or eliminate
the risk of accidental contamina on or injury from these materials. In such an event, we may be held liable for any resul ng damages and such
liability could exceed our resources and state or federal or other applicable authori es may curtail our use of certain materials and/or interrupt
our business opera ons. Furthermore, environmental laws and regula ons are complex, change frequently and have tended to become more
stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. We do not currently carry biological
or hazardous waste insurance coverage.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
We have developed and implemented a cybersecurity risk management program intended to protect the confiden ality, integrity, and
availability of our cri cal systems and informa on. Our cybersecurity risk management program is designed to align with industry standards and
incorporates best prac ces such as the Na onal Ins tute of Standards and Technology (“NIST”) Cybersecurity Framework. This does not imply
that we meet any par cular technical standards, specifica ons, or requirements, only that we use the NIST as a guide to help us iden fy, assess,
and manage cybersecurity risks relevant to our business.
We have also established an interdisciplinary Cybersecurity Incident Response Team (“CIRT”), which is responsible for our incident
response plan, our security controls, and for assessing incidents reported by our informa on technology security team. In addi on, our
cybersecurity risk management program includes:
• Monitoring and evalua on of our vulnerability performance.
•
•
Implementa on of processes to oversee and iden fy risks from cybersecurity threats associated with our use of third-party
service providers that have access to our cri cal systems and informa on. For any agreements with service providers that do not
contain acceptable protec ons, we are working to put them in place on an ongoing basis.
Risk assessments designed to help iden fy material cybersecurity risks to our cri cal systems, informa on, products, services,
and our broader enterprise informa on technology environment. We use a third-party consultant to provide us with advisory,
project execu on, and opera onal support in connec on with cybersecurity and to conduct NIST assessments and vulnerability
evalua ons.
•
Cybersecurity awareness training of our employees, incident response personnel, and senior management.
We have not iden fied risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have
materially affected or are reasonably likely to materially affect us, including our opera ons, business strategy, results of opera ons, or financial
condi on. For more informa on, see the sec on tled “Risk Factor— Our informa on technology systems, or those used by our third-party
CROs or other contractors or consultants, may fail or suffer security breaches and geopoli cal tensions or conflicts, such as the ongoing war in
Ukraine or conflicts in the Middle East, may create a heightened risk of cybera acks.”
Cybersecurity Governance
Risk assessment and oversight are an integral part of our governance and management processes. Our Board of Directors encourages
management to promote a culture that incorporates risk management into our corporate strategy and day-to-day business opera ons. Our
Board considers cybersecurity risk as part of its risk oversight func on and oversees management’s implementa on of our cybersecurity risk
management program.
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Management discusses strategic and opera onal risks at regular management mee ngs and conducts specific strategic planning and
review sessions throughout the year. Throughout the year, senior management reviews these risks, including with respect to cybersecurity, with
the Board of Directors at board mee ngs from me to me as part of management presenta ons that focus on par cular business func ons,
opera ons or strategies and presents the steps taken by management to mi gate or eliminate such risks. We have implemented a risk-based
approach to iden fy and assess the cybersecurity threats that could adversely affect our business, data or informa on systems that we use or
own.
Our Vice President of Informa on Technology, as head of our informa on technology team, leading our cybersecurity efforts, oversees
the day-to-day administra on of our cybersecurity program. Our CIRT has members that include our Chief Execu ve Officer, Chief Financial
Officer, and Vice President of Informa on Technology. As key members of our management team, our Chief Execu ve Officer, Interim Chief
Financial Officer, and Vice President of Informa on Technology have approximately a combined 45 years of risk management experience and
are responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall
cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity
consultants. Key members of our informa on technology management team collec vely possess over 15 years of hands-on experience in
implemen ng a diverse array of cybersecurity ini a ves. Their exper se spans both cloud and on-premise IT infrastructure and
applica ons/systems, cul vated through extensive engagement across various regulated environments.
Our management team supervises efforts to prevent, detect, mi gate, and remediate cybersecurity risks and incidents through various
means, which may include briefings from internal security personnel; threat intelligence and other informa on obtained from governmental,
public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the
informa on technology environment.
Item 2. Proper es
Our headquarters are located in Redwood City, California, where we occupy office space under a lease that was amended in October
2023. Pursuant to the amendment, we extended the term of the lease through September 30, 2027 for approximately 27,532 square feet of
office space and for 20,257 square feet of previously-leased office space, the term of the lease expired on December 31, 2023.
Our analy cal and process development laboratory is located in Camarillo, California under a lease that expires in May 2027, and
contains a one- me op on to extend the lease term for five years.
We believe that our exis ng facili es are adequate for our current needs. When our leases expire, or if we need to hire more
employees, we may exercise our renewal op on or look for addi onal or alternate space for our opera ons and we believe that suitable
addi onal or alterna ve space will be available in the future on commercially reasonable terms.
Item 3. Legal Proceedings
The informa on called for by this Item is incorporated herein by reference to Item 8. “Financial Statements and Supplementary Data,”
Note 9. “Commitments and Con ngencies.”
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Ma ers and Issuer Purchases of Equity Securi es
Market Informa on
Our common stock has been listed on The Nasdaq Global Market under the symbol “CHRS” since November 6, 2014. As of
February 29, 2024, there were approximately 85 stockholders of record of our common stock.
Dividends
We have never declared or paid any cash dividends on our capital stock and do not an cipate paying cash dividends in the foreseeable
future.
Stock Performance Graph
The following graph shows the total stockholder’s return on an investment of $100 in cash at market close on December 31, 2018
through December 29, 2023 (the last trading day at the end of our fi h fiscal year) for (i) our common stock, (ii) the Nasdaq Composite Index
and (iii) the Nasdaq Biotechnology Index. Pursuant to applicable Securi es and Exchange Commission rules, all values assume reinvestment of
the full amount of all dividends, however, no dividends have been declared on our common stock to date. The stockholder return shown on the
graph below is not necessarily indica ve of future performance, and we do not make or endorse any predic ons as to future stockholder
return. This graph shall not be deemed “solici ng material” or be deemed “filed” for purposes of Sec on 18 of the Exchange Act, or otherwise
subject to the liabili es under that Sec on, and shall not be deemed to be incorporated by reference into any of our filings under the Securi es
Act, whether made before or a er the date hereof and irrespec ve of any general incorpora on language in any such filing.
Recent Sales of Unregistered Equity Securi es
From January 1, 2023 through December 31, 2023, there were no sales or issuances of unregistered securi es that were not otherwise
reported on a Quarterly Report on Form 10-Q or Current Report on Form 8-K.
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Issuer Purchases of Equity Securi es
We did not repurchase any of our equity securi es during the fourth quarter ended December 31, 2023. A total of 96,047 shares were
surrendered to Coherus in the fourth quarter of 2023, to sa sfy minimum tax withholding obliga ons in connec on with the ves ng or exercise
of stock-based awards.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condi on and Results of Opera ons
The following discussion should be read in conjunc on with the consolidated financial statements and notes thereto included
elsewhere in this Annual Report on Form 10-K (“Form 10-K”). This Form 10-K, including the following sec ons, contains forward-looking
statements within the meaning of the federal securi es laws. These statements are subject to risks and uncertain es that could cause actual
results and events to differ materially from those expressed or implied by such forward-looking statements. For a detailed discussion of these
risks and uncertain es, see the “Risk Factors” sec on in Item 1A of this Form 10-K. We cau on the reader not to place undue reliance on these
forward-looking statements, which reflect management’s analysis only as of the date of this Form 10-K. We undertake no obliga on to update
forward-looking statements, which reflect events or circumstances occurring a er the date of this Form 10-K.
This MD&A sec on generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of
2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management's
Discussion and Analysis of Financial Condi on and Results of Opera ons” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2022, filed with the SEC on March 6, 2023.
Overview
We are a commercial-stage biopharmaceu cal company focused on the research, development and commercializa on of innova ve
cancer treatments and the commercializa on of our por olio of FDA-approved oncology products, including LOQTORZI. Our strategy is to build
a leading immuno-oncology business funded with cash generated from our diversified por olio of FDA-approved therapeu cs.
As of March 15, 2024, our commercial por olio includes two FDA-approved biosimilar products. Our first product, UDENYCA, a
biosimilar to Neulasta, a long-ac ng G-CSF, was launched commercially in the United States in January 2019. The FDA approved the PAS for an
AI presenta on of UDENYCA on March 3, 2023, and on May 22, 2023 we announced the availability of UDENYCA AI for commercial sale. On
December 26, 2023 we announced that the FDA approved the PAS for our third pegfilgras m presenta on, UDENYCA ONBODY. UDENYCA
ONBODY became commercially available in the first quarter of 2024. Our second product, YUSIMRY (adalimumab-aqvh), a biosimilar to Humira
(adalimumab), was launched in the United States in July 2023. Another product, CIMERLI (ranibizumab-eqrn), was approved by the FDA in
August 2022 as a biosimilar product interchangeable with Lucen s (ranibizumab injec on) for the treatment of neovascular (wet) age-related
macular degenera on, macular edema following re nal vein occlusion, diabe c macular edema, diabe c re nopathy, and myopic choroidal
neovasculariza on. We launched CIMERLI commercially in the United States in October 2022. On January 19, 2024, we entered into the
Purchase Agreement by and between us and Sandoz. Pursuant to the terms and subject to the condi ons set forth in the Purchase Agreement,
on March 1, 2024, we completed the dives ture of our CIMERLI ophthalmology franchise through the sale of our subsidiary, Coherus
Ophthalmology LLC, to Sandoz for upfront, all-cash considera on of $170.0 million plus an addi onal $17.8 million for CIMERLI product
inventory and prepaid manufacturing assets. Such considera on is subject to certain adjustments that will be finalized following the closing
pursuant to the Purchase Agreement.
Our commercial por olio includes LOQTORZI, a novel PD-1 inhibitor. On October 27, 2023, we announced that LOQTORZI was
approved by the FDA in combina on with cispla n and gemcitabine for the first-line treatment of adults with metasta c or recurrent locally
advanced NPC, and as monotherapy for the treatment of adults with recurrent, unresectable, or metasta c NPC with disease progression on or
a er pla num-containing chemotherapy. LOQTORZI is an an -PD-1 an body that we developed in collabora on with Junshi Biosciences. We
announced the launch of LOQTORZI in the U.S. on January 2, 2024.
We also have a pipeline of earlier stage clinical and preclinical immuno-oncology programs. On September 8, 2023, we acquired
Surface and took ownership of its assets, including its por olio of product candidates. The lead clinical stage product candidate from the
Surface Acquisi on is casdozokitug (CHS-388, formerly SRF388), an inves ga onal an body targe ng IL-27, an immune regulatory cytokine, or
protein that is overexpressed in certain cancers, including hepatocellular, lung and renal cell carcinoma. IL-27 is a cytokine
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secreted by macrophages and an gen presen ng cells that plays an important physiologic role in suppressing the immune system, as evidenced
by its ability to resolve ssue inflamma on. In addi on, one of the subunits of IL-27, EBI3, is highly expressed during pregnancy and its
expression is correlated with maternal-fetal tolerance. Due to its immunosuppressive nature, there is a ra onale for inhibi ng IL-27 to treat
cancer, as this approach will influence the ac vity of mul ple types of immune cells that are necessary to recognize and a ack a tumor.
Casdozokitug received orphan drug designa on and fast track designa on from the FDA for the treatment of HCC in November 2020.
Casdozokitug is currently in two on-going clinical studies, a Phase 1/2 study in pa ents with advanced solid tumors (clinicaltrials.gov
iden fier# NCT04374877) and a Phase 2 study in HCC (clinicaltrials.gov iden fier# NCT05359861). Our second clinical-stage product candidate
from the Surface Acquisi on, CHS-114 (formerly SRF114), is an inves ga onal IgG1 an body targe ng CCR8, a chemokine receptor highly
expressed on Treg cells in the TME. CHS-114 is designed to cause deple on of intra-tumoral Treg cells, important regulators of immune
suppression and tolerance, through ADCC, or ADCP, or both, that has shown an -tumor ac vity in preclinical models. We are enrolling pa ents
with advanced solid tumors in North America in a clinical trial evalua ng safety and pharmacokine cs of CHS-114 (clinicaltrials.gov iden fier#
NCT05635643). We are also pursuing an early-stage development candidate that is in inves ga onal new drug applica on-enabling studies,
CHS-1000, an an body targe ng human ILT4, designed to improve an -PD-1 clinical benefit by transforming an unfavorable TME to a more
favorable TME.
In addi on to our internally developed por olio of product candidates that we obtained in the Surface Acquisi on, we have two
product candidates, NZV930 and GSK4381562, which are exclusively licensed to Novar s Ins tutes and GSK, respec vely. We will pay 70% of all
milestone- and royalty-based payments that we or our affiliates actually receive from the product candidates licensed to Novar s Ins tutes and
GSK during the ten-year period following the entry into the CVR Agreement to the holders of the CVRs.
We have built an experienced and robust oncology market access, key account management and medical affairs capability in the
United States, which have supported the successful commercializa on of UDENYCA across its three FDA-approved presenta ons. We expect to
leverage these capabili es as we build and launch our immuno-oncology franchise.
We primarily operate in the United States and partner with companies that operate in other countries.
Business Update
Surface Acquisi on
On September 8, 2023 (the “Acquisi on Date”), in accordance with the Agreement and Plan of Merger dated June 15, 2023 (the “Merger
Agreement”) by and among us, Crimson Merger Sub I, Inc., a direct, wholly owned subsidiary of the Company (“Merger Sub I”), Crimson Merger
Sub II, LLC, a direct, wholly owned subsidiary of the Company (“Merger Sub II,” and together with Merger Sub I, the “Merger Subs”), and
Surface, we completed the acquisi on of Surface, a clinical-stage I-O company focused on using its specialized knowledge of the biological
pathways cri cal to the immunosuppressive tumor microenvironment for the development of next-genera on cancer therapies. The Surface
Acquisi on expanded our I-O pipeline with the following: casdozokitug (CHS-388, formerly SRF388), an inves ga onal, novel IL-27-targeted
an body currently being evaluated in a Phase 2 clinical trial in HCC, and CHS-114 (formerly SRF114), an inves ga onal, CCR8-targeted an body
currently in a Phase 1/2 study as a monotherapy in pa ents with advanced solid tumors.
On September 8, 2023, we issued to the holders of all outstanding Surface common stock (other than treasury shares, any shares of
Surface common stock held directly by us or the Merger Subs immediately prior to the Acquisi on Date and shares of Surface common stock
issued and outstanding immediately prior to the Acquisi on Date and held by any holder properly demanding appraisal for such shares in
accordance with Sec on 262 of the Delaware General Corpora on Law) 0.1960 shares of our common stock in exchange for each share of
outstanding Surface common stock and certain outstanding Surface employee equity awards. The exchange ra o was calculated pursuant to
the terms of the Merger Agreement and was based on a $5.2831 per share price of our common stock and a nominal total amount of cash in
lieu of frac onal shares. Surface shareholders also received one CVR for each share of Surface common stock and employee equity award
converted. Each CVR en tles the holder to receive quarterly con ngent payments in the form of cash, stock or a combina on of cash and stock
at our discre on during the ten-year period following September 8, 2023, for the sum of the following, less any permi ed deduc ons (in
accordance with the CVR Agreement):
● 70% of all milestone- and royalty-based payments actually received by us or our affiliates under the GSK Agreement related to the
exis ng program (GSK4381562);
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● 70% of all milestone- and royalty-based payments actually received by us or our affiliates under the Novar s Agreement related
to the exis ng program (NZV930);
● 25% of any upfront payment actually received by us or our affiliates pursuant to poten al ex-U.S. licensing agreements for CHS-
114; and
● 50% of any upfront payment actually received by us or our affiliates pursuant to poten al ex-U.S. licensing agreements for
casdozokitug.
We expensed $5.1 million of acquisi on-related costs during 2023.
CIMERLI Divestment Transac on
On January 19, 2024, we entered into the Purchase Agreement by and between us and Sandoz. Pursuant to the terms and subject to the
condi ons set forth in the Purchase Agreement, on March 1, 2024, we completed the dives ture of our CIMERLI ophthalmology franchise
through the sale of our subsidiary, Coherus Ophthalmology LLC, to Sandoz for upfront, all-cash considera on of $170.0 million plus an
addi onal $17.8 million for CIMERLI product inventory and prepaid manufacturing assets. Such considera on is subject to certain adjustments
that will be finalized following the closing pursuant to the Purchase Agreement.
Other Updates
On October 27, 2023, we announced that LOQTORZI was approved by the FDA in combina on with cispla n and gemcitabine for the first-
line treatment of adults with metasta c or recurrent locally advanced NPC, and as monotherapy for the treatment of adults with recurrent,
unresectable, or metasta c NPC with disease progression on or a er pla num-containing chemotherapy. LOQTORZI is an an -PD-1 an body
that we developed in collabora on with Junshi Biosciences. We announced the launch of LOQTORZI in the U.S. on January 2, 2024.
During the year ended December 31, 2023, we donated approximately 36,000 units of UDENYCA in the PFS presenta on to the
nonprofit organiza on Direct Relief to benefit cancer pa ents in low- and middle-income countries requiring increased access for vulnerable
pa ents. The carrying value of this inventory was wri en down to zero in the third quarter of 2022, thus there was no charge associated with
the dona on.
On October 9, 2023, in accordance with the terms of an Op onal Stock Purchase Agreement entered with a CMO on September 28,
2023 (the “Op onal Stock Purchase Agreement”), we issued 2,225,513 shares of our common stock to the CMO for a price of $3.675 per share,
represen ng an aggregate value of $8.2 million. The Op onal Stock Purchase Agreement gave us the op on, in our sole discre on to elect to
pay for certain manufacturing services provided by the CMO by either paying cash or issuing shares of our common stock in a private placement
offering (the “Stock Service Fee Payment”). On October 4, 2023, we no fied the CMO of our elec on of the Stock Service Fee Payment. The
price per share of common stock was equal to the volume-weighted average closing trading price per share of common stock on the Nasdaq
Global Market over the ten-trading day period ending on and including October 6, 2023.
On November 8, 2022, we filed a registra on statement on Form S-3, which was declared effec ve on November 17, 2022 (the
“Registra on Statement”). Under the Registra on Statement, we could offer and sell up to $150.0 million in the aggregate of our common
stock, preferred stock, debt securi es, warrants and units from me to me in one or more offerings. Also on November 8, 2022, we entered
into the Sales Agreement with TD Cowen pursuant to which we may issue and sell from me to me up to $150.0 million of our common stock
in the ATM Offering. On May 15, 2023, pursuant to an Amendment No. 1 to Sales Agreement, we reduced the number of shares that could be
issued and sold pursuant to the ATM Offering by $86.25 million, lowering the aggregate offering price under the Sales Agreement from $150.0
million to $63.75 million. On September 11, 2023, pursuant to Amendment No. 2 to Sales Agreement, we increased the number of shares that
could be issued and sold pursuant to its ATM Offering with TD Cowen by $28.75 million, increasing the aggregate offering price under the Sales
Agreement from $63.75 million to $92.5 million. For the ATM Offering program to date as of December 31, 2023, we sold 4,476,645 shares of
common stock at a weighted-average price per share of $5.81 for gross proceeds of $26.0 million pursuant to the ATM Offering and received
net proceeds of $25.4 million, net of $0.6 million of commissions and fees.
On January 10, 2024, we announced that we had delivered a no ce of termina on for the TIGIT Program (as defined in the
Collabora on Agreement) to Junshi Biosciences pursuant to the Collabora on Agreement. We had previously no fied Junshi Biosciences on
January 9, 2022 of our elec on to exercise the license op on for the TIGIT program CHS-006 described in the Collabora on Agreement (the
“TIGIT Program”). A er our acquisi on of Surface Oncology, Inc. in September 2023, we disclosed that we would conduct a por olio
priori za on process to allocate resources towards the most promising and compe vely posi oned product candidates in our pipeline.
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We believed it would be in our best interests to terminate future work with Junshi Biosciences on the TIGIT Program. We plan to con nue to
wind down work with Junshi Biosciences on the TIGIT Program pursuant to the termina on. Despite the termina on of the work with Junshi
BioSciences on the TIGIT Program, we will con nue to support pa ents in its current studies involving CHS-006 (clinicaltrials.gov iden fier#
NCT05061628 and clinicaltrials.gov iden fier# NCT05757492). The Collabora on Agreement remains effec ve and ac ve for all other purposes
as we con nue to work together with Junshi Biosciences on the development of LOQTORZI.
On February 5, 2024, we entered into the Consent and Amendment with the Collateral Agent and the Lenders, pursuant to which the
Lenders and the Collateral Agent provided certain consents, and released certain assets and subsidiaries of the Company from their obliga ons
under the Loan Agreement and the other loan documents in connec on therewith, and the par es thereto agreed to amend the previously
disclosed Loan Agreement. Pursuant to and subject to terms and condi ons in the Consent and Amendment, among other things: (1) the
Lenders and the Collateral Agent provided consent to consumma on of the transac ons contemplated by the Purchase Agreement, and
released certain subsidiary of us from our obliga on and certain assets subject to the transac ons contemplated thereby, (2) the Lenders and
the Collateral Agent required us to make a par al prepayment of the principal of the loans outstanding under the Loan Agreement in the
amount of $175.0 million upon consumma on of the transac ons contemplated by the Purchase Agreement, subject to certain condi ons and
(3) the par es thereto agreed to adjust the minimum net sales covenant level under the Loan Agreement. Other terms of the Loan Agreement,
as amended by the Consent and Amendment, remain generally iden cal to those under the Loan Agreement. Upon the closing of the Sale
Transac on we became liable to repay $175.0 million of the exis ng principal balance of $250.0 million of the loans outstanding under the Loan
Agreement on April 1, 2024 and we plan to repay $175.0 million and the prepayment premium and makewhole amount of $6.8 million to the
Lenders on or before April 1, 2024 pursuant to the Consent and Amendment.
Products and Product Candidates
Our por olio includes the following products and product candidates:
Oncology
●
●
●
UDENYCA, a biosimilar to Neulasta, a long-ac ng G-CSF, was launched commercially in the United States in January 2019. The FDA
approved the PAS for an AI presenta on of UDENYCA on March 3, 2023, and on May 22, 2023 we announced the availability of
UDENYCA AI for commercial sale. On December 26, 2023 we announced that the FDA approved the PAS for our third pegfilgras m
presenta on, UDENYCA ONBODY. UDENYCA ONBODY became commercially available in the first quarter of 2024.
LOQTORZI was developed for its ability to block PD-1 interac ons with its ligands, PD-L1 and PD-L2, by binding to the FG loop on
the PD-1 receptor. We believe blocking PD-1 interac ons with PD-L1 and PD-L2 can help to promote the immune system’s ability to
a ack and kill tumor cells.
On October 27, 2023, we announced that LOQTORZI was approved by the FDA in combina on with cispla n and gemcitabine for
the first-line treatment of adults with metasta c or recurrent locally advanced NPC, and as monotherapy for the treatment of
adults with recurrent, unresectable, or metasta c NPC with disease progression on or a er pla num-containing chemotherapy.
LOQTORZI is an an -PD-1 an body that we developed in collabora on with Junshi Biosciences. We announced the launch of
LOQTORZI in the U.S. on January 2, 2024.
Casdozokitug (CHS-388, formerly SRF388), is an inves ga onal recombinant human IgG1 monoclonal an body targe ng IL-27, an
immune regulatory cytokine, or protein that is overexpressed in certain cancers, including hepatocellular, lung and renal cell
carcinoma. IL-27 is a cytokine secreted by macrophages and an gen presen ng cells that plays an important physiologic role in
suppressing the immune system, as evidenced by its ability to resolve ssue inflamma on. In addi on, IL-27 is highly expressed
during pregnancy and its expression is correlated with maternal-fetal tolerance. Due to its immune regulatory nature, there is a
ra onale for inhibi ng IL-27 to treat cancer, as this approach will influence the ac vity of mul ple types of immune cells that are
necessary to recognize and a ack a tumor. Casdozokitug received orphan drug designa on and fast track designa on from the FDA
for the treatment of HCC in November 2020. Casdozokitug is currently in two on-going clinical studies a Phase 1/2 study in
advanced solid tumors (clinicaltrials.gov iden fier# NCT04374877) and a Phase 2 study in HCC (clinicaltrials.gov iden fier#
NCT05359861).
●
CHS-114 (formerly SRF114), is an inves ga onal highly specific human afucosylated IgG1 monoclonal an body selec vely targe ng
CCR8, a chemokine receptor highly expressed on Treg cells in the TME. CHS-114 is designed as a cytoly c an body
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to cause deple on of intra-tumoral Treg cells, important regulators of immune suppression and tolerance, through ADCC, and/or
ADCP. CHS-114 has shown an -tumor ac vity as monotherapy or in combina on with an -PD-1 an bodies in preclinical models.
We are enrolling pa ents with advanced solid tumors in North America in a clinical trial evalua ng safety and pharmacokine cs of
CHS-114 (clinicaltrials.gov iden fier# NCT05635643).
● We are pursuing an early-stage development candidate, CHS-1000, an an body targe ng human ILT4, designed to improve an -PD-
1 clinical benefit by transforming an unfavorable TME to a more favorable TME. We plan to submit an IND to the FDA in the second
quarter of 2024 for CHS-1000.
●
●
●
In addi on to our internally developed por olio of product candidates that we obtained in the Surface Acquisi on, we also own
NZV930 and GSK4381562, which are exclusively licensed to Novar s Ins tutes and GSK, respec vely. NZV930 is an an body
designed to inhibit CD73, which is a cri cal enzyme involved in the produc on of extracellular adenosine, a key metabolite with
strong immunosuppressive proper es within the TME. NZV930 aims to reduce the produc on of immunosuppressive adenosine
within the TME. GSK4381562 is an an body targe ng CD112R, also known as PVRIG, an inhibitory protein expressed on NK and T
cells. GSK4381562 blocks the interac on of CD112R with CD112, its binding partner that is expressed on tumor cells. GSK4381562
can promote the ac va on of both NK and T cells, with poten al to elicit a strong an -tumor response and promote
immunological memory. We will pay 70% of all milestone- and royalty-based payments that we or our affiliates actually receive
from the product candidates licensed to Novar s Ins tutes and GSK during the ten-year period following the entry into the CVR
Agreement to the holders of the CVRs.
Immunology
YUSIMRY, a biosimilar of Humira (adalimumab), is a monoclonal an body that can bind to TNF. YUSIMRY provides certain
therapeu c benefits for treatment of pa ents with certain inflammatory diseases characterized by increased produc on of TNF in
the body, including rheumatoid arthri s, juvenile idiopathic arthri s, psoria c arthri s, ankylosing spondyli s, Crohn’s disease,
psoriasis and ulcera ve coli s. In December 2021, the FDA approved YUSIMRY, which we launched in the United States in July
2023. The list price of YUSIMRY at launch represented an approximately 85% discount to the list price of Humira. YUSIMRY is now
available for sale na onwide through select retail, mail order, and specialty pharmacy channels.
Ophthalmology franchise – sold to Sandoz pursuant to the Sale Transac on
CIMERLI is a Lucen s biosimilar. In November 2019, we entered into a license agreement with Bioeq for the commercializa on of
CIMERLI in certain dosage forms in both a vial and pre-filled syringe (“PFS”) presenta on. Under the Bioeq Agreement, Bioeq
granted to us an exclusive royalty-bearing license to commercialize CIMERLI in the field of ophthalmology (and any other approved
labelled indica on) in the United States.
On August 2, 2022, the FDA approved CIMERLI as a biosimilar product interchangeable with Lucen s for the treatment of
neovascular (wet) age-related macular degenera on, macular edema following re nal vein occlusion, diabe c macular edema,
diabe c re nopathy, and myopic choroidal neovasculariza on. The FDA also granted CIMERLI 12 months of first interchangeable
exclusivity. On October 3, 2022, we launched CIMERLI commercially in the United States in both 0.3 mg and 0.5 mg dosage forms.
On January 19, 2024, we entered into the Purchase Agreement by and between us and Sandoz. Pursuant to the terms and subject
to the condi ons set forth in the Purchase Agreement, on March 1, 2024, we completed the dives ture of our CIMERLI
ophthalmology franchise through the sale of our subsidiary, Coherus Ophthalmology LLC, to Sandoz for upfront, all-cash
considera on of $170.0 million plus an addi onal $17.8 million for CIMERLI product inventory and prepaid manufacturing assets.
Such considera on is subject to certain adjustments that will be finalized following the closing pursuant to the Purchase
Agreement.
License Agreement with Junshi Biosciences
On February 1, 2021, we entered into the Collabora on Agreement with Junshi Biosciences for the co-development and
commercializa on of LOQTORZI, Junshi Biosciences’ an -PD-1 an body in the United States and Canada.
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Under the terms of the Collabora on Agreement, we paid $150.0 million upfront for exclusive rights to LOQTORZI in the United
States and Canada, an op on in these territories to Junshi Biosciences’ an -TIGIT an body CHS-006, an op on in these territories to a next-
genera on engineered IL-2 cytokine, and certain nego a on rights to two undisclosed preclinical immuno-oncology drug candidates. We will
have the right to conduct all commercial ac vi es of LOQTORZI in the United States and Canada. We are obligated to pay Junshi Biosciences up
to a 20% royalty on net sales of LOQTORZI and up to an aggregate $380.0 million in one- me payments for the achievement of various
regulatory and sales milestones.
In March 2022, we paid $35.0 million for the exercise of our op on to license CHS-006. Subsequent joint development consistent with
the Collabora on Agreement commenced. On January 10, 2024, we announced that we had delivered a no ce of termina on of the TIGIT
Program (as defined in the Collabora on Agreement) to Junshi Biosciences pursuant to the Collabora on Agreement. Under the Collabora on
Agreement, we retain the right to collaborate in the development of LOQTORZI and the other licensed compounds and will pay for a por on of
these co-development ac vi es up to a maximum of $25.0 million per licensed compound per year. Addi onally, we are responsible for certain
associated regulatory and technology transfer costs for LOQTORZI and other licensed compounds and will reimburse Junshi Biosciences for such
costs.
We accounted for the licensing transac on as an asset acquisi on under the relevant accoun ng rules. The $35.0 million payment for
the op on to license CHS-006 was reflected in our first quarter of 2022 financial statements. As of December 31, 2023, we have accrued a $25.0
million milestone payment to Junshi Biosciences, of which we expect to pay $12.5 million in the second quarter of 2024 and $12.5 million in the
first quarter of 2025, as well as an immaterial royalty obliga on. The addi onal milestone payments and royal es are con ngent upon future
events and, therefore, will be recorded if and when it becomes probable that a milestone will be achieved, or when an op on fee or royal es
are incurred.
Financial Opera ons Overview
Revenue
Our first FDA-approved product, UDENYCA, was approved in November 2018, and we ini ated United States sales of UDENYCA on
January 3, 2019. In December 2021, the FDA-approved YUSIMRY, which we launched in the United States in July 2023. On August 2, 2022, the
FDA approved CIMERLI, which we launched in the United States in October 2022. On October 27, 2023, we announced that LOQTORZI was
approved by the FDA, and we subsequently launched LOQTORZI in the United States in January 2024. Total net revenues were $257.2 million
and $211.0 million in 2023 and 2022, respec vely. On January 19, 2024, we entered into the Purchase Agreement by and between us and
Sandoz. Pursuant to the terms and subject to the condi ons set forth in the Purchase Agreement, on March 1, 2024, we completed the Sale
Transac on of our CIMERLI ophthalmology franchise through the sale of our subsidiary, Coherus Ophthalmology LLC, to Sandoz for upfront, all-
cash considera on of $170.0 million plus an addi onal $17.8 million for CIMERLI product inventory and prepaid manufacturing assets. Such
considera on is subject to certain adjustments that will be finalized following the closing pursuant to the Purchase Agreement.
Cost of Goods Sold
Cost of goods sold consists primarily of third-party manufacturing, distribu on, certain overhead costs, and royal es on certain
products. In the fourth quarter of 2023, we recorded a $47.0 million charge for the write-down of slow moving YUSIMRY inventory and the
related par al recogni on of certain firm purchase commitments in cost of goods sold in the consolidated statements of opera ons. On May 2,
2019, we se led a trade secret ac on brought by Amgen. As a result, cost of goods sold reflects a mid-single digit royalty on UDENYCA net
product revenue, which began July 1, 2019 and con nues for five years from then. Addi onally, we share a percentage of gross profits on sales
of Bioeq Licensed Products in the United States with Bioeq in the low- to mid-fi y percent range, and pursuant to the Genentech Agreement we
incur a royalty that is a low single-digit percentage of net sales of CIMERLI that was incurred through the end of 2023 but that is no longer
owed.
Research and Development Expense
Research and development expense represents costs incurred to conduct research, such as the discovery and development of our
product candidates. We recognize all research and development costs as they are incurred. We currently track research and development costs
incurred on a product candidate basis only for external research and development expenses. Our external research and development expense
consists primarily of:
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● expense incurred under agreements with collaborators, consultants, third-party CROs, and inves ga ve sites where a substan al
por on of our preclinical studies and all of our clinical trials are conducted;
● costs of acquiring originator comparator materials and manufacturing preclinical study and clinical trial supplies and other
materials from CMOs, and related costs associated with release and stability tes ng;
● costs associated with manufacturing process development ac vi es, analy cal ac vi es and pre-launch inventory manufactured
prior to regulatory approval being obtained or deemed to be probable; and
● upfront and certain milestone payments related to licensing and collabora on agreements.
Internal costs are associated with ac vi es performed by our research and development organiza on and generally benefit mul ple
programs. These costs are not separately allocated by product candidate. Unallocated, internal research and development costs consist
primarily of:
● personnel-related expense, which include salaries, benefits and stock-based compensa on; and
● facili es and other allocated expense, which include direct and allocated expense for rent and maintenance of facili es,
deprecia on and amor za on of leasehold improvements and equipment, laboratory and other supplies.
The largest component of our total opera ng expense has historically been our investment in research and development ac vi es,
including the licensing and collabora on costs, clinical development and manufacturing process development of our product candidates.
The process of conduc ng the necessary clinical research to obtain regulatory approval is costly and me consuming. Furthermore, in
the past, we have entered into collabora ons with third par es to par cipate in the development and commercializa on of our product
candidates, and we may enter into addi onal collabora ons in the future. In situa ons in which third par es have substan al influence over the
development ac vi es for product candidates, the es mated comple on dates are not fully under our control. For example, our partners in
licensed territories may exert considerable influence on the regulatory filing process globally. Therefore, we cannot forecast with any degree of
certainty the dura on and comple on costs of these or other current or future clinical trials of our product candidates. We may never succeed
in achieving regulatory approval for any of our pipeline product candidates. In addi on, we may enter into other collabora on arrangements for
our other product candidates, which could affect our development plans or capital requirements.
The following table summarizes our research and development expense incurred during the respec ve periods:
(in thousands)
External costs incurred by product candidate:
UDENYCA
YUSIMRY
LOQTORZI
CHS-006 (op on terminated)
CHS-1000
Casdozokitug
CHS-114
Other discon nued projects
Other research and development expenses (7)
Internal costs
Total research and development expenses
Development Status as of
December 31, 2023
Year Ended December 31,
2023
2022
Approved (1)
Approved (2)
Approved (3)
Clinical Trials (4)
Development
Development (5)
Development (5)
Discon nued (6)
$
4,476
7,273
17,192
5,833
7,105
4,129
1,429
23
2,826
59,150
$ 109,436
$ 17,358
26,309
36,871
39,650
2,671
—
—
1,007
1,838
73,654
$ 199,358
(1) Expenses related primarily to development efforts to obtain PAS for addi onal presenta ons of UDENYCA.
(2) YUSIMRY, formerly CHS-1420, was approved by the FDA in December 2021. Expenses in 2023 and 2022 primarily related to manufacturing efforts for
new formula ons and clinical studies.
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(3)
(4)
In October 2023, LOQTORZI was approved by the FDA in combina on with cispla n and gemcitabine for the first-line treatment of adults with
metasta c or recurrent locally advanced NPC, and for LOQTORZI as monotherapy for the treatment of adults with recurrent, unresectable, or
metasta c NPC with disease progression on or a er pla num-containing chemotherapy.
In March 2022, we paid $35.0 million to exercise our op on to license CHS-006, a TIGIT-targeted an body, in the United States and Canada from Junshi
Biosciences. Expenses in 2023 and 2022 included our reimbursement for certain costs related to an ongoing CHS-006 clinical trial being conducted by
Junshi Biosciences. On January 10, 2024, we announced that we delivered a no ce of termina on of the TIGIT Program (as defined in the
Collabora on Agreement) to Junshi Biosciences pursuant to the Collabora on Agreement.
(5) We acquired casdozokitug and CHS-114 in connec on with the Surface Acquisi on in September 2023.
(6) The $1.0 million of expense in 2022 relates to CHS-3318 and CHS-305 which were both discon nued during 2022.
(7) Amount consists of expenses for other pipeline candidates and CIMERLI, which was approved by the FDA in August 2022.
Selling, General and Administra ve Expense
Selling, general and administra ve expense consists primarily of personnel costs, allocated facili es costs and other expense for
outside professional services, including legal, insurance, human resources, outside marke ng, adver sing, audit and accoun ng services,
acquisi on-related costs, as well as costs associated with establishing commercial capabili es in support of the commercializa on of UDENYCA,
CIMERLI, YUSIMRY and LOQTORZI. Personnel costs consist of salaries, benefits and stock-based compensa on.
Interest Expense
Interest expense consists primarily of interest incurred on our outstanding indebtedness and non-cash interest related to the
amor za on of debt discount and debt issuance costs associated with our outstanding debt agreements.
Loss on Debt Ex nguishment
Loss on debt ex nguishment consists of losses incurred related to the early repayment of debt obliga ons.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest earned on our cash and cash equivalents, non-cash accre on of discount on
our investments in marketable securi es, foreign exchange gains (losses) resul ng from currency fluctua ons, and gains (losses) from disposal
of long-lived assets.
Results of Opera ons
Comparison of Years Ended December 31, 2023 and 2022
Revenue
(in thousands)
Net revenue
Year Ended December 31,
2023
257,244
$
2022
211,042
$
$
Change
46,202
The increase in net revenue was primarily due to our three new products: CIMERLI launched in October 2022 and contributed $118.4
million more in 2023 as compared to 2022, YUSIMRY launched in July 2023 contribu ng $3.6 million, and LOQTORZI sales to distributors began
in December ahead of the January 2024 launch, contribu ng $0.6 million of net revenue. This was par ally offset by a $76.8 million decline in
UDENYCA net revenue as compared to 2022, primarily related to the decline in the average net selling price per unit. Our net revenue and
market penetra on may con nue to be adversely impacted by pricing trends and compe ve dynamics in the overall pegfilgras m market. In
addi on, the COVID-19 pandemic has nega vely impacted the pre-filled syringe pegfilgras m market due to preferences to administer
medica on at home.
We expect our net revenue to decrease during 2024, as a result of the CIMERLI Sale Transac on that closed on March 1, 2024.
However, we believe this will be par ally offset by the con nued market share growth of UDENYCA, considering its mul ple presenta ons, as
well as the launch of LOQTORZI in the U.S. as announced on January 2, 2024, and a full year of sales of YUSIMRY.
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Cost of Goods Sold
(in thousands)
Cost of goods sold
Gross margin
$
2023
158,992
$
38 %
Year Ended December 31,
2022
70,083
$
67 %
Change
88,909
The increase in cost of goods sold in 2023 compared to 2022 was due to a $47.0 million charge in the fourth quarter of 2023 for the
write-down of slow moving YUSIMRY inventory and the related par al recogni on of certain firm purchase commitments, a $47.5 million
increase in royalty costs and $25.0 million increase in product costs, both driven primarily by CIMERLI sales, $3.0 million in contract
modifica on fees with one of our manufacturers for reducing the number of UDENYCA batches to be produced, and $2.3 million in write-
downs, net of recoveries for inventory that was damaged during processing. These unfavorable factors were offset by the $26.0 million write-
down in the third quarter of 2022 of inventory at risk of expira on and due to the sale in the second half of 2023 of certain of those UDENYCA
units having no carrying value following the write-down and a total original cost of $9.9 million.
We expect our gross margin to increase during 2024 primarily because 2023 results included a $47.0 million charge for the write-down
of slow moving YUSIMRY inventory and the related par al recogni on of certain firm purchase commitments, as well as 2023 had a full year of
sales of CIMERLI, which was divested March 1, 2024 and had a gross profit share in the low- to mid-fi y percent range reflected in COGS. Sales
generated from our other products a er the closing of the Sale Transac on will have a higher average gross margin. In addi on, the mid-single
digit royalty on UDENYCA net product revenue expires on June 30, 2024.
Research and Development Expense
(in thousands)
Research and development
Year Ended December 31,
2023
109,436
2022
199,358
$
$
Change
$
(89,922)
The decrease in research and development expense was primarily due to:
● the first quarter of 2022 including an upfront payment of $35.0 million to exercise our op on to license CHS-006, a TIGIT-targeted
an body, in the United States and Canada;
● a decrease of $19.0 million in YUSIMRY costs primarily due to certain manufacturing costs for YUSIMRY being capitalized since
mid-2022, as well as comple on of key studies in the second half of 2022;
● a decrease of $18.5 million in co-development costs for LOQTORZI and CHS-006 resul ng from reducing the scope of the
development plan for LOQTORZI in the United States beginning in 2023;
● a decrease of $12.9 million in costs to develop addi onal presenta ons of UDENYCA;
● a decrease of $10.0 million in personnel and stock-based compensa on expense primarily due to fewer employees; and
● a decrease of $4.5 million in facili es, supplies and materials and other infrastructure related expenses to support our research
and development programs.
The decrease was par ally offset by increases of $4.4 million for development of CHS-1000 and $4.1 million for development of
casdozokitug.
We expect our research and development expense in 2024 to be lower than in 2023, as CHS-006 co-development with Junshi
Biosciences has been terminated and we con nue our focus on cost containment across mul ple func ons.
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Selling, General and Administra ve Expense
(in thousands)
Selling, general and administra ve
$
2023
192,015
Year Ended December 31,
2022
198,481
$
$
Change
(6,466)
The decrease in selling, general and administra ve expense was primarily due to lower average headcount, including reduc ons of
$9.9 million in employee and consultant costs and $3.1 million in stock-based compensa on. These decreases were par ally offset by increases
of $5.9 million in professional services driven by the Surface Acquisi on and third-party processing fees.
Excluding the poten al impact of any acquisi ons or business development transac ons that have not been consummated, we expect
our selling, general and administra ve expense for the full year 2024 to be lower than the full year 2023 primarily as a result of the CIMERLI
Sale Transac on, reduced headcount and decreased commercial costs.
Interest Expense
(in thousands)
Interest expense
$
Year Ended December 31,
2022
32,474
$
$
2023
40,542
Change
8,068
The increase in interest expense in 2023 was primarily due to a higher average outstanding debt balance and a higher average interest
rate for the 2027 Term Loans. This was par ally offset by $3.9 million of interest expense in 2022 related to the 2027 Term Loans discount and
debt issuance costs that were allocated to unfunded tranches and subsequently amor zed over the respec ve commitment periods for
tranches, including $2.3 million allocated to Tranche B that was fully amor zed in the first quarter of 2022.
Our 2027 Term Loans have a variable interest rate component that resets at the beginning of every quarter, and the total interest rate
ranged from 9.25% to 12.00% during 2022 and from 13.03% in the first quarter of 2023 to 13.91% in the fourth quarter of 2023. The interest
rate on the 2027 Term Loans decreased to 13.84% for the first quarter of 2024.
Due to the expected par al prepayment of $175.0 million of principal under the 2027 Term Loans as a result of the CIMERLI Sale
Transac on, we expect interest expense to decrease in 2024 compared to 2023.
Loss on Debt Ex nguishment
(in thousands)
Loss on debt ex nguishment
Year Ended December 31,
2022
Change
2023
$
— $
6,222
$
(6,222)
The $6.2 million loss on debt ex nguishment recorded in 2022 resulted from voluntarily prepaying all amounts outstanding under the
loan agreement between us and affiliates of Healthcare Royalty Partners dated as of January 7, 2019 (the “2025 Term Loan”) in January 2022.
Other Income (Expense), Net
(in thousands)
Other income (expense), net
Year Ended December 31,
2022
2023
Change
$
5,469
$
3,822
$
1,647
In 2023, other income (expense), net changed favorably compared to 2022 primarily due to higher income from investments in
marketable securi es.
Income Tax Provision (Benefit)
Income tax provision (benefit) consists of the change in deferred tax balances resul ng from the recogni on of a deferred tax liability
related to the Surface Acquisi on. We recognized $0.4 million of income tax benefit for the year ended December 31, 2023. No income tax
provision or benefit was recognized for the year ended December 31, 2022.
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Liquidity and Capital Resources
Certain relevant measures of our liquidity and capital resources are summarized as follows:
(in thousands)
Financial assets
Total Cash, cash equivalents and marketable securi es
Debt obliga ons:
2027 Term Loans
2026 Conver ble Notes
Total debt obliga ons
December 31,
2023
December 31,
2022
$
$
$
117,748
246,481
226,888
473,369
$
$
$
191,681
245,483
225,575
471,058
Although we were profitable in 2020 and 2019, due to our research and development expenditures and decline in revenue beginning
in 2021, we have generated significant opera ng losses in all other years since our incep on, including in 2023 and 2022. We have funded our
opera ons primarily through sales of our common stock, issuance and incurrence of conver ble and term debt and sales of our products.
On January 19, 2024, we entered into the Purchase Agreement by and between us and Sandoz. Pursuant to the terms and subject to
the condi ons set forth in the Purchase Agreement, on March 1, 2024, we completed the Sale Transac on for our CIMERLI ophthalmology
franchise through the sale of our subsidiary, Coherus Ophthalmology LLC, to Sandoz for upfront, all-cash considera on of $170.0 million plus an
addi onal $17.8 million for CIMERLI product inventory and prepaid manufacturing assets. Such considera on is subject to certain adjustments
that will be finalized following the closing pursuant to the Purchase Agreement.
On February 5, 2024, we entered into a Consent, Par al Release and Third Amendment to the 2027 Term Loans (the “Consent and
Amendment”), that among other things: (1) provided consent to consumma on of the transac ons contemplated by the Purchase Agreement,
and released certain of our subsidiary from our obliga on and certain assets subject to the transac ons contemplated thereby, (2) required us
to make a par al prepayment of $175.0 million of the principal of the 2027 Term Loans outstanding upon consumma on of the transac ons
contemplated by the Purchase Agreement, subject to certain condi ons and (3) adjusted the minimum net sales covenant level under the 2027
Term Loans. Upon the closing of the Sale Transac on we became liable to repay $175.0 million of the exis ng principal balance of $250.0
million of the loans outstanding under the Loan Agreement on April 1, 2024 and we plan to repay $175.0 million and the prepayment premium
and makewhole amount of $6.8 million to the Lenders on or before April 1, 2024 pursuant to the Consent and Amendment.
On September 8, 2023, we obtained $28.8 million of cash, cash equivalents and marketable securi es as part of the Surface
Acquisi on.
On May 16, 2023, we entered into an underwri ng agreement (the “Underwri ng Agreement”) with J.P. Morgan Securi es LLC and
Ci group Global Markets Inc., as representa ves of the several underwriters named therein (collec vely, the “Underwriters”), pursuant to
which we issued and sold an aggregate of 11,764,706 shares (the “Firm Shares”) of our common stock, par value $0.0001 per share, to the
Underwriters (the “Public Offering”). Addi onally, under the terms of the Underwri ng Agreement, we granted the Underwriters an op on, for
30 days from the date of the Underwri ng Agreement, to purchase up to an addi onal 1,764,705 shares of common stock (the “Op on Shares,”
and together with the Firm Shares, the “Shares”), which the Underwriters elected to exercise in full. The price to the public in the Public
Offering was $4.25 per share. The Underwriters agreed to purchase the Shares from us pursuant to the Underwri ng Agreement at a price of
$3.995 per share. On May 18, 2023, we completed the sale and issuance of an aggregate of 13,529,411 Shares, including the exercise in full of
the Underwriters’ op on to purchase the Op on Shares. We received net proceeds of approximately $53.6 million, a er deduc ng the
Underwriters’ discounts and commissions and offering expenses payable by us.
On November 8, 2022, we entered into the Sales Agreement related to the ATM Offering pursuant to which we may issue and sell from
me to me up to $150.0 million of our common stock. On May 15, 2023, pursuant to an Amendment No. 1 to Sales Agreement and in
connec on with the Public Offering, we reduced the number of shares that could be issued and sold pursuant to its ATM Offering with TD
Cowen by $86.25 million, lowering the aggregate offering price under the Agreement from $150.0 million to $63.75 million. On September 11,
2023, pursuant to an Amendment No. 2 to Sales Agreement, we increased the number of shares that could be issued and sold pursuant to
its ATM Offering with TD Cowen by $28.75 million, increasing the aggregate offering price under the Sales Agreement from $63.75 million to
$92.5 million. During the year ended December 31, 2023, 3,559,761 shares were sold pursuant to the ATM Offering.
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For the ATM Offering program to date as of December 31, 2023, we sold 4,476,645 shares of common stock at a weighted-average price per
share of $5.81 for gross proceeds of $26.0 million and received net proceeds of $25.4 million, net of $0.6 million of commissions and fees. As of
December 31, 2023, we had approximately $66.5 million of our common stock remaining available for sales under the ATM Offering. The ability
to elect to sell shares of our common stock in the ATM Offering from me to me adds to our financial flexibility.
As of December 31, 2023, we had an accumulated deficit of $1.6 billion and cash, cash equivalents, and marketable securi es of
$117.7 million. We believe that our available cash, cash equivalents, marketable securi es, cash collected from product sales and ATM Offering
and Public Offering proceeds received to date will be sufficient to fund our planned expenditures and meet our obliga ons for at least the
twelve months following our financial statement issuance date.
We have based this es mate on assump ons that may prove to be wrong, and we could u lize our available capital resources sooner
than we currently expect. Further, our opera ng plan may change, and we may need addi onal funds to meet opera onal needs and capital
requirements for product development and commercializa on sooner than planned. Because of the numerous risks and uncertain es
associated with the development and commercializa on of our product candidates and the extent to which we may enter into addi onal
agreements with third par es to par cipate in their development and commercializa on, we are unable to es mate the amounts of increased
capital outlays and opera ng expenditures associated with our current and an cipated research and development ac vi es, and on-going and
future licensing and collabora on obliga ons. We may need to raise addi onal funds in the future; however, there can be no assurance that
such efforts will be successful or that, if they are successful, the terms and condi ons of such financing will be favorable. Our future funding
requirements will depend on many factors, including the following:
● cash proceeds from product sales;
● the costs of manufacturing, distribu ng and marke ng our products;
● the cost of manufacturing clinical supplies and any products that we may develop;
● the terms and ming of any other collabora ve, licensing and other arrangements that we have established or may establish;
● the ming, receipt and amount of sales, profit sharing or royal es, if any, from any product candidates that are approved in the
future;
● the number and characteris cs of product candidates that we pursue;
● the scope, rate of progress, results and cost of our clinical trials, preclinical tes ng and other related ac vi es;
● the costs of acquiring originator comparator materials and manufacturing preclinical study and clinical trial supplies and other
materials from CMOs and related costs associated with release and stability tes ng;
● the cost, ming and outcomes of regulatory approvals;
● the cost of preparing, filing, prosecu ng, defending and enforcing any patent claims and other intellectual property rights;
● the extent to which we acquire or invest in businesses, products or technologies;
● the impact of general economic condi ons on our business, including but not limited to increased interest rates and high
infla on; and
● the costs of the impact from the COVID-19 pandemic and future outbreaks.
For further discussion of risks related to our financial condi on and capital requirements, please see “Risk Factors—Risks Related to
Our Financial Condi on and Capital Requirements.”
Financing arrangements
2027 Term Loans
In January 2022, we entered into the 2027 Term Loans which provide for a senior secured term loan facility of up to $300.0 million to
be funded in four commi ed tranches: (i) a Tranche A Loan in an aggregate principal amount of $100.0 million that was funded on January 5,
2022; (ii) a Tranche B Loan in an aggregate principal amount of $100.0 million that was funded on March 31, 2022, in connec on with the full
repayment of our $100.0 million aggregate principal amount 8.2% Conver ble Senior Notes due in March 2022 (“2022 Conver ble Notes”); (iii)
a Tranche C Loan in an aggregate principal amount of $50.0 million that was not funded; and (iv) a Tranche D Loan
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in an aggregate principal amount of $50.0 million that was funded on September 14, 2022. We have the right to request an uncommi ed
addi onal facility amount of up to $100.0 million that is subject to new terms and condi ons.
The 2027 Term Loans mature on either (i) January 5, 2027; or (ii) October 15, 2025, if the outstanding aggregate principal amount of
our 2026 Conver ble Notes is greater than $50.0 million on October 1, 2025. The 2027 Term Loans accrued interest from incep on through
March 31, 2023 at 8.25% plus three-month LIBOR per annum with a LIBOR floor of 1.0%; and, star ng April 1, 2023, accrue interest at 8.25%
plus the Adjusted Term SOFR, with a floor on Adjusted Term SOFR of 1.0%. Interest is payable quarterly in arrears. Repayment of outstanding
principal of the 2027 Term Loans will be made in five equal quarterly payments of principal commencing March 31, 2026.
In January 2022, we paid to the Lenders of the 2027 Term Loans $6.0 million for a funding fee equal to 2.00% of the Lenders’ total
commi ed amount to fund all four tranches.
Pursuant to the Loan agreement, and subject to certain restric ons, proceeds of the 2027 Term Loans were and will be used to fund
our general corporate and working capital requirements except for the following: in January 2022, proceeds of the Tranche A Loan were used to
voluntarily repay in full all amounts outstanding under the 2025 Term Loan, as well as all associated costs and expenses; and proceeds of the
Tranche B Loan were drawn in connec on with the full repayment of our 2022 Conver ble Notes due in March 2022.
As of December 31, 2023, we were in full compliance with these covenants, and there were no events of default under the 2027 Term
Loans.
On February 5, 2024, we entered into the Consent and Amendment, that among other things: (1) provided consent to consumma on
of the transac ons contemplated by the Purchase Agreement, and released certain of our subsidiary from our obliga on and certain assets
subject to the transac ons contemplated thereby, (2) required us to make a par al prepayment of $175.0 million of the principal of the 2027
Term Loans outstanding upon consumma on of the transac ons contemplated by the Purchase Agreement, subject to certain condi ons and
(3) adjusted the minimum net sales covenant level under the 2027 Term Loans. Upon the closing of the Sale Transac on we became liable to
repay $175.0 million of the exis ng principal balance of $250.0 million of the loans outstanding under the Loan Agreement on April 1, 2024 and
we plan to repay $175.0 million and the prepayment premium and makewhole amount of $6.8 million to the Lenders on or before April 1, 2024
pursuant to the Consent and Amendment.
2026 Conver ble Notes
As of December 31, 2023, the carrying amount of our $230.0 million aggregate principal amount conver ble senior subordinated notes
due 2026 was $226.9 million. The 2026 Conver ble Notes accrue interest at a rate of 1.5% per annum, payable semi-annually in arrears on April
15 and October 15 of each year, and will mature on April 15, 2026, unless earlier repurchased or converted at the op on of holders. Since
incep on, the conversion price has been 51.9224 shares of common stock per $1,000 principal amount of the 2026 Conver ble Notes, which
represents a conversion price of approximately $19.26 per share of common stock. The ini al conversion price represents a premium of
approximately 30.0% over the last reported sale of $14.82 per share of our common stock on the Nasdaq Global Market on April 14, 2020, the
date the 2026 Conver ble Notes were issued. The conversion rate and conversion price will be subject to customary adjustments upon the
occurrence of certain events. The 2026 Conver ble Notes are not redeemable at our elec on before maturity. If the 2026 Conver ble Notes
were converted on December 31, 2023, the holders of the 2026 Conver ble Notes would have received common shares with an aggregate
value of $39.8 million based on our closing stock price of $3.33 as of December 29, 2023.
In connec on with the pricing of the 2026 Conver ble Notes, we entered into privately nego ated capped call transac ons with
certain of the ini al purchasers of the 2026 Conver ble Notes and other financial ins tu ons. Since incep on, the cap price has been $25.93
per share, which represents a premium of approximately 75.0% over the last reported sale price of our common stock of $14.82 per share on
April 14, 2020, and is subject to certain adjustments under the terms of the capped call transac ons.
Con ngent Milestones
We have obliga ons to make future payments to third par es that become due and payable upon the achievement of certain
development, regulatory and commercial milestones (such as clinical trial achievements, the filing of a BLA, approval by the FDA or product
launch). These milestone payments and other similar fees are con ngent upon future events and therefore are only recorded when it becomes
probable that a milestone will be achieved, or other applicable criteria will be met. With the excep on of $25.0 million for a milestone payment
to Junshi Biosciences, of which we expect to pay $12.5 million in the second quarter of 2024 and $12.5 million in the first quarter of 2025, as of
December 31, 2023, no other milestones were accrued because their probability of achievement had not reached the threshold for recogni on.
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The following table presents a summary of our ac ve partnerships and collabora ons that have con ngent regulatory and sales
milestones as of December 31, 2023:
Counterparty
Junshi Biosciences
Adimab
Vaccinex
Descrip on
LOQTORZI
CHS-006 an -TIGIT an body
Casdozokitug
CHS-114
Poten al Aggregate Milestone Amount
$355.0 million (1)
$255.0 million (2)
$13.0 million
$15.0 million
(1) $290.0 million relates to sales milestones and $65.0 million relates to regulatory milestones, excluding the $25.0 million milestone
payment to Junshi Biosciences, of which we expect to pay $12.5 million in the second quarter of 2024 and $12.5 million in the first quarter
of 2025.
(2) On January 10, 2024, we announced we delivered a no ce of termina on of the TIGIT Program so the Poten al Aggregate Milestone
Amount for CHS-006 an -TIGIT an body became $0 as of that date.
Con ngent Value Rights
We have recorded a con ngent considera on liability for the fair value of the poten al payments under the CVR Agreement in
connec on with the Surface Acquisi on. These poten al payments during the ten-year period following September 8, 2023 are only due if we
first receive milestone- or royalty-based payments under certain license agreements or upfront payments pursuant to ex-U.S. licensing
agreements. Payments to CVR holders can be in the form of cash, stock or a combina on of cash and stock. As of December 31, 2023, no
payments are due to CVR holders. For further details, see “Note 6. Surface Acquisi on” in the Notes to Consolidated Financial Statements
contained in Part II, Item 8 of this Annual Report on Form 10-K.
Other Commitments
Non-cancelable purchase commitments
We enter into contracts in the normal course of business with CROs for preclinical research studies and clinical trials, research supplies
and other services and products for opera ng purposes. We have also entered into agreements with several CMOs for the manufacture and
clinical drug supply of our commercial and product candidates. Our non-cancelable purchase commitments as of December 31, 2023 were
$73.1 million, as outlined in “Note 9. Commitments and Con ngencies” in the Notes to Consolidated Financial Statements contained in Part II,
Item 8 of this Annual Report on Form 10-K.
Leases
We lease office and laboratory facili es through arrangements treated as opera ng leases, and we lease vehicles through finance
leases. Refer to “Note 10. Leases” in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form
10-K for addi onal informa on to our leases. Our total non-cancelable contractual obliga ons arising from these agreements as of December
31, 2023 was $9.1 million, with $2.9 million of these obliga ons due within twelve months.
Summary Statement of Cash Flows
The following table summarizes our cash flows for the periods presented:
(in thousands)
Net cash used in opera ng ac vi es
Net cash provided by (used in) inves ng ac vi es
Net cash provided by financing ac vi es
Net increase (decrease) in cash, cash equivalents and restricted cash
87
Year Ended
December 31,
2023
(174,884)
144,640
69,600
39,356
$
$
$
$
2022
(241,124)
(166,850)
54,326
(353,648)
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Net cash used in opera ng ac vi es
Cash used in opera ng ac vi es of $174.9 million for the year ended December 31, 2023 was primarily due to the net loss of $237.9
million adjusted for non-cash items including net inventory write-downs of $52.6 million, stock-based compensa on expense of $43.1 million
and other non-cash adjustments of $4.1 million, par ally offset by the changes in our opera ng assets and liabili es of $36.8 million.
Cash used in opera ng ac vi es of $241.1 million in 2022 was primarily due to the net loss of $291.8 million adjusted for the
classifica on of the cash op on payment to Junshi Biosciences of $35.0 million to inves ng ac vi es, non-cash items including stock-based
compensa on expense of $50.7 million, net inventory write-downs of $26.0 million and other non-cash adjustments of $18.2 million, par ally
offset by the changes in our opera ng assets and liabili es of $79.3 million.
Net cash provided by (used in) inves ng ac vi es
Cash provided by inves ng ac vi es of $144.6 million in 2023 was primarily due to proceeds from maturi es of investments in
marketable securi es of $144.4 million, proceeds from sale of investments in marketable securi es of $13.3 million, and $7.0 million of cash
acquired from the Surface Acquisi on, par ally offset by purchases of investments in marketable securi es of $19.5 million and a $1.1 million
upfront milestone payment due to the first commercial sale of YUSIMRY.
Cash used in inves ng ac vi es of $166.9 million in 2022 was primarily due to purchases of investments in marketable securi es of
$127.4 million, the op on fee payment of $35.0 million to license CHS-006 from Junshi Biosciences, a $2.4 million milestone payment to Bioeq
related to the launch of CIMERLI, and purchases of property and equipment of $2.0 million.
Net cash provided by financing ac vi es
Cash provided by financing ac vi es of $69.6 million in 2023 was primarily due to proceeds of $53.6 million from the Public Offering,
net of issuance costs, $18.1 million proceeds from the ATM Offering, net of issuance costs, and $1.8 million proceeds from purchase under the
ESPP. These were par ally offset by $3.6 million in tax payments related to net share se lement.
Cash provided by financing ac vi es of $54.3 million in 2022 was primarily due to proceeds of $240.7 million under the 2027 Term
Loans, net of debt discount and issuance costs, proceeds of $6.4 million from the ATM Offering, net of issuance costs, and $2.3 million proceeds
from purchase under the ESPP. These were par ally offset by fully repaying $109.0 million on the 2022 Conver ble Notes and $81.8 million on
the 2025 Term Loan (excluding interest which is presented as an opera ng ac vity), and $3.7 million in tax payments related to net share
se lement of RSUs.
Cri cal Accoun ng Es mates
The prepara on of our consolidated financial statements in accordance with United States generally accepted accoun ng principles
(“U.S. GAAP”) requires us to make es mates and assump ons that affect the reported amounts of assets and liabili es and the disclosure of
con ngent assets and liabili es at the date of the consolidated financial statements, as well as the reported revenue generated and expense
incurred during the repor ng periods. “Note 1. Organiza on and Significant Accoun ng Policies” in the Notes to Consolidated Financial
Statements in Part II, Item 8 of this Form 10-K describes the significant accoun ng policies and methods used in the prepara on of our
consolidated financial statements. Our es mates are based on our historical experience and on various other factors that we believe to be
reasonable under the circumstances. These es mates form the basis for making judgments about the carrying value of assets and liabili es that
are not readily apparent from other sources.
Business Combina on Accoun ng and Valua on of Acquired Assets
We completed the Surface Acquisi on on September 8, 2023, which was accounted for as a business combina on. We account for
acquisi ons of en es that include inputs and processes and have the ability to create outputs as business combina ons. Judgment was
required in assessing whether the acquired processes or ac vi es, along with their inputs, met the criteria to cons tute a business, as defined
by U.S. GAAP.
The acquisi on method of accoun ng requires the recogni on of assets acquired and liabili es assumed at their acquisi on date fair
values. The excess of the fair value of considera on transferred over the fair value of the net assets acquired is recorded as goodwill, or when
there is an excess of the fair values of these iden fiable assets and liabili es over the fair value of purchase considera on,
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a bargain purchase gain is recorded in the consolidated statements of opera ons. The es ma ons of fair values are based on non-observable
inputs that are included in valua on models. An income approach, which generally relies upon projected cash flow models, is used in
es ma ng the fair value of the acquired intangible assets. These cash flow projec ons are based on management's es mates of economic and
market condi ons including the es mated future cash flows from revenues of acquired assets, the ming and projec on of costs and expenses
and the related profit margins, tax rates, and discount rate.
During the measurement period, which occurs before finaliza on of the purchase price alloca on, changes in assump ons and es mates
that result in adjustments to the fair values of assets acquired and liabili es assumed, if based on facts and circumstances exis ng at the
acquisi on date, are recorded on a retroac ve basis as of the acquisi on date, with the corresponding offset to goodwill or bargain purchase
gain.
Product Sales Discounts and Allowances
We recognize revenue when a customer obtains control of the product, which generally occurs upon delivery to and acceptance by the
customer. The amount recognized in net revenue reflects the considera on which we expect to receive in exchange for product sold, which
includes adjustments to gross sales amounts for es mated chargebacks, rebates, discounts for prompt payment, co-payment assistance,
product returns and other allowances. The actual amount of considera on ul mately received may differ from our es mates. If actual results in
the future vary from our es mates, the es mates will be adjusted, which will affect net product revenue in the period that such variances
become known.
The most significant and judgmental gross to net revenue adjustments are for chargebacks and rebates we provide to customers,
hospitals, clinics, and payers under commercial and government programs. Amounts payable are provided for under various programs and vary
by payer and individual payer plans. In developing our es mates of chargebacks and rebates, we use our historical claims experience and also
consider payer mix, statutory discount rates and expected u liza on, contractual terms, market events and trends, customer and commercially
available payer data, as well as data collected from the healthcare providers, channel inventory data obtained from our customers and other
relevant informa on.
In 2023, 2022 and 2021, total sales deduc ons to gross product sales were 77%, 73% and 67%, respec vely. Adjustments to provisions
for rebates and chargebacks related to sales made in prior periods were less than 3% of the actual payments and customer credits issued in
each of the years 2023 and 2022. A change of 10% in our total provisions for product sales discounts and allowances as of December 31, 2023,
would have resulted in a change of our pre-tax earnings in 2023 by approximately $24.5 million. A summary of the ac vi es and ending reserve
balances for each significant category of discounts and allowances, can be found in “Note 2. Revenue” in the Notes to Consolidated Financial
Statements in Part II, Item 8 of this Form 10-K.
Inventory Valua on
Our inventory is stated at the lower of cost or es mated net realizable value with cost determined under the first-in first-out method.
The determina on of excess or obsolete inventory requires judgment including considera on of many factors, such as es mates of future
product demand, current and future market condi ons, product expira on informa on and poten al product obsolescence, among others.
Although we believe that the assump ons we use in es ma ng poten al inventory write-downs are reasonable, if actual market
condi ons are less favorable than projected by us, write-downs of inventory, charges related to firm purchase commitments, or both may be
required which would be recorded as cost of goods sold in our consolidated statements of opera ons. Adverse developments affec ng our
assump ons of the level and ming of demand for our products include those that are outside of our control such as the ac ons taken by
compe tors and customers, the direct or indirect effects of the COVID-19 pandemic, and other factors.
In 2023, 2022 and 2021, cost of goods sold included inventory write-downs, net of $52.6 million, $26.0 million and $5.1 million,
respec vely. As of December 31, 2023, a 10% reduc on in the carrying value of inventory we expect to sell in 2024 would be approximately
$6.3 million.
Recent Accoun ng Pronouncements
For a descrip on of the impact of recent accoun ng pronouncements, see “Note 1. Organiza on and Significant Accoun ng Policies”
in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.
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Item 7A. Quan ta ve and Qualita ve Disclosures about Market Risk
We are exposed to market risk related to changes in interest rates. As of December 31, 2023, we had cash and cash equivalents and
marketable securi es of $117.7 million, primarily invested in U.S. treasuries and government agency securi es, commercial paper, corporate
bonds and money market funds. Our primary exposure to market risk is interest rate sensi vity. Our marketable securi es are subject to
interest rate risk and could fall in value if market interest rates increase. Due to the short-term dura on of our investment por olio and the low
risk profile of our investments, we believe that our exposure to interest rate risk on these investments is not significant and a 1% movement in
market interest rates would not have a material impact to our financial results. We do not enter into investments for trading or specula ve
purposes.
Our financial instruments that are exposed to concentra on of credit risk consist primarily of cash, cash equivalents, investments and
accounts receivables. We a empt to minimize the risks related to cash, cash equivalents and investments by inves ng in a broad and diverse
range of financial instruments. The investment por olio is maintained in accordance with our investment policy, which defines allowable
investments, specifies credit quality standards and limits the credit exposure of any single issuer. There were no material losses from credit risks
on such accounts during any of the periods presented. We are not exposed to any significant concentra ons of credit risk from these financial
instruments.
We are also subject to credit risk from trade receivables related to product sales, and we monitor the credit worthiness of customers
that are granted credit in the normal course of business. In general, there is no requirement for collateral from customers. We have not
experienced significant losses with respect to the collec on of trade receivables.
We are exposed to interest rate risk with respect to variable rate debt. As of December 31, 2023, we had $250.0 million principal
outstanding on our 2027 Term Loans that star ng April 1, 2023, accrue interest at 8.25% plus the Adjusted Term SOFR, with a floor on Adjusted
Term SOFR of 1.0%. We currently do not hedge our variable interest rate debt. The interest rate for our variable rate debt during the quarter
ended December 31, 2023 was 13.91%, and the interest rate during the first quarter of 2024 will be 13.84%. A hypothe cal 100 basis point
increase in the interest rate on our variable rate debt could result in up to a $2.5 million increase in the annual interest expense as of December
31, 2023.
In April 2020, we issued $230.0 million aggregate principal amount of 2026 Conver ble Notes with a fixed interest rate of 1.5%. Since
the notes have a fixed annual interest rate, we have no financial or economic interest exposure associated with changes in interest rates.
However, the fair value of fixed rate debt fluctuates when interest rates change. Addi onally, the fair value of the 2026 Conver ble Notes can
be impacted when the market price of our common stock fluctuates. We carry the 2026 Conver ble Notes on our balance sheet at face value
less the unamor zed discount and issuance costs, and we present the fair value for required disclosure purposes only.
Substan ally all of our sales are denominated in U.S. dollars. We had exposure to the exchange rate between the U.S. Dollar and the
Euro because we made purchases of CIMERLI inventory from and paid royal es to our partner Bioeq that were denominated in Euros, and we
were therefore subject to fluctua ons due to changes in foreign currency exchange rates. Accordingly, fluctua ons in the exchange rate
between the U.S. Dollar and the Euro may have impacted our consolidated statements of opera ons. In the first quarter of 2023, we started
u lizing euro currency contracts to manage euro currency risk in purchasing inventory and future se lement of euro denominated assets and
liabili es. The volume of our foreign currency contract ac vity is limited by the amount of transac on exposure in each foreign currency and
our elec on whether to hedge the transac ons. There are no deriva ve instruments entered into for specula ve or trading purposes. Since our
deriva ves all matured and se led by December 31, 2023, there were no deriva ve assets or deriva ve liabili es as of December 31, 2023.
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Item 8. Consolidated Financial Statements and Supplementary Data
COHERUS BIOSCIENCES, INC.
ANNUAL REPORT ON FORM 10-K
INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accoun ng Firm (PCAOB ID 42)
Audited Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Opera ons
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
91
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92
95
96
97
98
99
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Report of Independent Registered Public Accoun ng Firm
To the Stockholders and the Board of Directors of Coherus BioSciences, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Coherus BioSciences, Inc., (the Company) as of December 31, 2023 and
2022, the related consolidated statements of operations, comprehensive loss, stockholders' equity (deficit), and cash flows for each of the
three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at
December 31, 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 U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated
March 15, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the
financial statements and (2) 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
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Description of the
Matter
Estimate of Reserves for Chargebacks and Rebates
………………………………………………………………………………
As described in Note 1 to the consolidated financial statements, the Company recognizes revenues from product sales at
the net sales price, which includes estimates of reserves for chargebacks and rebates it provides to hospitals, clinics, and
payers under commercial and government programs. These reserves are recorded in the period when sales occur and are
based on the amounts to be claimed on the related sales which may not be known at the point of sale. Chargebacks and
rebates are estimated based on expected channel and payer mix, and contracted discount rates, adjusted for current
period assumptions. Estimated chargebacks are recorded as a reduction of trade receivables on the consolidated balance
sheet and totaled $74.0 million at December 31, 2023. Estimated rebates are presented within accrued rebates, fees and
reserves and other liabilities, non-current on the consolidated balance sheet and totaled $121.1 million at December 31,
2023.
Auditing the estimates for chargebacks and rebates was complex due to the judgmental nature of the assumptions used.
In particular for product that remains in the distribution channel at December 31, 2023, management is required to
estimate the portion of product that is expected to be subject to a chargeback and rebate as well as the applicable
discount rate.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the
Company's estimates of chargebacks and rebates, which are accounted for as reductions to revenue. This included
controls over management’s review of significant assumptions used in the estimates such as expected channel and payer
mix and contractual discount rate.
To test the Company's estimated reserves for chargebacks and rebates, our audit procedures included, among others,
testing the accuracy and completeness of the underlying data used in the Company’s analyses and evaluating the
significant assumptions stated above. Specifically, for estimated chargebacks and rebates, we obtained third-party
channel inventory reports and reviewed the remaining inventory in the distribution channel, tested historical channel and
payer mix data, and compared applicable contractual chargeback or rebate percentages applied against executed
chargeback and rebate agreements. We also assessed the completeness and accuracy of current and historical channel
and payer mix and discount rate data used in management’s estimates and performed sensitivity analyses to determine
the effect of changes in assumptions, where appropriate.
Excess and Obsolete Inventory Reserve
Description of the
Matter
As of December 31, 2023, the Company had $130.1 million of inventory which included $13.0 million of raw materials,
$82.6 million of work in progress and $34.5 million of finished goods. As disclosed in Note 1 to the Company’s
consolidated financial statements, inventories are stated at the lower of cost or estimated net realizable value. The
Company assesses its inventory levels along with its purchase commitments each reporting period and writes down
inventory that is either expected to be at risk of expiration prior to sale or has a cost basis in excess of its expected net
realizable value.
Auditing management's estimates for excess inventory involved subjective auditor judgment because the estimates rely
on a number of factors that are affected by market and economic conditions outside the Company's control. In particular,
the excess inventory calculations are sensitive to significant assumptions, including the expected demand for the
Company’s products, the effect on demand of competitive products and the Company's purchase commitments.
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Table of Contents
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the
Company's excess and obsolete inventory reserve process including management’s review of the significant assumptions
described above and controls over the completeness and accuracy of the information used to develop the estimate.
Our substantive audit procedures included, among others, evaluating methodologies used and data utilized in the
analysis for inventory expected to be at risk for expiration or excess, or has a cost basis in excess of its expected net
realizable value. We evaluated purchase commitments or alternative uses, compared forecasted demand and expected net
realizable value to historical trends, compared actual inventory levels to forecasted demand requirements and expected
net realizable value, and evaluated the sensitivity of sales forecast assumptions on the amount of inventory reserves
recorded.
Business Combination
Description of the
Matter
During the year ended December 31, 2023, the Company completed its acquisition of Surface Oncology, Inc.
(“Surface”) for consideration of $64.6 million in net assets, as disclosed in Note 6 to the consolidated financial
statements. The transaction was accounted for as a business combination.
Auditing the Company’s accounting for its acquisition of Surface was complex due to the significant estimation required
by management to determine the fair value of certain identified finite and indefinite-lived intangible assets, principally
consisting of out-license intangible assets of $13.5 million and in-process research and development intangible assets of
$26.2 million, respectively. The significant estimation uncertainty was primarily due to the sensitivity of the respective
fair values to underlying assumptions about the future performance of the acquired business. The significant
assumptions used to estimate the fair value of these intangible assets included certain assumptions including estimated
future cash flows from revenues of acquired assets, the timing and projection of costs and expenses and the related profit
margins, and discount rates. These significant assumptions are forward looking and could be affected by future
economic and market conditions.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the
Company’s accounting for the acquisition. This included testing controls over the estimation process supporting the
recognition and measurement of the out-license assets and in-process research and development, including the valuation
models and underlying assumptions used to develop such estimates.
To test the estimated fair value of the in-process research and development and out-license assets, we performed audit
procedures that included, among others, evaluating the Company's selection of the valuation methodology, evaluating
the methods and significant assumptions used by the Company, and evaluating the completeness and accuracy of the
underlying data supporting the significant assumptions and estimates. For example, we compared the significant
assumptions to current industry, market and economic trends and to the Company's forecasts. We involved our valuation
specialists to assist with our evaluation of the methodology used by the Company and significant assumptions included
in the fair value estimates. Our valuation specialists’ procedures included, among others, developing a range of
independent estimates for the discount rates used in the valuation models and comparing those to the discount rates
selected by management.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2012.
San Mateo, California
March 15, 2024
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Table of Contents
Coherus BioSciences, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents
Investments in marketable securi es
Trade receivables, net
Inventory
Prepaid manufacturing
Other prepaids and current assets
Total current assets
Property and equipment, net
Inventory, non-current
Intangible assets, net
Other assets, non-current
Total assets
Liabili es and Stockholders’ Deficit
Current liabili es:
Accounts payable
Accrued rebates, fees and reserves
Accrued compensa on
Accrued and other current liabili es
Total current liabili es
Term loans
Conver ble notes
Lease liabili es, non-current
Other liabili es, non-current
Total liabili es
Commitments and con ngencies (Note 9)
Stockholders’ deficit:
Preferred stock ($0.0001 par value; shares authorized: 5,000,000; shares issued and outstanding: 0 at December 31, 2023 and
2022)
Common stock ($0.0001 par value; shares authorized: 300,000,000; shares issued and outstanding: 112,215,260 and
78,851,516 at December 31, 2023 and 2022, respec vely)
Addi onal paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders' deficit
Total liabili es and stockholders’ deficit
See accompanying notes.
95
December 31,
2023
December 31,
2022
$
$
$
$
$
$
$
102,891
14,857
260,522
62,605
23,657
11,099
475,631
5,119
67,495
71,673
9,686
629,604
35,219
169,645
21,521
105,386
331,771
246,481
226,888
5,328
12,561
823,029
63,547
128,134
109,964
38,791
17,880
22,918
381,234
8,754
76,260
5,931
8,668
480,847
11,526
54,461
22,610
50,097
138,694
245,483
225,575
5,046
3,467
618,265
—
—
11
1,386,312
(248)
(1,579,500)
(193,425)
629,604
$
8
1,204,431
(249)
(1,341,608)
(137,418)
480,847
Table of Contents
Net revenue
Costs and expenses:
Cost of goods sold
Research and development
Selling, general and administra ve
Total costs and expenses
Loss from opera ons
Interest expense
Loss on debt ex nguishment
Other income (expense), net
Loss before income taxes
Income tax provision (benefit)
Net loss
Basic and diluted net loss per share
Coherus BioSciences, Inc.
Consolidated Statements of Opera ons
(in thousands, except share and per share data)
2023
Year Ended December 31,
2022
2021
$
257,244
$
211,042
$
326,551
158,992
109,436
192,015
460,443
(203,199)
(40,542)
—
5,469
(238,272)
(380)
(237,892)
(2.53)
$
$
70,083
199,358
198,481
467,922
(256,880)
(32,474)
(6,222)
3,822
(291,754)
—
(291,754)
(3.76)
$
$
57,591
363,105
169,713
590,409
(263,858)
(22,959)
—
(283)
(287,100)
—
(287,100)
(3.81)
$
$
Weighted-average number of shares used in compu ng basic and diluted net loss per share
94,162,637
77,630,020
75,449,632
See accompanying notes.
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Table of Contents
Coherus BioSciences, Inc.
Consolidated Statements of Comprehensive Loss
(in thousands)
Net loss
Other comprehensive income (loss):
Unrealized gain on available-for-sale securi es, net of tax
Foreign currency transla on adjustments, net of tax
Comprehensive loss
Year Ended December 31,
2022
2021
2023
(237,892)
(291,754)
$
(287,100)
2
(1)
(237,891)
$
22
(1)
(291,733)
$
—
—
(287,100)
$
$
See accompanying notes.
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Table of Contents
Coherus BioSciences, Inc.
Consolidated Statements of Stockholders’ Equity (Deficit)
(in thousands, except share and per share data)
Balances at December 31, 2020
Net loss
Issuance of common stock upon exercise of stock op ons
Issuance of common stock upon ves ng of RSUs
Issuance of common stock under the ESPP
Issuance of common stock to Junshi Biosciences, net of issuance costs
Taxes paid related to net share se lement of RSUs
Stock-based compensa on expense
Balances at December 31, 2021
Net loss
Issuance of common stock upon exercise of stock op ons
Issuance of common stock upon ves ng of RSUs
Issuance of common stock under the ESPP
Issuance of common stock under ATM Offering, net of issuance costs
Taxes paid related to net share se lement of RSUs
Stock-based compensa on expense
Other comprehensive gain, net of tax
Balances at December 31, 2022
Net loss
Issuance of common stock upon exercise of stock op ons
Issuance of common stock upon ves ng of RSUs
Issuance of common stock under the ESPP
Issuance of common stock in connec on with Surface Acquisi on:(1)
Issuance to Surface shareholders for acquisi on
Accelerated ves ng of equity awards
Taxes paid related to net share se lement of equity awards
Issuance of common stock under ATM Offering, net of issuance costs
Issuance of common stock under Public Offering, net of issuance costs
Issuance of common stock under Op onal Stock Purchase Agreement
Taxes paid related to net share se lement of RSUs
Stock-based compensa on expense
Other comprehensive gain, net of tax
Balances at December 31, 2023
(1)
See Note 6 for further discussion.
Accumulated
Other
Comprehensive Accumulated
Common Stock
Shares
72,513,348
—
1,316,361
465,930
238,934
2,491,988
(96,465)
—
76,930,096
—
141,897
806,854
347,883
916,884
(292,098)
—
—
78,851,516
$
Amount
7
—
—
—
—
—
—
—
7
—
—
—
—
1
—
—
—
8
Addi onal
Paid-In
Capital
$ 1,043,991
—
10,410
—
3,002
40,903
(1,753)
51,290
1,147,843
—
691
—
2,320
6,133
(3,744)
51,188
—
1,204,431
Loss
$
(270)
—
—
—
—
—
—
—
(270)
—
—
—
—
—
—
—
21
(249)
$
Total
Stockholders'
Equity (Deficit)
280,974
(287,100)
10,410
—
3,002
40,903
(1,753)
51,290
97,726
Deficit
$ (762,754)
(287,100)
—
—
—
—
—
—
(1,049,854)
(291,754)
—
—
—
—
—
—
—
(1,341,608)
(237,892)
—
—
—
—
—
—
—
—
—
—
—
—
$
$ (1,579,500)
—
—
—
—
—
—
—
—
—
—
—
—
1
(248)
(291,754)
691
—
2,320
6,134
(3,744)
51,188
21
(137,418)
(237,892)
694
—
1,809
58,541
1,053
(347)
18,317
53,625
8,179
(3,527)
43,540
1
(193,425)
—
430,504
1,280,901
630,348
11,971,460
261,239
(65,732)
3,559,761
13,529,411
2,225,513
(459,661)
—
—
112,215,260
$
—
—
—
—
—
694
—
1,809
1
—
—
1
1
—
—
—
—
11
58,540
1,053
(347)
18,316
53,624
8,179
(3,527)
43,540
—
$ 1,386,312
$
See accompanying notes.
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Table of Contents
Coherus BioSciences, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Opera ng ac vi es
Net loss
Adjustments to reconcile net loss to net cash used in opera ng ac vi es:
Deprecia on and amor za on
Stock-based compensa on expense
Write-off of prepaid manufacturing services related to the termina on of CHS-2020
Inventory write-downs, net
Non-cash amor za on of premium (accre on of discount) on marketable securi es, net
Non-cash interest expense from amor za on of debt discount and issuance costs
Non-cash opera ng lease expense
Upfront and op on payments to Junshi Biosciences
Loss on debt ex nguishment
Other non-cash adjustments, net
Changes in opera ng assets and liabili es:
Trade receivables, net
Inventory
Prepaid manufacturing
Other prepaid, current and non-current assets
Accounts payable
Accrued rebates, fees and reserves
Accrued compensa on
Accrued and other current and non-current liabili es
Net cash used in opera ng ac vi es
Inves ng ac vi es
Purchases of property and equipment
Proceeds from disposal of property and equipment
Purchases of investments in marketable securi es
Proceeds from maturi es of investments in marketable securi es
Proceeds from sale of investments in marketable securi es
Cash and cash equivalents acquired from Surface Acquisi on
Upfront and op on payments to Junshi Biosciences
Milestone based license fee payments
Net cash provided by (used in) inves ng ac vi es
Financing ac vi es
Proceeds from 2027 Term Loans, net of debt discount & issuance costs
Proceeds from issuance of common stock to Junshi Biosciences, net of issuance costs
Proceeds from issuance of common stock under ATM Offering, net of issuance costs
Proceeds from issuance of common stock under Public Offering, net of issuance costs
Proceeds from issuance of common stock upon exercise of stock op ons
Proceeds from purchase under the employee stock purchase plan
Taxes paid related to net share se lement
Repayment of 2022 Conver ble Notes and premiums
Repayment of 2025 Term Loan, premiums and exit fees
Other financing ac vi es
Net cash provided by financing ac vi es
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental disclosure of cash flow informa on
Cash paid for interest
Income taxes paid (refunded), net
$
$
$
See accompanying notes.
99
2023
Years Ended December 31,
2022
2021
$
(237,892)
$
(291,754)
$
(287,100)
3,791
43,110
—
52,595
(3,052)
2,407
2,476
—
—
(1,493)
(150,683)
(46,734)
2,027
16,155
23,760
113,105
(5,373)
10,917
(174,884)
(286)
845
(19,507)
144,360
13,282
6,997
—
(1,051)
144,640
—
—
18,093
53,625
694
1,809
(3,587)
—
—
(1,034)
69,600
39,356
63,987
103,343
37,857
(118)
$
$
$
3,699
50,737
—
26,000
(730)
6,431
2,503
35,000
6,222
25
13,052
(47,348)
(4,214)
(13,424)
(4,548)
(24,566)
596
1,195
(241,124)
(2,039)
—
(127,382)
—
—
—
(35,000)
(2,429)
(166,850)
240,679
—
6,358
—
691
2,320
(3,744)
(109,000)
(81,750)
(1,228)
54,326
(353,648)
417,635
63,987
34,878
40
$
$
$
3,454
51,364
3,210
5,133
1,095
4,257
2,207
136,000
—
588
34,062
(6,253)
3,828
(5,351)
874
(2,502)
(230)
17,932
(37,432)
(1,289)
—
(182,485)
99,692
81,672
—
(136,000)
—
(138,410)
—
40,903
—
—
10,399
3,002
(1,753)
—
—
(672)
51,879
(123,963)
541,598
417,635
18,684
1,221
Table of Contents
Coherus BioSciences, Inc.
Notes to Consolidated Financial Statements
1.
Organiza on and Significant Accoun ng Policies
Descrip on of the Business
Coherus BioSciences, Inc. (the “Company” or “Coherus”) is a commercial-stage biopharmaceu cal company focused on the research,
development and commercializa on of its por olio of FDA-approved oncology products, including LOQTORZI. The Company’s strategy is to
build a leading immuno-oncology business funded with cash generated from its diversified por olio of FDA-approved therapeu cs. The
Company’s headquarters and laboratories are located in Redwood City, California and in Camarillo, California, respec vely. The Company sells
UDENYCA (pegfilgras m-cbqv), a biosimilar to Neulasta, a long-ac ng granulocyte-colony s mula ng factor, in the United States. On August 2,
2022, the FDA approved CIMERLI® (ranibizumab-eqrn), a biosimilar to Lucen s, and commercial launch commenced in October 2022 in the
United States. The Company launched YUSIMRY® (adalimumab-aqvh), a biosimilar to Humira (adalimumab), in the United States in July 2023.
On October 27, 2023, the Company announced that LOQTORZI™ (toripalimab-tpzi) was approved by the FDA in combina on with cispla n and
gemcitabine for the first-line treatment of adults with metasta c or recurrent locally advanced NPC, and as monotherapy for the treatment of
adults with recurrent, unresectable, or metasta c NPC with disease progression on or a er pla num-containing chemotherapy. LOQTORZI is a
novel PD-1 inhibitor that the Company developed in collabora on with Junshi Biosciences. The Company announced the launch of LOQTORZI in
the U.S. on January 2, 2024. On January 19, 2024, the Company entered into the Purchase Agreement by and between the Company and
Sandoz. Pursuant to the terms and subject to the condi ons set forth in the Purchase Agreement, on March 1, 2024, the Company completed
the Sale Transac on for its CIMERLI ophthalmology franchise through the sale of its subsidiary, Coherus Ophthalmology LLC, to Sandoz for
upfront, all-cash considera on of $170.0 million plus an addi onal $17.8 million for CIMERLI product inventory and prepaid manufacturing
assets. Such considera on is subject to certain adjustments that will be finalized following the closing pursuant to the Purchase Agreement.
The Company’s product pipeline comprises the following three product candidates: CHS-1000, an an body targe ng ILT4; casdozokitug
(CHS-388, formerly SRF388), an an body targe ng IL-27; and CHS-114 (formerly SRF114), a highly specific afucosylated IgG1 an body targe ng
CCR8. In addi on to the Company’s internally developed por olio of product candidates, the Company has two product candidates, NZV930
and GSK4381562, which are exclusively licensed to Novar s Ins tutes and GSK, respec vely.
Basis of Consolida on
The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of
Coherus and its wholly-owned subsidiaries. The Company does not have any significant interest in variable interest en es. All material
intercompany transac ons and balances have been eliminated upon consolida on.
Use of Es mates
The prepara on of financial statements in conformity with U.S. GAAP requires management to make judgements, es mates and
assump ons that affect the reported amounts of assets, liabili es, revenue and expenses, and related disclosures. Management bases its
es mates on historical experience and on various other assump ons that are believed to be reasonable under the circumstances. These
es mates form the basis for making judgments about the carrying values of assets and liabili es when these values are not readily apparent
from other sources. Accoun ng es mates and judgements are inherently uncertain, and the actual results could differ from these es mates.
Segment Repor ng and Revenue by Geographic Region
The Company operates and manages its business as one reportable and opera ng segment, which is the business of developing and
commercializing human pharmaceu cal products. The Company’s chief execu ve officer, as the chief opera ng decision maker (“CODM”),
manages and allocates resources to the opera ons of the Company on an en ty-wide basis. Managing and alloca ng resources on an en ty-
wide basis enables the CODM to assess the overall level of resources available and how to best deploy these resources across func ons.
Primarily, all revenue is generated and all long-lived assets are maintained in the United States.
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Table of Contents
Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash comprise cash and highly liquid investments with original maturi es of 90 days or less.
The following table provides a reconcilia on of cash, cash equivalents and restricted cash within the consolidated balance sheets and
which, in aggregate, represent the amount reported in the consolidated statements of cash flows:
(in thousands)
At beginning of period:
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
At end of period:
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
2023
63,547
440
63,987
2023
102,891
452
103,343
$
$
$
$
January 1,
2022
417,195
440
417,635
$
$
December 31,
2022
63,547
440
63,987
$
$
2021
541,158
440
541,598
2021
417,195
440
417,635
$
$
$
$
Restricted cash consists of deposits for le ers of credit that the Company has provided to secure its obliga ons under certain leases
and is included in other assets, non-current in the consolidated balance sheets.
The Company classifies the up-front and milestone payments related to licensing arrangements as cash flows used in inves ng
ac vi es in its consolidated statements of cash flows.
Trade Receivables
Trade receivables are recorded net of allowances for chargebacks, chargeback prepayments, cash discounts for prompt payment and
credit losses. The Company es mates an allowance for expected credit losses by considering factors such as historical experience, credit quality,
the age of the accounts receivable balances, and current economic condi ons that may affect a customer’s ability to pay. The corresponding
expense for the credit loss allowance is reflected in selling, general and administra ve expenses and was not material during the periods
presented. The Company believes that its allowance for expected credit losses was adequate and immaterial as of December 31, 2023 and
2022.
Investments in Marketable Securi es
Investments in marketable securi es primarily consist of U.S. Treasury securi es, government agency securi es, commercial paper,
corporate bonds and market money funds. Management determines the appropriate classifica on of investments in marketable securi es at
the me of purchase based upon management’s intent with regards to such investment and reevaluates such designa on as of each balance
sheet date. The Company’s investment policy requires that it only invests in highly rated securi es and limits its exposure to any single issuer,
except for securi es issued by the U.S. government. All investments in marketable debt securi es are held as “available-for-sale” and are
carried at the es mated fair value as determined based upon quoted market prices or pricing models for similar securi es.
The Company classifies investments in marketable securi es as short-term when they have remaining contractual maturi es of one
year or less from the balance sheet date. The Company regularly reviews its investments for declines in fair value below the amor zed cost
basis to determine whether the impairment, if any, is due to credit-related or other factors. This review includes the credit worthiness of the
security issuers, the severity of the unrealized losses, whether the Company has the intent to sell the securi es and whether it is more likely
than not that the Company will be required to sell the securi es before the recovery of the amor zed cost basis. Unrealized gains and losses on
available-for-sale debt securi es are reported as a component of accumulated comprehensive income (loss), with the excep on of unrealized
losses believed to be related to credit losses, if any, which are recognized in earnings in the period the impairment occurs. Impairment
assessments are made at the individual security level each repor ng period. When the fair value of an available-for-sale debt investment is less
than its cost at the balance sheet date, a determina on is made as to whether the impairment is related to a credit loss and, if it is, the por on
of the impairment rela ng to credit loss is recorded as an allowance through net income. There were no impairments related to credit losses
during any of the periods presented. Realized gains and losses, if any, on available-for-sale securi es
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Table of Contents
are included in other income (expense), net, in the consolidated statements of opera ons based on the specific iden fica on method. During
2023, 2022 and 2021, interest income from marketable securi es was $2.8 million, $1.9 million and $1.4 million, respec vely, and is included in
other income (expense), net, in the consolidated statements of opera ons.
Concentra ons of Risk
The Company’s financial instruments that are exposed to concentra on of credit risk consist primarily of cash, cash equivalents,
investments in marketable securi es and trade receivables. The Company a empts to minimize the risks related to cash, cash equivalents and
marketable securi es by inves ng in a broad and diverse range of financial instruments. The investment por olio is maintained in accordance
with the Company’s investment policy, which defines allowable investments, specifies credit quality standards and limits the credit exposure of
any single issuer. The Company monitors the credit worthiness of customers that are granted credit in the normal course of business. In general,
there is no requirement for collateral from customers.
Substan ally all of the Company’s revenues are in the United States to three wholesalers. During 2023, the products sold by the
Company were UDENYCA, CIMERLI, YUSIMRY and LOQTORZI. During 2022, UDENYCA and CIMERLI were the only products sold by the Company,
and in 2021 UDENYCA accounted for all of the Company’s revenues.
The Company enters into a strategic commercial supply agreement for each of its products. The Company currently has not engaged
back-up suppliers or vendors. If any of the Company’s current vendors are not able to manufacture the supply needed in the quan es and
meframe required, the Company may not be able to supply the product in a mely manner.
Deriva ve Instruments
In January 2023, the Company commenced using deriva ve contracts (foreign exchange op on contracts) for the purpose of
economically hedging exposure to changes in currency fluctua ons between the U.S. Dollar and the Euro. The Company recognizes all
deriva ves at fair value on the consolidated balance sheets, and corresponding gains and losses are recognized in other income (expense), net
in the consolidated statements of opera ons. The es mated fair value of deriva ve financial instruments represents the amount required to
enter into similar contracts with similar remaining maturi es based on quoted market prices. During the periods presented, the Company did
not apply hedge accoun ng to these instruments. There are no deriva ve instruments entered into for specula ve or trading purposes. Since
the Company's foreign exchange deriva ves all matured and se led by December 31, 2023, there were no deriva ve assets or deriva ve
liabili es as of December 31, 2023.
Business Combina on Accoun ng & Valua on of Acquired Assets
The Company accounts for acquisi ons of en es that include inputs and processes and have the ability to create outputs as business
combina ons. Judgment is required in assessing whether the acquired processes or ac vi es, along with their inputs, meet the criteria to
cons tute a business, as defined by U.S. GAAP.
The acquisi on method of accoun ng requires the recogni on of assets acquired and liabili es assumed at their acquisi on date fair
values. The excess of the fair value of considera on transferred over the fair value of the net assets acquired is recorded as goodwill, or when
there is an excess of the fair values of these iden fiable assets and liabili es over the fair value of purchase considera on, a bargain purchase
gain is recorded in the consolidated statements of opera ons. The es ma ons of fair values based on non-observable inputs that are included
in valua on models. An income approach, which generally relies upon projected cash flow models, is used in es ma ng the fair value of the
acquired intangible assets. These cash flow projec ons are based on management's es mates of economic and market condi ons including the
es mated future cash flows from revenues of acquired assets, the ming and projec on of costs and expenses and the related profit margins,
tax rates, and discount rate.
During the measurement period, which occurs before finaliza on of the purchase price alloca on, changes in assump ons and
es mates that result in adjustments to the fair values of assets acquired and liabili es assumed, if based on facts and circumstances exis ng at
the acquisi on date, are recorded on a retroac ve basis as of the acquisi on date, with the corresponding offset to goodwill or bargain
purchase gain (See Note 6. Surface Acquisi on).
Foreign Currency
Monetary assets and liabili es denominated in foreign currency are remeasured at period-end exchange rates. Non-monetary assets
and liabili es denominated in foreign currencies are remeasured at historical rates. Transla on gains and losses are included in
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Table of Contents
accumulated other comprehensive loss in stockholders’ equity (deficit). Revenue and expense accounts are translated to U.S. dollars at average
exchange rates in effect during the period with resul ng transac on gains and losses recognized in other income (expense), net in the
consolidated statements of opera ons. The Company has not experienced material foreign currency transac on gains and losses for any of the
years presented.
Inventory
Inventory is stated at the lower of cost or es mated net realizable value with cost determined under the first-in first-out method.
Inventory costs include third-party contract manufacturing, third-party packaging services, freight, labor costs for personnel involved in the
manufacturing process, and indirect overhead costs. The Company primarily uses actual costs to determine the cost basis for inventory. The
determina on of excess or obsolete inventory requires judgment including considera on of many factors, such as es mates of future product
demand, current and future market condi ons, product expira on informa on, and poten al product obsolescence, among others. During
2023 and 2022, the Company recorded $52.6 million and $26.0 million in inventory write-downs, respec vely, within cost of goods sold in the
consolidated statements of opera ons. The 2023 charge was primarily for the write-down of slow moving YUSIMRY inventory and the related
par al recogni on of certain firm purchase commitments. The 2022 charge was due to the compe ve environment and lower demand for
UDENYCA resul ng in certain inventory becoming at risk of expira on.
Although the Company believes the assump ons used in es ma ng poten al inventory write-downs are reasonable, if actual market
condi ons are less favorable than projected by management, write-downs of inventory, charges related to firm purchase commitments, or both
may be required which would be recorded as cost of goods sold in the consolidated statements of opera ons. Adverse developments affec ng
the Company’s assump ons of the level and ming of demand for its products include those that are outside of the Company’s control such as
the ac ons taken by compe tors and customers, the direct or indirect effects of the COVID-19 pandemic, and other factors.
Prior to the regulatory approval of product candidates, the Company incurs expenses for the manufacture of drug products that could
poten ally be available to support the commercial launch of the products. Inventory costs are capitalized when future commercializa on is
considered probable and the future economic benefit is expected to be realized, based on management’s judgment. A number of factors are
considered, including the current status in the regulatory approval process, poten al impediments to the approval process such as safety or
efficacy, viability of commercializa on and marketplace trends. Inventory in the consolidated balance sheets as of December 31, 2023 was
related to UDENYCA, YUSIMRY, CIMERLI and LOQTORZI. The Company began to capitalize inventory costs associated with UDENYCA, CIMERLI
and LOQTORZI a er receiving final regulatory approval in November 2018, August 2022, and October 2023, respec vely, and capitaliza on of
YUSIMRY inventory costs began in the second quarter of 2022 when sales were deemed probable.
Property and Equipment
Property and equipment is stated at cost less accumulated deprecia on and amor za on. Maintenance and repairs are charged to
expense as incurred. Interest costs incurred during the construc on of major capital projects are capitalized un l the underlying asset is ready
for its intended use, at which point the capitalized interest costs are amor zed as deprecia on or amor za on expense over the life of the
underlying asset. When the Company disposes of property and equipment, it removes the associated cost and accumulated deprecia on from
the related accounts in the consolidated balance sheets and include any resul ng gain or loss in the consolidated statements of opera ons.
Eligible costs of internal use so ware and implementa on costs of certain hos ng arrangements are capitalized and amor zed over the
es mated useful life of the so ware or associated hos ng arrangement, as applicable. Deprecia on and amor za on are recognized using the
straight-line method over the following es mated useful lives:
Computer equipment and so ware
Furniture and fixtures
Machinery and equipment
Leasehold improvements
Goodwill and Intangible Assets
3 - 7 years
5 years
5 years
Shorter of lease term or useful life
Goodwill represents the excess of the considera on transferred over the fair value of net assets acquired in a business combina on.
Goodwill is not amor zed but is evaluated for impairment on an annual basis, during the fourth quarter, or more frequently if an event occurs
or circumstances change that would more-likely-than-not reduce the fair value of the Company’s single repor ng unit below its carrying
amount.
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Table of Contents
Acquired in-process research and development (“IPR&D”) that the Company acquires in conjunc on with the acquisi on of a business
represents the fair value assigned to incomplete research projects which, at the me of acquisi on, have not reached technological feasibility.
The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment tes ng un l comple on or
abandonment of the projects. Upon successful comple on of each IPR&D project, the Company will commence amor za on over the useful life
of the intangible asset, which will generally be determined by the period in which the substan al majority of the cash flows are expected to be
generated. The Company evaluates IPR&D for impairment on an annual basis, during the fourth quarter, or more frequently if impairment
indicators exist.
Finite-lived intangible assets are generally amor zed on a straight-line basis over their es mated economic life and are reviewed
periodically for impairment. The amor za on expense related to capitalized milestone payments under license agreements and the
amor za on expense from out-licenses are recorded as a component of cost of goods sold in the consolidated statements of opera ons. The
es mated life for capitalized milestone payments is ten years, and the life for acquired out-licenses is fi een years.
Impairment of Long-Lived Assets
Long-lived assets, including property and equipment and finite-lived intangible assets, are reviewed for impairment whenever facts or
circumstances either internally or externally may indicate that the carrying value of an asset may not be recoverable. If there is an indica on of
impairment, the Company tests for recoverability by comparing the es mated undiscounted future cash flows expected to result from the use
of the asset to the carrying amount of the asset or asset group. If the asset or asset group is determined to be impaired, any excess of the
carrying value of the asset or asset group over its es mated fair value is recognized as an impairment loss.
Accrued Research and Development Expense
Clinical trial costs are a component of research and development expense. The Company accrues and expenses clinical trial ac vi es
performed by third par es based upon actual work completed in accordance with agreements established with clinical research and
manufacturing organiza ons and clinical sites. The Company determines the actual costs through monitoring pa ent enrollment, discussions
with internal personnel and external service providers regarding the progress or stage of comple on of trials or services and the agreed-upon
fee to be paid for such services.
Con ngent Considera on
Con ngent considera on relates to the poten al payments to holders of the CVRs that are con ngent upon the achievement of the
Company and certain third-par es mee ng product development or financial performance milestones. For transac ons accounted for as
business combina ons, the Company records con ngent considera on at fair value at the date of the acquisi on based on the considera on
expected to be transferred. Liabili es for con ngent considera on are remeasured each repor ng period and subsequent changes in fair value
are recognized within loss from opera ons in the consolidated statements of opera ons. The assump ons u lized in the calcula on of the fair
values include probability of success and the discount rates. Con ngent considera on involves certain assump ons requiring significant
judgment and actual results may differ from es mated amounts.
Net Revenues
The Company sells to wholesalers and distributors, (collec vely, “Customers”). The Customers then resell to hospitals and clinics
(collec vely, “Healthcare Providers”) pursuant to contracts with the Company. In addi on to distribu on agreements with Customers and
contracts with Healthcare Providers, the Company enters into arrangements with group purchasing organiza ons (“GPOs”) that provide for
United States government-mandated or privately nego ated rebates, chargebacks and discounts. The Company also enters into rebate
arrangements with payers, which consist primarily of commercial insurance companies and government en es, to cover the reimbursement of
products to Healthcare Providers. The Company provides co-payment assistance to pa ents who have commercial insurance and meet certain
eligibility requirements. Revenue from product sales is recognized at the point when a Customer obtains control of the product and the
Company sa sfies its performance obliga on, which generally occurs at the me product is shipped to the Customer. Payment terms differ by
jurisdic on and customer, but payment terms typically range from 30 to approximately 90 days from date of shipment and may be extended
during the launch period of a new product.
Product Sales Discounts and Allowances
Revenue from product sales is recorded at the net sales price (“transac on price”), which includes es mates of variable considera on
for which reserves are established and that result from chargebacks, rebates, co-pay assistance, prompt-payment discounts,
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Table of Contents
returns and other allowances that are offered within contracts between the Company and its Customers, Healthcare Providers, payers and
GPOs. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reduc ons in trade
receivables (if the amounts are payable to a Customer) or current and non-current liabili es (if the amounts are payable to a party other than a
Customer). Where appropriate, these es mates take into considera on a range of possible outcomes that are probability-weighted for relevant
factors such as historical experience, current contractual and statutory requirements, specifically known market events and trends, industry
data and forecasted Customer buying and payment pa erns. Overall, these reserves reflect the best es mates of the amount of considera on
to which the Company is en tled based on the terms of its contracts. The amount of variable considera on that is included in the transac on
price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of
the cumula ve revenue recognized will not occur in a future period. The actual amount of considera on ul mately received may differ. If actual
results in the future vary from the Company’s es mates, the es mates will be adjusted, which will affect net product revenue in the period that
such variances become known.
Chargebacks: Chargebacks are discounts that occur when Healthcare Providers purchase directly from a Customer. Healthcare
Providers, which belong to Public Health Service ins tu ons, non-profit clinics, government en es, GPOs, and health maintenance
organiza ons, generally purchase the product at a discounted price. The Customer, in turn, charges back to the Company the difference
between the price ini ally paid by the Customer and the discounted price paid by the Healthcare Providers to the Customer. The allowance for
chargebacks is based on an es mate of sales through to Healthcare Providers from the Customer.
Discounts for Prompt Payment: The Company provides for prompt payment discounts to its Customers, which are recorded as a
reduc on in revenue in the same period that the related product revenue is recognized.
Rebates: Rebates include mandated discounts under the Medicaid Drug Rebate Program, other government programs and commercial
contracts. Rebate amounts owed a er the final dispensing of the product to a benefit plan par cipant are based upon contractual agreements
or legal requirements with these public sector benefit providers. The accrual for rebates is based on statutory or contractual discount rates and
expected u liza on. The es mates for the expected u liza on of rebates are based on Customer and commercially available payer data, as well
as data collected from the Healthcare Providers, Customers, GPOs, and historical u liza on rates. Rebates invoiced by payers, Healthcare
Providers and GPOs are paid in arrears. If actual future rebates vary from es mates, the Company may need to adjust its accruals, which would
affect net product revenue in the period of adjustment.
Co-payment Assistance: Pa ents who have commercial insurance and meet certain eligibility requirements may receive co-payment
assistance. The calcula on of the accrual for co-pay assistance is based on an es mate of claims and the cost per claim that the Company
expects to receive associated with product that has been recognized as revenue.
Product Returns: The Company offers its Customers limited product return rights, which are principally based upon whether the
product is damaged or defec ve, or the product’s expira on date.
Other Allowances: The Company pays fees to Customers and GPOs for account management, data management and other
administra ve services. To the extent that the services received are dis nct from the sale of products to the customer, these payments are
classified in selling, general and administra ve expense in the Company’s consolidated statements of opera ons, otherwise they are included
as a reduc on in product revenue.
Royalty Revenue
Royalty revenue from licensees, which is based on sales to third par es of licensed products, is recorded when the third-party sale
occurs and the performance obliga on to which some or all of the royalty has been allocated has been sa sfied (or par ally sa sfied). Royalty
revenue was immaterial for all periods presented and is included in net revenue.
Cost of Goods Sold
Cost of goods sold consists primarily of third-party manufacturing, distribu on, certain overhead costs, royal es on certain products,
and charges for inventory write-downs. Through March 31, 2021, a por on of the costs of producing UDENYCA sold was expensed as research
and development before the FDA approval of UDENYCA and therefore is not reflected in cost of goods sold. All the inventory expensed prior to
approval of UDENYCA was fully u lized by March 31, 2021; thus, the costs of producing UDENYCA are fully reflected in cost of goods sold
beginning April 1, 2021.
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On May 2, 2019, the Company and Amgen se led a trade secret ac on brought by Amgen. As a result, cost of goods sold reflects a
mid-single digit royalty on UDENYCA net product revenue, which began on July 1, 2019. The royalty cost will con nue for five years pursuant to
the se lement. Addi onally, the Company shares a percentage of gross profits on sales of Bioeq Licensed Products in the United States with
Bioeq in the low- to mid-fi y percent range. The Company incurs royal es on net sales of LOQTORZI in the low- to mid-twenty percent range
and on net sales of YUSIMRY in the mid-single digit range. Pursuant to the Genentech Agreement, the Company incurred a royalty that was a
low single-digit percentage of net sales of CIMERLI through the end of 2023.
In 2023, 2022 and 2021, cost of goods sold included inventory write-downs, net of $52.6 million, $26.0 million and $5.1 million,
respec vely.
Research and Development Expense
Research and development expense represents costs incurred to conduct research, such as the discovery and development of product
candidates. The Company recognizes all research and development costs as they are incurred. The Company currently tracks research and
development costs incurred on a product candidate basis only for external research and development expenses. The Company’s external
research and development expense consists primarily of:
● expense incurred under agreements with collaborators, consultants, third-party CROs, and inves ga ve sites where a substan al
por on of the Company’s preclinical studies and all of its clinical trials are conducted;
● costs of acquiring originator comparator materials and manufacturing preclinical study and clinical trial supplies and other
materials from CMOs, and related costs associated with release and stability tes ng;
● costs associated with manufacturing process development ac vi es, analy cal ac vi es and pre-launch inventory manufactured
prior to regulatory approval being obtained or deemed to be probable; and
● upfront and milestone payments related to licensing and collabora on agreements.
Internal costs are associated with ac vi es performed by the Company’s research and development organiza on and generally benefit
mul ple programs. These costs are not separately allocated by product candidate. Unallocated, internal research and development costs consist
primarily of:
● personnel-related expense, which include salaries, benefits and stock-based compensa on; and
● facili es and other allocated expense, which include direct and allocated expense for rent and maintenance of facili es,
deprecia on and amor za on of leasehold improvements and equipment, laboratory and other supplies.
License Agreements
The Company has entered and may con nue to enter into license agreements to access and u lize certain technology. To determine
whether the licensing transac ons should be accounted for as a business combina on or as an asset acquisi on, the Company makes certain
judgments, which include assessing whether the acquired set of ac vi es and assets would meet the defini on of a business under the relevant
accoun ng rules.
If the acquired set of ac vi es and assets does not meet the defini on of a business, the transac on is recorded as an asset
acquisi on and therefore, any acquired IPR&D that does not have an alterna ve future use is charged to expense at the acquisi on date. To
date none of the Company’s license agreements have been considered to be the acquisi on of a business.
Selling, General and Administra ve Expense
Selling, general and administra ve expense comprises primarily compensa on and benefits associated with sales and marke ng,
finance, human resources, legal, informa on technology and other administra ve personnel, outside marke ng, adver sing and legal expenses
and other general and administra ve costs. The Company expenses the cost of adver sing, including promo onal expenses, as incurred.
Adver sing expenses were $10.9 million, $10.5 million and $8.7 million in 2023, 2022 and 2021, respec vely.
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Stock-Based Compensa on
The Company’s compensa on programs include stock-based awards, and the related grants under these programs are accounted for
at fair value. The fair values are recognized as compensa on expense on a straight-line basis over the ves ng period with the related costs
recorded in cost of goods sold, research and development, and selling, general and administra ve expense, as appropriate. The Company
accounts for forfeitures as they occur. The Company accounts for stock issued in connec on with business combina ons based on the fair value
of the Company’s common stock on the date of issuance.
Income Taxes
The Company u lizes the liability method of accoun ng for deferred income taxes. Under this method, deferred tax liabili es and
assets are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of
assets and liabili es. A valua on allowance is established against deferred tax assets when, based on the weight of available evidence, it is
more likely than not that some or all of the deferred tax assets will not be realized. The Company’s policy is to record interest and penal es on
uncertain tax posi ons as income tax expense.
The Company recognizes uncertain income tax posi ons at the largest amount that is more likely than not to be sustained upon audit
by the relevant taxing authority. The Company does not expect its unrecognized tax benefits from prior years to change significantly in 2024.
Opera ng and Finance Leases
The Company determines at an arrangement’s incep on whether it is a lease. The Company does not recognize right-of-use assets and
lease liabili es related to short-term leases. The Company also does not separate lease and non-lease components for its facility and vehicle
leases. Opera ng leases are included in accrued and other current liabili es, other assets, non-current, and lease liabili es, non-current in the
consolidated balance sheets. The lease terms may include op ons to extend or terminate the lease when it is reasonably certain that the
Company will exercise any such op ons. The Company recognizes opera ng lease expense for these leases on a straight-line basis over the
lease term.
The terms of vehicles leased under the Company’s fleet agreement (“Vehicle Lease Agreement”) are 36 months. The vehicles leased
under this arrangement were classified as finance leases. Finance leases are included in property and equipment, net, accrued and other
current liabili es, and lease liabili es, non-current in the consolidated balance sheets. Assets under finance leases are depreciated to opera ng
expenses on a straight-line basis over the lease term.
The opera ng and finance lease right-of-use assets and the lease liabili es are recognized based on the present value of lease
payments over the lease term at the lease commencement date. The Company uses its incremental borrowing rate based on the informa on
available at the commencement date or the lease modifica on date, as applicable, in determining the lease liabili es as the Company's leases
generally do not provide an implicit rate.
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding
for the period, without considera on for poten al dilu ve common shares. Diluted net loss per share is computed by dividing net loss by the
weighted-average number of common shares outstanding for the period, without considera on for any poten al dilu ve common share
equivalents as their effect would be an dilu ve (see Note 14. Net Loss Per Share).
Comprehensive Loss
Comprehensive loss includes the following two components: net loss and other comprehensive income (loss). Other comprehensive
income (loss) refers to gains and losses that are recorded as an element of stockholders’ equity (deficit), but are excluded from net loss. The
Company’s other comprehensive income (loss) includes unrealized gains on available-for-sale securi es and foreign currency transla on
adjustments in 2023, 2022 and 2021.
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Reclassifica ons
Certain amounts in prior years’ financial statements have been reclassified to conform with the current year presenta on in 2023,
including amounts in the consolidated statements of cash flows. There were no changes to net cash used in opera ng ac vi es in the
consolidated statements of cash flows for the prior years as a result.
Recent Accoun ng Pronouncements
The following are recent accoun ng pronouncements that the Company has not yet adopted:
In November 2023, the Financial Accoun ng Standards Board (“FASB”) issued Accoun ng Standards Update (“ASU”) 2023-07, Segment
Repor ng (Topic 280) Improvements to Reportable Segment Disclosures, which enhances the disclosures required for opera ng segments by
requiring disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of
segment profit or loss, among other expanded. All disclosure requirements of ASU 2023-07 are required for en es with a single reportable
segment. The new standard is effec ve for the Company for fiscal years beginning a er December 15, 2023, and interim periods within fiscal
years beginning a er December 15, 2024. Early adop on is permi ed and the amendments in this update should be applied retrospec vely to
all periods presented. The Company is currently evalua ng the impact this ASU may have on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides
qualita ve and quan ta ve updates to the rate reconcilia on and income taxes paid disclosures, among others, in order to enhance the
transparency of income tax disclosures, including consistent categories and greater disaggrega on of informa on in the rate reconcilia on and
disaggrega on by jurisdic on of income taxes paid. The new standard is effec ve for the Company for annual periods beginning a er December
15, 2024, with early adop on permi ed. The amendments in this ASU should be applied prospec vely; however, retrospec ve applica on is
also permi ed. The Company is currently evalua ng the impact this ASU may have on its financial statement disclosures.
The Company has reviewed other recent accoun ng pronouncements and concluded they are either not applicable to the business or
that no material effect is expected on the consolidated financial statements as a result of future adop on.
2.
Revenue
The Company launched LOQTORZI and YUSIMRY in the United States in December and July 2023, respec vely, and ini ated sales of
CIMERLI on October 3, 2022. All net product revenue was generated in the United States, and the Company’s net revenue was as follows:
(in thousands)
Products
UDENYCA
CIMERLI
YUSIMRY
LOQTORZI
Total net product revenue
Other
Total net revenue
Year Ended December 31,
2023
2022
2021
$
$
127,064
125,388
3,574
554
256,580
664
257,244
$
$
203,814
6,946
—
—
210,760
282
211,042
$
$
326,509
—
—
—
326,509
42
326,551
Gross product revenues by significant customer as a percentage of total gross product revenues were as follows:
McKesson Corpora on
Cencora (previously known as AmeriSource-Bergen Corpora on)
Cardinal Health, Inc.
Year Ended December 31,
2023
2022
2021
40 %
43 %
15 %
38 %
44 %
17 %
39 %
39 %
20 %
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Product Sales Discounts and Allowances
Provisions that reduce net revenue include chargebacks and discounts for prompt payment, which are recorded as a reduc on in trade
receivables, and rebates, other fees, co-pay assistance and returns, which are recorded as current liabili es and other liabili es, non-current in
the accompanying consolidated balance sheets. The ac vi es and ending reserve balances for each significant category of sales discounts and
allowances, which cons tute variable considera on, are as follows:
(in thousands)
Balances at December 31, 2020
Provision related to sales made in:
Current period
Prior period - increase (decrease)
Payments and customer credits issued
Balances at December 31, 2021
Provision related to sales made in:
Current period
Prior period - increase (decrease)
Payments and customer credits issued
Balances at December 31, 2022
Provision related to sales made in:
Current period
Prior period - increase (decrease)
Payments and customer credits issued
Balances at December 31, 2023
3.
Fair Value Measurements
Chargebacks
and Discounts
for Prompt
Payment
Other Fees,
Co-pay
Assistance
and Returns
Rebates
$
40,580
$
54,058
$
28,760
$
470,791
(2,876)
(478,830)
29,665
436,865
(2,090)
(421,763)
42,677
590,772
(1,361)
(558,135)
73,953
113,705
(4,976)
(108,783)
54,004
68,399
(1,050)
(82,640)
38,713
94,703
(3,555)
(93,854)
26,054
73,435
32
(80,408)
19,113
143,370
1,424
(62,370)
121,137
$
110,183
3,744
(83,245)
49,795
$
$
$
Total
123,398
679,199
(11,407)
(681,467)
109,723
578,699
(3,108)
(584,811)
100,503
844,325
3,807
(703,750)
244,885
The fair value of financial instruments are classified into one of the following categories based upon the lowest level of input that is
significant to the fair value measurement:
● Level 1 — Quoted prices in ac ve markets for iden cal assets or liabili es.
● Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets
or liabili es, quoted prices in markets that are not ac ve, or other inputs that are observable or can be corroborated by
observable market data for substan ally the full term of the assets or liabili es.
● Level 3 — Unobservable inputs that are supported by li le or no market ac vity and that are significant to the fair value of
the assets or liabili es.
The fair values of cash equivalents approximate their carrying values due to the short-term nature of such financial instruments.
In connec on with the Surface Acquisi on on September 8, 2023 (see Note 6. Surface Acquisi on), the Company acquired money
market funds and marketable securi es and recorded a con ngent considera on liability related to the CVRs. At the end of each repor ng
period, the fair value of the CVR liability is determined using a financial model represen ng a Level 3 measurement within the fair value
hierarchy. Assump ons used in this calcula on include es mated revenue, discount rate and various probability factors. If different assump ons
were used for the various inputs, the es mated fair value could be significantly higher or lower than the fair value the Company determined.
For example, increases in discount rates and the me to payment may result in lower fair value measurements. There is no assurance that any
of the condi ons for payment of the CVR liability will be met. As of December 31, 2023, the CVR liability was reduced by a fair value adjustment
of $0.9 million which was recorded within selling, general and administra ve expense in the
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consolidated statements of opera ons. The CVR liabili es were recorded in accrued and other current liabili es and other liabili es, non-
current on the consolidated balance sheets.
Financial liabili es related to long-term debt obliga ons are summarized in Note 8. Debt Obliga ons. Other financial liabili es and
financial assets measured at fair value on a recurring basis are summarized as follows:
(in thousands)
Financial Assets:
Cash equivalents(1)
Marketable debt securi es:
U.S. government agency securi es
U.S. treasury securi es
Commercial paper and corporate notes
Prepaid financial instrument in Prepaid manufacturing(2)
Total
Financial Liabili es:
Con ngent considera on
(in thousands)
Financial Assets:
Cash equivalents(1)
Marketable debt securi es:
U.S. government agency securi es
U.S. treasury securi es
Commercial paper and corporate notes
Total
Fair Value Measurements
December 31, 2023
Level 1
Level 2
Level 3
Total
$
88,460
$
998
$
— $
89,458
5,195
2,993
—
—
96,648
$
—
—
6,669
—
7,667
$
—
—
—
625
625
— $
— $
4,472
5,195
2,993
6,669
625
104,940
4,472
$
$
Fair Value Measurements
December 31, 2022
Level 1
Level 2
Level 3
Total
55,060
$
— $
— $
55,060
19,964
68,418
—
143,442
$
—
—
48,203
48,203
$
—
—
—
— $
19,964
68,418
48,203
191,645
$
$
$
$
(1) Cash equivalents consist of money market funds, U.S treasury securi es, and commercial paper and corporate notes with original maturi es of 90 days
or less.
(2) Relates to Op onal Stock Purchase Agreement.
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Table of Contents
The cost, unrealized gains or losses, and fair value by investment type are summarized as follows:
(in thousands)
Money market funds
U.S. government agency securi es
U.S. treasury securi es
Commercial paper and corporate notes
Total
(in thousands)
Money market funds
U.S. government agency securi es
U.S. treasury securi es
Commercial paper and corporate notes
Total
Cost
Unrealized Gain Unrealized (Loss)
Fair Value
December 31, 2023
$
79,484
5,200
11,967
7,673
104,324 $
— $
—
2
—
2
$
— $
(5)
—
(6)
(11)
$
79,484
5,195
11,969
7,667
104,315
Cost
Unrealized Gain Unrealized (Loss)
Fair Value
December 31, 2022
$
55,060
19,929
68,431
48,203
191,623 $
— $
35
8
—
43
$
— $
—
(21)
—
(21)
$
55,060
19,964
68,418
48,203
191,645
$
$
$
$
The Company held 9 and 13 posi ons that were in unrealized loss posi ons as of December 31, 2023 and 2022, respec vely. No
impairment was recognized in 2023 or 2022. As of December 31, 2023 and 2022, the remaining contractual maturi es of available-for-sale
securi es were less than one year, and the average maturity of investments upon acquisi on was approximately 9 and 7 months, respec vely.
The accrued interest receivable on available-for-sale marketable securi es was immaterial at December 31, 2023 and 2022.
4.
Inventory
Inventory consisted of the following:
(in thousands)
Raw materials
Work in process
Finished goods
Total
December 31,
2023
12,975
82,588
34,537
130,100
2022
10,262
86,712
18,077
115,051
$
$
$
$
During 2023, the Company recorded a $47.0 million charge for the write-down of slow moving YUSIMRY inventory, inclusive of the
related par al recogni on of $20.5 million in certain firm purchase commitments in cost of goods sold in the consolidated statements of
opera ons. The Company has presented the par al recogni on of these certain firm purchase commitments in the amounts of $11.5 million
and $9.0 million in accrued and other current liabili es and other liabili es, non-current, respec vely, in the consolidated balance sheets as of
December 31, 2023. Inventory expected to be sold more than twelve months from the balance sheet date is classified as inventory, non-current
in the consolidated balance sheets. As of December 31, 2023 and 2022, the non-current por on of inventory consisted of raw materials, work
in process and a por on of finished goods. The following table presents the inventory balance sheet classifica ons:
(in thousands)
Inventory
Inventory, non-current
Total
December 31,
2023
62,605
67,495
130,100
$
$
2022
38,791
76,260
115,051
$
$
Prepaid manufacturing of $23.7 million as of December 31, 2023 includes prepayments of $12.6 million to CMOs for manufacturing
services of the Company’s products, which the Company expects to be converted into inventory during 2024, and prepayments of $11.1 million
to various CMOs for research and development pipeline programs. Prepaid manufacturing of $17.9 million
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as of December 31, 2022 included prepayments of $13.0 million to CMOs for manufacturing services of the Company’s products and
prepayments of $4.9 million to various CMOs for research and development pipeline programs.
In February 2021, the Company announced the discon nua on of the development of CHS-2020, a biosimilar of Eylea as part of a
realignment of research and development resources toward other development programs. As a result, the Company recognized $11.2 million
within research and development expense in the consolidated statements of opera ons in 2021, which included an impairment charge of $3.2
million for the write-off of prepaid manufacturing services no longer deemed to have future benefits. No material expense rela ng to the
discon nua on of CHS-2020 was recognized a er March 31, 2021.
5.
Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consisted of the following:
(in thousands)
Machinery and equipment
Computer equipment and so ware
Furniture and fixtures
Leasehold improvements
Finance lease right of use assets
Construc on in progress
Total property and equipment
Accumulated deprecia on and amor za on
Property and equipment, net
December 31,
$
2023
13,124
3,546
1,055
5,751
2,294
—
25,770
(20,651)
5,119
$
2022
12,944
3,183
1,258
6,198
4,632
696
28,911
(20,157)
8,754
$
$
Deprecia on and amor za on expense related to property and equipment, net was $3.2 million, $3.6 million and $3.5 million in 2023,
2022 and 2021, respec vely. There were no material impairments of property and equipment in 2023, 2022 and 2021.
As of December 31, 2023 and 2022, the net book value of so ware implementa on costs related to hos ng arrangements was $3.2
million and $3.5 million, respec vely, and the amor za on expense was immaterial for all periods presented.
Intangible Assets, Net
Goodwill and intangible assets, net consisted of the following:
(in thousands)
Finite-lived assets, net of accumulated amor za on of $639 and $61, respec vely
Indefinite-lived assets - IPR&D
Goodwill
Total Intangible assets, net
December 31,
2023
41,871
28,859
943
71,673
$
$
2022
2,368
2,620
943
5,931
$
$
Amor za on expense related to finite-lived intangible assets was immaterial in all periods presented. As of December 31, 2023,
amor za on expense related to finite-lived assets for each of the five succeeding fiscal years will be approximately $3.8 million. The weighted
average remaining life of the finite-lived assets is 11.4 years on December 31, 2023. No impairment charges were recognized for goodwill or
intangible assets during 2023, 2022 or 2021. During 2023, the Company’s intangible assets increased due to assets acquired in the Surface
Acquisi on (see Note 6. Surface Acquisi on) and capitalized milestone payments, including $25.0 million to Junshi Biosciences (see Note 7.
Collabora ons and Other Arrangements).
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Accrued and Other Current Liabili es
Accrued and other current liabili es consisted of the following:
(in thousands)
Accrued commercial and research and development manufacturing
Accrued co-development costs and milestone payments
Accrued royal es
Accrued other
Lease liabili es, current
Con ngent considera on, current
Total Accrued and other current liabili es
Other Liabili es, Non-current
Other liabili es, non-current consisted of the following:
(in thousands)
Con ngent considera on, non-current
Deferred tax liability
Other
Total Other liabili es, non-current
6. Surface Acquisi on
December 31,
December 31,
2023
23,470
26,812
42,031
7,628
2,145
3,300
105,386
$
$
2022
21,774
8,356
5,015
10,634
4,318
—
50,097
$
$
December 31,
December 31,
2023
2022
$
$
1,172
1,102
10,287
12,561
$
$
102
—
3,365
3,467
On September 8, 2023, in accordance with Merger Agreement by the Merger Subs, and Surface, the Company completed the Surface
Acquisi on. Surface is a clinical-stage immuno-oncology company focused on using its specialized knowledge of the biological pathways cri cal
to the immunosuppressive tumor microenvironment for the development of next-genera on cancer therapies. The Surface Acquisi on
expanded the Company’s immune-oncology pipeline with the following: casdozokitug (CHS-388, formerly SRF388), an inves ga onal, novel IL-
27-targeted an body currently being evaluated in a Phase 2 clinical trial in HCC, and CHS-114 (formerly SRF114), an inves ga onal, CCR8-
targeted an body currently in a Phase 1/2 study as a monotherapy in pa ents with advanced solid tumors.
On the Acquisi on Date, and in accordance with the Merger Agreement, the Company issued to the holders of all outstanding Surface
common stock (other than treasury shares, any shares of Surface common stock held directly by the Company or the Merger Subs immediately
prior to the Acquisi on Date and shares of Surface common stock issued and outstanding immediately prior to the Acquisi on Date and held by
any holder properly demanding appraisal for such shares in accordance with Sec on 262 of the Delaware General Corpora on
Law) 0.1960 shares of Coherus common stock in exchange for each share of outstanding Surface common stock and certain outstanding Surface
employee equity awards. The exchange ra o was calculated pursuant to the terms of the Merger Agreement and was based on a $5.2831 per
share price of Coherus common stock and a nominal total amount of cash in lieu of frac onal shares. Surface shareholders also
received one CVR for each share of Surface common stock and employee equity award converted. Each CVR en tles the holder to receive
quarterly con ngent payments in the form of cash, stock or a combina on of cash and stock at the Company’s discre on during the ten-
year period following September 8, 2023, for the sum of the following, less any permi ed deduc ons in accordance with the CVR Agreement:
● 70% of all milestone- and royalty-based payments actually received by the Company or its affiliates under the GSK Agreement related
to the exis ng program (GSK4381562);
● 70% of all milestone- and royalty-based payments actually received by the Company or its affiliates under the Novar s Agreement
related to the exis ng program (NZV930);
● 25% of any upfront payment actually received by the Company or its affiliates pursuant to poten al ex-U.S. licensing agreements for
CHS-114; and
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● 50% of any upfront payment actually received by the Company or its affiliates pursuant to poten al ex-U.S. licensing agreements for
casdozokitug.
The Company has recorded a con ngent considera on liability for the fair value of the poten al payments under the CVR Agreement
described above. The Company is unable to es mate a range of outcomes for poten al royalty and milestone payments for CHS-114
and casdozokitug.
The total considera on paid for the Surface Acquisi on of $64.6 million consisted of the following:
(in thousands, except share and per share amounts)
Coherus common stock issued
Coherus common stock share price
Fair value of components of purchase price considera on at closing:
Equity of combined company owned by Surface equity holders
Con ngent CVR liability
Equity of combined company owned by Surface former employees (1)
Fair value of total purchase considera on
As of Acquisi on Date
11,971,460
4.89
58,540
5,290
766
64,596
$
$
$
(1) Represents 161,100 shares of Coherus common stock, net of shares withheld for taxes, issued to Surface’s former employees on the
Acquisi on Date.
The Company has accounted for the Surface Acquisi on as a business combina on which requires, among other things, that the assets
acquired and liabili es assumed generally be recognized at their fair value on the Acquisi on Date. Fair value es mates are based on
management’s es mated future cash flows from revenues of acquired assets, the ming and projec on of costs and expenses and the related
profit margins, tax rates, and discount rate. The judgments used to determine the es mated fair value assigned to each class of assets acquired
and liabili es assumed, as well as asset lives, can materially impact the Company’s results of opera ons. The purchase price alloca on for the
Surface Acquisi on is preliminary and subject to revisions as addi onal informa on about fair value of assets and liabili es becomes available.
This is primarily related to the Company’s deferred tax liabili es assumed in connec on with the Surface Acquisi on, as the 2023 short period
tax returns have not yet been filed. The following table below sets forth the purchase price alloca on to the es mated fair value of the net
assets acquired:
(in thousands)
Assets Acquired
Cash and cash equivalents
Investments in marketable securi es
Other prepaids and other assets
In-process research and development
Out-licenses
Total assets
Liabili es Assumed
Accrued and other current liabili es
Deferred tax liability
Total liabili es
Total net assets acquired
Amounts Recognized at Acquisi on Date
$
$
$
$
6,997
21,791
5,260
26,239
13,530
73,817
7,722
1,499
9,221
64,596
The Company believes that, even a er reassessing its iden fica on of all assets acquired and liabili es assumed, it was able to acquire
Surface for a price that was completely allocable to iden fiable assets acquired and liabili es assumed with no residual a ributable to goodwill
primarily due to Surface’s need to raise addi onal capital to finance its opera ons, the challenging biotech funding environment at the me the
transac on was ini ally announced, and the value of the acquired net assets.
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The amount allocated to iden fiable intangible assets has been a ributed to the following assets:
(in thousands)
In-process research and development - casdozokitug
In-process research and development - CHS-114
Out-license - GSK
Out-license - Novar s Ins tutes
Total iden fiable intangible assets
Useful lives
n/a
n/a
15 years
15 years
$
$
Fair Value at Acquisi on Date
25,899
340
2,506
11,024
39,769
Surface had two out-licensed partnership programs, with Novar s Ins tutes (NZV930) and GSK (GSK4381562), to advance certain next-
genera on cancer therapies. The out-license intangible assets represent poten al milestone and royalty-based payments to be received in the
future. Surface shareholders received CVRs for certain percentages of these milestone and royalty-based payments on exis ng programs with
Novar s Ins tutes (NZV930) and GSK (GSK4381562), as further explained above.
Following the Acquisi on Date, the opera ng results of Surface have been included in the consolidated financial statements. For the
period September 8, 2023 through December 31, 2023, there was no revenue a ributable to Surface and opera ng losses a ributable to
Surface for such period were $5.9 million, excluding acquisi on-related costs.
Unaudited Pro Forma Summary of Opera ons
The following table shows the unaudited pro forma summary of opera ons for the years ended December 31, 2023 and 2022, as if the
Surface Acquisi on had occurred on January 1, 2022. This pro forma informa on does not purport to represent what the Company’s actual
results would have been if the acquisi on had occurred as of January 1, 2022, and it is not indica ve of what such results would be expected for
any future period:
(in thousands)
Total revenues
Net loss
Year Ended December 31,
2023
$
$
257,244
(284,575)
$
$
2022
241,042
(369,442)
The unaudited pro forma financial informa on was prepared using the acquisi on method of accoun ng and was based on the historical
financial informa on of the Company and Surface. In order to reflect the Surface Acquisi on as if it had occurred on January 1, 2022, the
summary pro forma financial informa on includes adjustments to reflect Surface’s severance expense, the early termina on and related
amor za on expense of Surface’s corporate headquarters opera ng lease, the loss on debt ex nguishment and historical interest expense
related to the cash se lement of Surface’s conver ble note as if it had occurred on January 1, 2022, and amor za on expense on the acquired
finite-lived intangible assets. The unaudited pro forma summary of opera ons does not reflect the income tax effects, if any, of the pro forma
adjustments, given the combined en ty incurred significant losses during the historical periods presented.
Acquisi on-related costs of $5.1 million were recorded in selling, general and administra ve expense in the consolidated statements of
opera ons during the year ended December 31, 2023.
7. Collabora ons and Other Arrangements
In-Licensing Agreements
Junshi Biosciences
On February 1, 2021, the Company entered into the Collabora on Agreement with Junshi Biosciences for the co-development and
commercializa on of LOQTORZI, Junshi Biosciences’ an -PD-1 an body, in the United States and Canada.
Under the terms of the Collabora on Agreement, the Company paid $150.0 million upfront for exclusive rights to LOQTORZI in the
United States and Canada, an op on in these territories to Junshi Biosciences’ an -TIGIT an body CHS-006, an op on in these territories to a
next-genera on engineered IL-2 cytokine, and certain nego a on rights to two undisclosed preclinical immuno-oncology drug candidates. The
Company will have the right to conduct all commercial ac vi es of LOQTORZI in the United States and Canada. The
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Company will be obligated to pay Junshi Biosciences up to a 20% royalty on net sales of LOQTORZI and up to an aggregate $380.0 million in one-
me payments for the achievement of various regulatory and sales milestones.
In March 2022, the Company paid $35.0 million for the exercise of its op on to license CHS-006. Junshi Biosciences and the Company
were jointly developing CHS-006 with each party responsible for the associated development costs as set forth in the Collabora on Agreement,
however on January 10, 2024, the Company announced that it had delivered a no ce of termina on of the TIGIT Program (as defined in the
Collabora on Agreement) to Junshi Biosciences pursuant to the Collabora on Agreement. The Company plans to con nue to wind down work
with Junshi Biosciences on the TIGIT Program pursuant to the termina on. If the Company exercises its remaining op on for the IL-2 cytokine, it
will be obligated to pay Junshi Biosciences an addi onal op on exercise fee of $35.0 million and an 18% royalty on net sales, up to $85.0
million for the achievement of certain regulatory approvals, and up to $170.0 million for the a ainment of certain sales thresholds. Under the
Collabora on Agreement, the Company retains the right to collaborate in the development of LOQTORZI and the other licensed compounds
and will pay for a por on of these co-development ac vi es up to a maximum of $25.0 million per licensed compound per year. Addi onally,
the Company is responsible for certain associated regulatory and technology transfer costs for LOQTORZI and other licensed compounds and
will reimburse Junshi Biosciences for such costs.
The licensing transac on and the exercise of the op on were accounted for as asset acquisi ons under the relevant accoun ng rules.
Research and development expenses recognized for obliga ons to Junshi Biosciences were $8.0 million, $68.5 million (inclusive of the $35.0
million op on fee) and $175.4 million (inclusive of the upfront fee) in 2023, 2022, and 2021 respec vely. In the consolidated balance sheets as
of December 31, 2023 and 2022, the Company classified $26.3 million and $8.4 million, respec vely, in accrued and other current liabili es and
$6.3 million and $0 in accounts payable, respec vely, related to the co-development, regulatory and technology transfer costs related to these
programs.
On October 27, 2023, LOQTORZI was approved by the FDA in combina on with cispla n and gemcitabine for the first-line treatment of
adults with metasta c or recurrent locally advanced NPC, and as monotherapy for the treatment of adults with recurrent, unresectable, or
metasta c NPC with disease progression on or a er pla num-containing chemotherapy. As of December 31, 2023, the Company has accrued a
$25.0 million milestone payment to Junshi Biosciences, of which it expects to pay $12.5 million in the second quarter of 2024 and $12.5 million
in the first quarter of 2025. This amount is a non-cash transac on which the Company has recognized in intangible assets, net and accrued and
other current liabili es as of December 31, 2023. The accrued royalty obliga on to Junshi Biosciences is immaterial as of December 31, 2023.
The addi onal milestone payments, op on fee for the IL-2 cytokine and royal es are con ngent upon future events and, therefore, will be
recorded if and when it becomes probable that a milestone will be achieved, or when an op on fee or royal es are incurred.
In connec on with the Collabora on Agreement, the Company entered into a stock purchase agreement dated February 1, 2021 (the
“Stock Purchase Agreement”) with Junshi Biosciences agreeing, subject to customary condi ons, to acquire certain equity interests in the
Company. Pursuant to the Stock Purchase Agreement, on April 16, 2021, the Company issued 2,491,988 unregistered shares of its common
stock to Junshi Biosciences, at a price per share of $20.06, for an aggregate amount of approximately $50.0 million in cash. Under the terms of
the Stock Purchase Agreement, Junshi Biosciences was not permi ed to sell, transfer, make any short sale of, or grant any op on for the sale of
the common stock for the two-year period following its effec ve date. The Collabora on Agreement and the Stock Purchase Agreement were
nego ated concurrently and were therefore evaluated as a single agreement. The Company used the “Finnerty” and “Asian put” valua on
models and determined the fair value for the discount for lack of marketability (“DLOM”) was $9.0 million at the date the shares were issued.
The fair value of the DLOM was a ributable to the Collabora on Agreement and was included as an offset against the research and
development expense in the consolidated statements of opera ons for the year ended December 31, 2021.
Bioeq
On November 4, 2019, the Company entered into the Bioeq Agreement with Bioeq for the commercializa on of a biosimilar version of
ranibizumab (Lucen s) in certain dosage forms in both a vial and pre-filled syringe presenta on. Under this agreement, Bioeq granted to the
Company an exclusive, royalty-bearing license to commercialize the Bioeq Licensed Products in the field of ophthalmology (and any other
approved labelled indica on) in the United States. Bioeq will supply to the Company the Bioeq Licensed Products in accordance with terms and
condi ons specified in the agreement and a manufacturing and supply agreement to be executed by the par es in accordance therewith. The
agreement’s ini al term con nues in effect for ten years a er the first commercial sale of a Bioeq Licensed Product in the United States, and
therea er renews for an unlimited period of me unless otherwise terminated in accordance with its terms.
Bioeq will manufacture and supply the Bioeq Licensed Products to the Company in accordance with terms and condi ons specified in
the Bioeq Agreement and the Bioeq Manufacturing Agreement and will remain in force un l the first to occur of the following: (1) the
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termina on of the Bioeq Agreement; (2) the exercise of a right to termina on by the Company or Bioeq for a material breach of the other party
that is not cured in accordance with the Bioeq Manufacturing Agreement; and (3) the exercise of a right to termina on by Bioeq if invoices are
not paid in full in accordance with the Bioeq Manufacturing Agreement.
Under the agreement, Bioeq was required to use commercially reasonable efforts to develop and obtain regulatory approval of the
Bioeq Licensed Products in the United States in accordance with a development and manufacturing plan, and the Company was required to use
commercially reasonable efforts to commercialize the Bioeq Licensed Products in accordance with a commercializa on plan. Addi onally, the
Company was required to commit certain pre-launch and post-launch resources to the commercializa on of the Bioeq Licensed Products for a
limited me as specified in the agreement.
The Company accounted for the licensing transac on as an asset acquisi on under the relevant accoun ng rules. The Company paid
Bioeq an upfront and a milestone payment aggrega ng to €10 million ($11.1 million), which was recorded as research and development
expense in the Company’s consolidated statements of opera ons in 2019. The terms of the Bioeq Agreement include an aggregate of up to
€12.5 million in addi onal milestone payments in connec on with the achievement of certain development and regulatory milestones with
respect to the Bioeq Licensed Products in the United States including a €2.5 million milestone related to the FDA approval of the CIMERLI
Sec on 351(k) BLA that was paid in 2022. The Company shares a percentage of gross profits on sales of Bioeq Licensed Products in the United
States with Bioeq in the low- to mid-fi y percent range. Royal es due to Bioeq were $38.4 million and $2.9 million as of December 31, 2023
and 2022, respec vely. The remaining milestone payments are con ngent upon future events and, therefore, will be recorded when it becomes
probable that a milestone will be achieved.
Adimab Development and Op on Agreement
In October 2018, Surface and Adimab entered into the A&R Adimab Agreement, which amended and restated the Original Adimab
Agreement, for the discovery and op miza on of proprietary an bodies as poten al therapeu c product candidates. Under the A&R Adimab
Agreement, the Company will select biological targets against which Adimab will use its proprietary pla orm technology to research and
develop an body proteins using a mutually agreed upon research plan. The A&R Adimab Agreement, among other things, extended the
discovery term of the Original Adimab Agreement, provided access to addi onal an bodies, and expanded the Company’s right to evaluate and
use an bodies that were modified or derived using Adimab technology for diagnos c purposes.
Upon the Company’s selec on of a target, the Company and Adimab will ini ate a research plan and the discovery term begins. During
the discovery term, Adimab will grant the Company a non-exclusive, non-sublicensable license under its technology with respect to the target,
to research, design and preclinically develop and use an bodies that were modified or derived using Adimab technology, solely to evaluate such
an bodies, perform the Company’s responsibili es under the research plan, and use such an bodies for certain diagnos c purposes. The
Company also will grant to Adimab a non-exclusive, nontransferable license with respect to the target under the Company’s technology that
covers or relates to such target, solely to perform its responsibili es under the research plan during the discovery period. The Company is
required to pay Adimab at an agreed upon rate for its full- me employees during the discovery period while Adimab performs research on each
target under the applicable research plan.
Adimab granted the Company the Research Op on. In addi on, Adimab granted the Company the Commercializa on Op on. Upon
the exercise of a Commercializa on Op on, and payment of the applicable op on fee to Adimab, Adimab will assign the Company the patents
that cover the an bodies selected by such Commercializa on Op on. The Company will be required to use commercially reasonable efforts to
develop, seek market approval of, and commercialize at least one an body against the target covered by the Commercializa on Op on in
specified markets upon the exercise of a Commercializa on Op on.
Under the A&R Adimab Agreement, the Company is obligated to make milestone payments and to pay specified fees upon the exercise
of the Research Op on or Commercializa on Op on. During the discovery term, the Company may be obligated to pay Adimab up
to $0.3 million for technical milestones achieved against each biological target. Upon exercise of a Research Op on, the Company is obligated to
pay a nominal research maintenance fee on each of the next four anniversaries of the exercise. Upon the exercise of each Commercializa on
Op on, the Company will be required to pay an op on exercise fee of a low seven-digit dollar amount, and the Company may be responsible
for milestone payments of up to an aggregate of $13.0 million for each licensed product that receives marke ng approval. For any licensed
product that is commercialized, the Company is obligated to pay Adimab ered royal es of a low to mid single-digit percentage on worldwide
net sales of such product. The Company may also par ally exercise a Commercializa on Op on with respect to ten an bodies against a
biological target by paying 65% of the op on fee and later either (i) paying the balance and choosing addi onal an bodies for
commercializa on, up to the maximum number under the Commercializa on Op on, or (ii) foregoing the Commercializa on Op on en rely.
For any Adimab diagnos c product that is used with or in connec on with any compound or product other than a licensed an body or licensed
product, the Company is obligated to pay Adimab up to a low seven digits in regulatory milestone payments and low
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single-digit royal es on net sales. No addi onal payment is due with respect to any companion diagnos c or any diagnos c product that does
not contain any licensed an body. Any payments payable to Adimab as a result of any product candidates being developed pursuant to the GSK
Agreement, will be payable to Adimab directly by GSK.
The A&R Adimab Agreement will remain in effect un l (a) the earlier of (i) the expira on of the Research and Commercializa on
Op ons (if they expire without exercise) and (ii) 12 months from the effec ve date without the Company providing materials that pass Adimab’s
quality control; or (b) if a Research Op on is exercised but the Commercializa on Op on is not, then upon the expira on of the last to expire
research license term; or (c) upon commercializa on of a product, un l the end of the royalty term, which will vary on a product-by-product
and country-by-country basis, ending on the later of (y) the expira on of the last valid claim covering the licensed product in such country as
the product is manufactured or sold, or (z) ten years a er the first commercial sale of the licensed product in such country.
Either party may terminate the A&R Adimab Agreement for material breach if such breach remains uncured for a specified period of
me, however, if a Research Op on or Commercializa on Op on has been exercised and the breach only applies to the applicable target of
such Research Op on or Commercializa on Op on, then the termina on right will only apply to such target. The Company may also terminate
the A&R Adimab Agreement for any reason with prior no ce to Adimab. If Adimab is bankrupt, the Company will be en tled to a complete
duplicate of, or complete access to, all rights and licenses granted under or pursuant to the A&R Adimab Agreement.
Vaccinex License Agreement
On March 23, 2021, Surface and Vaccinex entered into the Vaccinex License Agreement which provides the Company a worldwide,
exclusive, sublicensable license to make, have made, use, sell, offer to sell, have sold, import, and otherwise exploit Vaccinex Licensed Products,
including the an body CHS-114 targe ng CCR8. Under the Vaccinex License Agreement, the Company is obligated to use commercially
reasonable efforts to develop, clinically test, achieve regulatory approval, manufacture, market and commercialize at least one Vaccinex
Licensed Product.
The Company is responsible for all costs and expenses of such development, manufacturing and commercializa on. Vaccinex is eligible
to receive up to an aggregate of $3.5 million based on achievement of certain clinical milestones, up to an aggregate of $11.5 million based on
achievement of certain regulatory milestones per Vaccinex Licensed Product, and low single-digit royal es on global net sales of any approved
licensed products.
The Company may terminate the Vaccinex License Agreement for convenience upon the no ce period specified in the Vaccinex
License Agreement. Either party may terminate the agreement for an uncured material breach by the other party. Vaccinex may terminate the
Vaccinex License Agreement if we default on any payments owed to Vaccinex under the agreement, if the Company is in material breach of, and
fails to cure, its development obliga ons, or ins tute certain ac ons related to the licensed patents. In the event of termina on, all rights in the
licensed intellectual property would revert to Vaccinex.
Out-Licensing Agreements Acquired as part of the Surface Acquisi on
On September 8, 2023, at the closing of the Surface Acquisi on, all the assets, liabili es, rights and obliga ons of Surface were assumed
by the Company’s direct, wholly-owned subsidiary, Surface Oncology, LLC. See further details in Note 6. Surface Acquisi on above.
Novar s Ins tutes
In January 2016, Surface entered into the Novar s Agreement. Pursuant to the Novar s Agreement, Surface granted Novar s Ins tutes a
worldwide exclusive license to research, develop, manufacture and commercialize an bodies that target cluster of differen a on 73 (“CD73”).
Under the Novar s Agreement, the Company is currently en tled to poten al development milestones of $325.0 million and sales milestones
of $200.0 million, as well as ered royal es on annual net sales by Novar s Ins tutes ranging from high single-digit to mid-teens percentages
upon the successful commercializa on of NZV930. Due to the uncertainty of pharmaceu cal development and the historical failure rates
generally associated with drug development, the Company may not receive any milestone payments or any royalty payments under the
Novar s Agreement. The Company did not recognize any revenue rela ng to the Novar s Agreement from September 8, 2023 through
December 31, 2023.
Unless terminated earlier, the Novar s Agreement will con nue in effect un l neither the Company nor Novar s Ins tutes is
researching, developing, manufacturing or commercializing NZV930. Novar s Ins tutes may terminate the Novar s Agreement for any or
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no reason upon prior no ce to the Company within a specified me period. Either party may terminate the Novar s Agreement in full if an
undisputed material breach is not cured within a certain period of me or upon no ce of insolvency of the other party. To the extent Novar s
Ins tutes terminates for convenience, or the Company terminates for Novar s Ins tutes’ uncured material breach, Novar s Ins tutes will grant
the Company, on mutually agreeable financial terms, an exclusive, worldwide, irrevocable, perpetual and royalty-bearing license with respect to
intellectual property controlled by Novar s Ins tutes that is reasonably necessary to research, develop, manufacture or commercialize NZV930.
GSK Agreement
In December 2020, Surface entered into the GSK Agreement. Pursuant to the GSK Agreement, Surface granted GSK a worldwide
exclusive, sublicensable license to develop, manufacture and commercialize the Licensed An bodies. GSK is responsible for the development,
manufacturing and commercializa on of the Licensed An bodies and a joint development commi ee was formed to facilitate informa on
sharing. GSK is responsible for all costs and expenses of such development, manufacturing and commercializa on and is obligated to provide
the Company with updates on its development, manufacturing and commercializa on ac vi es through the joint development commi ee. In
March 2022, Surface earned a $30.0 million milestone payment from GSK upon the dosing of the first pa ent in the Phase 1 trial of
GSK4381562. The Company is eligible to receive up to $60.0 million in addi onal clinical milestones and $155.0 million in regulatory milestones.
In addi on, the Company may receive up to $485.0 million in sales milestone payments. The Company is also eligible to receive royal es on
global net sales of any approved products based on the Licensed An bodies, ranging in percentages from high single digits to mid-teens. Due to
the uncertainty of pharmaceu cal development and the historical failure rates generally associated with drug development, the Company may
not receive any milestone payments or any royalty payments under the GSK Agreement. The Company did not recognize license-related
revenue under the GSK Agreement from September 8, 2023 through December 31, 2023.
Unless terminated earlier, the GSK Agreement expires on a licensed product-by-licensed product and country-by-country basis on the
later of ten years from the date of first commercial sale or when there is no longer a valid patent claim or regulatory exclusivity covering such
licensed product in such country. Either party may terminate the GSK Agreement for an uncured material breach by the other party or upon the
bankruptcy or insolvency of the other party. GSK may terminate the GSK Agreement for its convenience. The Company may terminate the GSK
Agreement if GSK ins tutes certain ac ons related to the licensed patents or if GSK ceases development ac vi es, other than for certain
specified technical or safety reasons. In the event of termina on, the Company would regain worldwide rights to the terminated program.
8.
Debt Obliga ons
A summary of the Company’s debt obliga ons, including level within the fair value hierarchy (see Note 3. Fair Value Measurements), is
as follows:
(in thousands)
Financial Liabili es:
2027 Term Loans
2026 Conver ble Notes
(in thousands)
Financial Liabili es:
2027 Term Loans
2026 Conver ble Notes
Principal
Amount
Unamor zed Debt Discount
and Debt Issuance Costs
At December 31, 2023
Net
Carrying Value
Es mated
Fair Value
Level
250,000
230,000
$
$
(3,519)
(3,112)
$
$
246,481
226,888
$
$
246,481
150,155
Level 2*
Level 2**
Principal
Amount
Unamor zed Debt Discount
and Debt Issuance Costs
At December 31, 2022
Net
Carrying Value
Es mated
Fair Value
Level
250,000
230,000
$
$
(4,517)
(4,425)
$
$
245,483
225,575
$
$
245,483
157,205
Level 2*
Level 2**
$
$
$
$
* The principal amounts outstanding are subject to variable interest rates, which are based on three-month SOFR star ng April 1, 2023 plus fixed percentages. Through March
31, 2023, the variable component was based on the three-month LIBOR. Therefore, the Company believes the carrying amount of these obliga ons approximates fair value.
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** The fair value is influenced by interest rates, the Company’s stock price and stock price vola lity and is determined by prices observed in market trading. Since the market
for trading of the 2026 Conver ble Notes is not considered to be an ac ve market, the es mated fair value is based on Level 2 inputs.
2027 Term Loans
The Company entered into the Loan Agreement with BioPharma Credit, PLC, BPCR Limited Partnership, and Biopharma Credit
Investments V (Master) LP, ac ng by its general partner, BioPharma Credit Investments V GP LLC that provides for a senior secured term loan
facility of up to $300.0 million to be funded in four commi ed tranches: (i) the Tranche A Loan in an aggregate principal amount of $100.0
million that was funded on January 5, 2022; (ii) the Tranche B Loan in an aggregate principal amount of $100.0 million that was funded on
March 31, 2022; (iii) the Tranche C Loan in an aggregate principal amount of $50.0 million that was not funded; and (iv) the Tranche D Loan in
an aggregate principal amount of $50.0 million that was funded on September 14, 2022. The Company has the right to request an uncommi ed
addi onal facility amount of up to $100.0 million that is subject to new terms and condi ons.
The 2027 Term Loans mature on either (i) the fi h anniversary of the Tranche A Closing Date; or (ii) October 15, 2025, if the
outstanding aggregate principal amount of the Company’s 2026 Conver ble Notes is greater than $50.0 million on October 1, 2025. The 2027
Term Loans accrued interest from incep on through March 31, 2023 at 8.25% plus three-month LIBOR per annum with a LIBOR floor of 1.0%;
and star ng April 1, 2023, accrue interest at 8.25% plus the Adjusted Term SOFR which is the sum of three-month SOFR and 0.26161% per
annum, with a floor on Adjusted Term SOFR of 1.0%. The interest rate for the fourth quarter of 2023 was 13.91%. Interest is payable quarterly
in arrears on March 31, June 30, September 30 and December 31 of each year. Repayment of outstanding principal of the 2027 Term Loans will
be made in five equal quarterly payments of principal commencing March 31, 2026.
The Company adopted the prospec ve method to account for future cash payments. Under the prospec ve method, the effec ve
interest rate is not constant, and any change in the expected cash flows is recognized prospec vely as an adjustment to the effec ve yield.
The obliga ons under the Loan Agreement are secured pursuant to customary security documenta on, including a guaranty and
security agreement among the Credit Par es and the Collateral Agent which provides for a lien on substan ally all of the Company’s tangible
and intangible assets and property, including intellectual property.
Pursuant to the Loan Agreement, and subject to certain restric ons, proceeds of the 2027 Term Loans were used to fund the
Company’s general corporate and working capital requirements except for the following: in January 2022, proceeds of the Tranche A Loan were
used to repay in full all amounts outstanding under the 2025 Term Loan, as well as all associated costs and expenses pursuant to which a payoff
amount of $81.9 million was outstanding; in March 2022, proceeds of the Tranche B Loan were drawn in connec on with the full repayment of
all amounts outstanding under the 2022 Conver ble Notes, as well as all associated costs and expenses pursuant to which a payoff amount of
$111.1 million was outstanding.
The Loan Agreement contains certain customary representa ons and warran es. In addi on, the Loan Agreement includes covenants,
such as the requirement to maintain minimum trailing twelve-month net sales in an amount that began at $200.0 million for the quarter ending
March 31, 2022 and increases to $210.0 million for the quarter ended March 31, 2024. As a result of the Consent and Amendment entered into
on February 5, 2024, beginning in the second quarter of 2024 and con nuing through the quarter ended December 31, 2026, the requirement
is to maintain minimum trailing twelve-month net sales of $125.0 million. In addi on, there is a requirement to maintain a minimum trailing
twelve-month net sales for LOQTORZI tested quarterly at the end of each quarter commencing with the quarter ended December 31, 2024.
Further, the Loan Agreement includes certain other affirma ve covenants and nega ve covenants, including, covenants and restric ons that
among other things, restrict the Company’s ability to incur liens, incur addi onal indebtedness, make investments, engage in certain mergers
and acquisi ons or asset sales, and declare dividends or redeem or repurchase capital stock. The Loan Agreement also contains customary
events of default, including among other things, the Company’s failure to make any principal or interest payments when due, the occurrence of
certain bankruptcy or insolvency events or its breach of the covenants under the Loan Agreement. Upon the occurrence of an event of default,
the Lenders may, among other things, accelerate the Company’s obliga ons under the Loan Agreement. A change of control of the Company
triggers a mandatory prepayment of the 2027 Term Loans within ten business days. See Note 17. Subsequent Events for further informa on
regarding the Consent and Amendment to the 2027 Term Loans.
As of December 31, 2023, the Company was in full compliance with these covenants and there were no events of default under the
2027 Term Loans.
In connec on with the closing of Tranche A, the Company incurred $7.8 million in debt discounts and issuance costs of which $6.8
million related to all the tranches of the 2027 Term Loans and was thus allocated pro rata between the tranches. The unamor zed debt
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discount and issuance costs allocated to funded tranches are presented as deduc ons to the 2027 Term Loan balance and are amor zed into
interest expense using the effec ve interest method. The $2.3 million allocated to Tranche B was fully amor zed over the commitment period
prior to funding and recognized as interest expense in the first quarter of 2022. The associated debt discounts and issuance costs of unfunded
tranches were deferred as assets and amor zed into interest expense using the straight-line method over the commitment period of the
respec ve tranches. At the closing dates of Tranche B on March 31, 2022 and Tranche D on September 14, 2022, the Company incurred an
addi onal $1.0 million and $0.5 million, respec vely, in debt issuance costs. As of December 31, 2023, the total remaining unamor zed debt
discount and debt offering costs related to Tranches A, B and D of $3.5 million will be amor zed using the effec ve interest rate over the
remaining term of 3.0 years.
The following table presents the components of interest expense related to the 2027 Term Loans:
(in thousands)
Contractual interest
Amor za on of debt discount and debt issuance costs
Total interest expense
Year Ended December 31,
2023
2022
$
$
34,289
1,094
35,383
$
$
20,243
4,550
24,793
Assuming the fourth quarter of 2023 interest rate of 13.91%, future payments on the 2027 Term Loans as of December 31, 2023, are
as follows:
Year ending December 31, (in thousands)
2024 - interest only
2025 - interest only
2026 - principal and interest
2027 - principal and interest
Total minimum payments
Less amount represen ng interest
2027 Term Loans, gross
Less unamor zed debt discount and debt issuance costs
Net carrying amount of 2027 Term Loans
$
$
35,345
35,248
224,607
50,097
345,297
(95,297)
250,000
(3,519)
246,481
The table above does not reflect any adjustment for transac ons contemplated by the Consent and Amendment entered into on
February 5, 2024, including any prepayments to the 2027 Term Loans.
1.5% Conver ble Senior Subordinated Notes due 2026
In April 2020, the Company issued and sold $230.0 million aggregate principal amount of its 2026 Conver ble Notes in a private
offering to qualified ins tu onal buyers pursuant to Rule 144A under the Securi es Act. The net proceeds from the offering were $222.2 million
a er deduc ng ini al purchasers’ fees and offering expenses. The 2026 Conver ble Notes are general unsecured obliga ons and will be
subordinated to the Company’s designated senior indebtedness (as defined in the indenture for the 2026 Conver ble Notes) and structurally
subordinated to all exis ng and future indebtedness and other liabili es, including trade payables. The 2026 Conver ble Notes accrue interest
at a rate of 1.5% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, since October 15, 2020, and will mature
on April 15, 2026, unless earlier repurchased or converted.
At any me before the close of business on the second scheduled trading day immediately before the maturity date, noteholders may
convert their 2026 Conver ble Notes at their op on into shares of the Company’s common stock, together, if applicable, with cash in lieu of any
frac onal share, at the then-applicable conversion rate. The ini al conversion rate is 51.9224 shares of common stock per $1,000 principal
amount of the 2026 Conver ble Notes, which represents an ini al conversion price of approximately $19.26 per share of common stock. The
ini al conversion price represents a premium of approximately 30.0% over the last reported sale of $14.82 per share of the Company’s common
stock on the Nasdaq Global Market on April 14, 2020, the date the 2026 Conver ble Notes were issued. The conversion rate and conversion
price will be subject to customary adjustments upon the occurrence of certain events. If a “make-whole fundamental change” (as defined in the
indenture for the 2026 Conver ble Notes) occurs, the Company will, in certain circumstances, increase the conversion rate for a specified
period of me for noteholders who convert their 2026 Conver ble Notes in connec on with that make-whole fundamental change. The 2026
Conver ble Notes are not redeemable at the Company’s elec on before maturity. If a “fundamental change” (as defined in the indenture for
the 2026 Conver ble Notes) occurs, then, subject to a limited excep on,
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noteholders may require the Company to repurchase their 2026 Conver ble Notes for cash. The repurchase price will be equal to the principal
amount of the 2026 Conver ble Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase
date.
The 2026 Conver ble Notes have customary provisions rela ng to the occurrence of “events of default” (as defined in the Indenture
for the 2026 Conver ble Notes). The occurrence of such events of default could result in the accelera on of all amounts due under the 2026
Conver ble Notes.
As of December 31, 2023, the Company was in full compliance with these covenants, and there were no events of default under the
2026 Conver ble Notes.
The Company evaluated the features embedded in the 2026 Conver ble Notes under the relevant accoun ng rules and concluded that
the embedded features do not meet the requirements for bifurca on, and therefore do not need to be separately accounted for as an equity
component. The proceeds received from the issuance of the conver ble debt were recorded as a liability in the consolidated balance sheets.
Capped Call Transac ons
In connec on with the pricing of the 2026 Conver ble Notes, the Company paid $18.2 million to enter into privately nego ated
capped call transac ons with one or a combina on of the ini al purchasers, their respec ve affiliates and other financial ins tu ons. The
capped call transac ons are generally expected to reduce the poten al dilu on upon conversion of the 2026 Conver ble Notes in the event
that the market price per share of the Company’s common stock, as measured under the terms of the capped call transac ons, is greater than
the strike price of the capped call transac ons, which ini ally corresponds to the conversion price of the 2026 Conver ble Notes, and is subject
to an -dilu on adjustments generally similar to those applicable to the conversion rate of the 2026 Conver ble Notes. Since incep on, the cap
price has been $25.93 per share, which represents a premium of approximately 75.0% over the last reported sale price of the Company’s
common stock of $14.82 per share on April 14, 2020, and is subject to certain adjustments under the terms of the capped call transac ons.
The capped call transac ons are accounted for as separate transac ons from the 2026 Conver ble Notes and classified as equity
instruments. Therefore, the total $18.2 million capped call premium paid was recorded as a reduc on to addi onal paid-in capital in the
consolidated balance sheets in 2020. The capped calls will not be subsequently re-measured as long as the condi ons for equity classifica on
con nue to be met.
The Company incurred $0.9 million of debt issuance costs rela ng to the issuance of the 2026 Conver ble Notes, which were recorded
as a reduc on to the notes in the consolidated balance sheet. The debt issuance costs are being amor zed and recognized as addi onal interest
expense over the six-year contractual term of the notes using the effec ve interest rate method.
If the 2026 Conver ble Notes were converted on December 31, 2023, the holders of the 2026 Conver ble Notes would have received
common shares with an aggregate value of $39.8 million based on the Company’s closing stock price of $3.33 as of December 29, 2023.
The following table presents the components of interest expense related to 2026 Conver ble Notes:
(in thousands)
Stated coupon interest
Amor za on of debt discount and debt issuance costs
Total interest expense
Year Ended December 31,
2023
2022
2021
$
$
3,450 $
1,313
4,763 $
3,450
1,286
4,736
$
$
3,450
1,259
4,709
The remaining unamor zed debt discount and debt offering costs related to the Company’s 2026 Conver ble Notes of $3.1 million as
of December 31, 2023, will be amor zed using the effec ve interest rate over the remaining term of the 2026 Conver ble Notes. The annual
effec ve interest rate is 2.1% for the 2026 Conver ble Notes.
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Future payments on the 2026 Conver ble Notes as of December 31, 2023 are as follows:
Year ending December 31, (in thousands)
2024 - interest only
2025 - interest only
2026 - principal and interest
Total minimum payments
Less amount represen ng interest
2026 Conver ble Notes, principal amount
Less unamor zed debt discount and debt issuance costs
Net carrying amount of 2026 Conver ble Notes
8.2% Conver ble Notes due 2022
$
$
3,450
3,450
231,725
238,625
(8,625)
230,000
(3,112)
226,888
On February 29, 2016, the Company issued and sold $100.0 million aggregate principal amount of its 8.2% Conver ble Senior Notes
due 2022. The 2022 Conver ble Notes cons tuted general, senior unsubordinated obliga ons of the Company and were guaranteed by certain
subsidiaries of the Company, bore interest at a fixed coupon rate of 8.2% per annum payable quarterly and matured on March 31, 2022. In
March 2022, the Company fully repaid the 2022 Conver ble Notes, and as a result had no con nuing obliga ons associated with them
therea er. The payoff amount of $111.1 million included the repayment of the en re outstanding principal amount, the 9.0% premium of the
outstanding principal amount and accrued and unpaid interest.
The 2022 Conver ble Notes were issued to Healthcare Royalty Partners III, L.P., for $75.0 million in aggregate principal amount, and to
three related party investors, KKR Biosimilar L.P., MX II Associates LLC, and KMG Capital Partners, LLC, for $20.0 million, $4.0 million, and $1.0
million, respec vely, in aggregate principal amount.
The following table presents the components of interest expense of the 2022 Conver ble Notes:
(in thousands)
Stated coupon interest
Amor za on of debt discount and debt issuance costs
Total interest expense
2025 Term Loan
Year Ended December 31,
2021
2022
$
$
2,050
521
2,571
$
$
8,200
1,966
10,166
On January 7, 2019, the Company entered into the 2025 Term Loan with affiliates of Healthcare Royalty Partners (together, the
“Lender”). The 2025 Term Loan consisted of a six-year term loan facility for an aggregate principal amount of $75.0 million (the “Borrowings”).
Star ng January 1, 2020, the Borrowings under the 2025 Term Loan bore interest at 6.75% per annum plus three month LIBOR. Interest was
payable quarterly in arrears.
Pursuant to the terms of the 2025 Term Loan, the Company was required to begin paying principal on the Borrowings in equal
quarterly installments beginning on January 7, 2022, with the outstanding balance to be repaid on January 7, 2025, the maturity date. In
January 2022, pursuant to the Company entering into the 2027 Term Loans, the Company voluntarily prepaid all amounts outstanding under
the 2025 Term Loan. The payoff amount of $81.9 million included principal repayment in full, accrued interest, a 5.0% prepayment premium fee
of the Borrowings principal amount, and an exit fee of 4.0% of the Borrowings principal amount. The prepayment premium fee and
unamor zed exit fee, debt discount and debt issuance costs, net from the 2025 Term Loan totaled $6.2 million and was recorded in loss on debt
ex nguishment in the consolidated statements of opera ons for 2022.
The following table presents the components of interest expense of the 2025 Term Loan:
(in thousands)
Stated coupon interest
Amor za on of debt discount and debt issuance costs
Total interest expense
123
Year Ended December 31,
2022
2021
$
$
154
16
170
$
$
7,034
1,032
8,066
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9.
Commitments and Con ngencies
Purchase Commitments
The Company entered into agreements with certain vendors to secure raw materials and certain CMOs to manufacture its supply of
products. As of December 31, 2023, the Company’s non-cancelable purchase commitments under the terms of its agreements are as follows:
Year ending December 31, (in thousands)
2024
2025
2026
Total obliga ons
$
$
52,514
19,154
1,410
73,078
As of December 31, 2023, total obliga ons excludes certain purchase commitments that were assumed by Sandoz upon their
acquisi on of the Company’s CIMERLI ophthalmology franchise (see Note 17. Subsequent Events). The Company enters into contracts in the
normal course of business with contract research organiza ons for preclinical studies and clinical trials and CMOs for the manufacture of clinical
trial materials. The contracts are cancellable, with varying provisions regarding termina on. If a contract with a specific vendor were to be
terminated, the Company would generally only be obligated for products or services that the Company had received as of the effec ve date of
the termina on and any applicable cancella on fees.
Guarantees and Indemnifica ons
In the normal course of business, the Company enters into contracts and agreements that contain a variety of representa ons and
warran es and provide for general indemnifica ons. The Company’s exposure under these agreements is unknown because it involves claims
that may be made against the Company in the future but have not yet been made. To date, the Company has not paid any claims or been
required to defend any ac on related to its indemnifica on obliga ons. However, the Company may record charges in the future as a result of
these indemnifica on obliga ons. The Company assesses the likelihood of any adverse judgments or related claims, as well as ranges of
probable losses. In the cases where the Company believes that a reasonably possible or probable loss exists, it will disclose the facts and
circumstances of the claims, including an es mate range, if possible.
Legal Proceedings and Other Claims
The Company is a party to various legal proceedings and claims that arise in the ordinary, rou ne course of business and that have not
been fully resolved. The outcome of such legal proceedings and claims is inherently uncertain. Accruals are recognized for such legal
proceedings and claims to the extent that a loss is both probable and reasonably es mable. The best es mate of a loss within a range is
accrued; however, if no es mate in the range is be er than any other, then the minimum amount in the range is accrued. If it’s determined that
a material loss is reasonably possible and the loss or range of loss can be es mated, the possible loss is disclosed. Some mes it is not possible
to determine the outcome of these ma ers or, unless otherwise noted, the outcome (including in excess of any accrual) is not expected to be
material, and the maximum poten al exposure or the range of possible loss cannot be reasonably es mated. As of December 31, 2023 and
2022, the Company had an accrual of $6.4 million and $4.7 million, respec vely, related to such ma ers that was included in accrued rebates,
fees and reserves in the consolidated balance sheets.
In late April of 2022, the Company received a demand le er from Zinc Health Services, LLC (“Zinc”) asser ng that Zinc was en tled to
approximately $14.0 million from the Company for claims related to certain sales of UDENYCA from October 2020 through December 2021. The
Company is con nuing to evaluate the claims in the le er. No legal proceeding has been filed in connec on with the claims in the le er and
based on currently available informa on the final resolu on of the ma er is uncertain. The Company intends to defend any legal proceeding
that may be filed. The Company established an accrual as of December 31, 2023 that represented its es mated liability to resolve the ma er.
Loss con ngencies are inherently unpredictable, the assessment is highly subjec ve and requires judgments about future events and
unfavorable developments or resolu ons can occur. The Company regularly reviews li ga on ma ers to determine whether its accrual is
adequate. The amount of ul mate loss may differ materially from the amount accrued to date.
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Table of Contents
Other than the ma er in connec on with the demand le er described in this Note 9, there are no pending legal proceedings, other
than ordinary rou ne li ga on incidental to the business, to which the Company or any of its subsidiaries is a party, or that any of the Company
or its subsidiaries' property is subject.
10.
Leases
Through December 31, 2023, the Company leased approximately 47,789 square feet of office space for its corporate headquarters in
Redwood City, California (the “Lease Agreement”). Prior to an amendment to the Lease Agreement entered into on October 24, 2023 (the
“Sixth Amendment”), the Lease Agreement was set to expire in September 2024 and contained a one- me op on to extend the lease term for
five years. Under the terms of the Sixth Amendment, the Company extended the lease term through September 30, 2027 and reduced the
amount of office space leased to 27,532 square feet. The remaining 20,257 square feet of office space expired on December 31, 2023,
according to the terms of the Sixth Amendment.
The Company also leases approximately 25,017 square feet for its laboratory facili es in Camarillo, California which commenced in
January 2020. This lease terminates in May 2027 and contains a one- me op on to extend the lease term for five years. Both facility leases
provide for certain limited rent abatement and annual scheduled rent increases over their respec ve lease terms.
The Company determined that the above facility leases were opera ng leases. The op ons to extend the lease terms, if any, for these
leases were not included as part of the right-of-use asset or lease liability as it was not reasonably certain the Company would exercise those
op ons.
In 2019, the Company entered into the Vehicle Lease Agreement, pursuant to which the Company leased approximately 50 vehicles as
of December 31, 2023. The term of each leased vehicle is 36 months and commences upon the delivery of the vehicle. The vehicles leased
under this arrangement were classified as finance leases. Beginning in February 2023, the Company no longer enters into these leasing
arrangements and began transi oning to a reimbursement program with employees.
Supplemental informa on related to the Company’s leases is as follows:
(in thousands)
Assets
Opera ng leases
Finance leases
Total leased assets
(in thousands)
Liabili es
Opera ng lease liabili es, current
Opera ng lease liabili es, non-current
Total opera ng lease liabili es
Finance lease liabili es, current
Finance lease liabili es, non-current
Total finance lease liabili es
Balance Sheet Classifica on
Other assets, non-current
Property and equipment, net
Balance Sheet Classifica on
Accrued and other current liabili es
Lease liabili es, non-current
Accrued and other current liabili es
Lease liabili es, non-current
December 31,
2023
2022
5,912
1,022
6,934
$
$
5,690
2,584
8,274
December 31,
2023
2022
1,424
4,977
6,401
721
351
1,072
$
$
$
$
3,127
3,628
6,755
1,191
1,418
2,609
$
$
$
$
$
$
Other informa on related to lease term and discount rate is as follows:
Weighted-Average Remaining Lease Term
Opera ng leases
Finance leases
Weighted-Average Discount Rate
Opera ng leases
Finance leases
125
December 31,
2023
2022
2021
3.6 years
1.4 years
2.2 years
2.2 years
3.2 years
1.7 years
11.8%
8.7%
8.0%
8.4%
8.0%
5.8%
Table of Contents
The components of lease expense were as follows:
(in thousands)
Finance lease cost
Amor za on of right-of-use assets
Interest on lease liabili es
Total finance lease cost
Opera ng lease cost
Total lease cost
Supplemental cash flow informa on related to leases was as follows:
(in thousands)
Cash paid for amounts included in measurement of lease liabili es:
Opera ng cash flows from opera ng leases
Opera ng cash flows from finance leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for lease obliga ons:
Opera ng leases
Finance leases
As of December 31, 2023, the maturi es of the lease liabili es were as follows:
Year ending December 31, (in thousands)
2024
2025
2026
2027
Total lease payments
Less imputed interest
Lease liabili es
11.
Stockholders’ Deficit
Public Offering
Year Ended December 31,
2022
2021
2023
$
$
1,069 $
146
1,215
2,984
4,199 $
1,228 $
166
1,394
3,154
4,548 $
707
82
789
3,066
3,855
Year Ended December 31,
2022
2021
2023
$
$
$
3,560 $
$
$
145
1,034
3,401 $
$
$
155
1,228
$
$
2,653
$
— $
— $
$
2,694
3,435
81
672
434
477
Opera ng leases
2,095
2,192
2,126
1,531
7,944
(1,543)
6,401
$
$
$
$
Finance leases
781
358
—
—
1,139
(67)
1,072
On May 16, 2023, the Company entered into the Underwri ng Agreement with the Underwriters, pursuant to which the Company
issued and sold the Firm Shares to the Underwriters. Addi onally, under the terms of the Underwri ng Agreement, the Company granted the
Underwriters an op on, for 30 days from the date of the Underwri ng Agreement, to purchase the Op on Shares, which the Underwriters
elected to exercise in full. The price to the public in the Public Offering was $4.25 per share. The Underwriters agreed to purchase the Shares
from the Company pursuant to the Underwri ng Agreement at a price of $3.995 per share.
The Offering was made pursuant to a prospectus supplement and related prospectus filed with the SEC pursuant to the Company’s
Registra on Statement under which the Company may offer and sell up to $150.0 million in the aggregate of its common stock, preferred stock,
debt securi es, warrants and units from me to me in one or more offerings. On May 18, 2023, the Company completed the sale and issuance
of an aggregate of 13,529,411 Shares, including the exercise in full of the Underwriters’ op on to purchase the Op on Shares. The Company
received net proceeds of approximately $53.6 million, a er deduc ng the Underwriters’ discounts and commissions and offering expenses
payable by the Company.
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Table of Contents
ATM Offering
On November 8, 2022, the Company filed a Registra on Statement. Also on November 8, 2022, the Company entered into a Sales
Agreement with Cowen, pursuant to which the Company may issue and sell from me to me up to $150.0 million of its common stock through
or to Cowen as the Company’s sales agent or principal in the ATM Offering.
On May 15, 2023, pursuant to an Amendment No. 1 to Sales Agreement and in connec on with the Public Offering, the Company
reduced the number of shares that could be issued and sold pursuant to its ATM Offering with TD Cowen by $86.25 million, lowering the
aggregate offering price under the Sales Agreement from $150.0 million to $63.75 million.
On September 11, 2023, pursuant to an Amendment No. 2 to Sales Agreement, the Company increased the number of shares that
could be issued and sold pursuant to its ATM Offering with TD Cowen by $28.75 million, increasing the aggregate offering price under the Sales
Agreement from $63.75 million to $92.5 million.
The following table summarizes informa on regarding se lements under the ATM Offering:
(in thousands, except share and per share data)
Number of common stock shares sold during the period
Weighted-average price per share
Gross proceeds
Less commissions and fees
Net proceeds a er commissions and fees
Year Ended December 31,
2023
2022
$
$
$
3,559,761
5.43
19,339
(483)
18,856
$
$
$
916,884
7.30
6,692
(168)
6,524
As of December 31, 2023, the Company had approximately $66.5 million of its common stock remaining available for sales under the
ATM Offering.
Common Stock
On October 9, 2023, in accordance with the terms of the Op onal Stock Purchase Agreement, the Company issued 2,225,513 shares of
its common stock to the CMO for a price of $3.675 per share, with a total value of $8.2 million in this non-cash transac on. The Op onal Stock
Purchase Agreement gave the Company the op on, in its sole discre on, to elect to pay for certain manufacturing services provided by the
CMO by either paying cash or a Stock Service Fee Payment. On October 4, 2023, the Company no fied the CMO of its elec on of the Stock
Service Fee Payment. The price per share of common stock was equal to the volume-weighted average closing trading price per share of
common stock on the Nasdaq Global Market over the ten-trading day period ending on and including October 6, 2023.
12.
Stock-Based Compensa on and Employee Benefits
Equity Incen ve Plans
In October 2014, the Company’s board of directors and its stockholders adopted the 2014 Equity Incen ve Plan, which became
effec ve upon the closing of the Company’s IPO on November 6, 2014. The 2014 Plan is subject to automa c annual increases in the number of
shares available for issuance on the first business day of each fiscal year equal to four percent (4%) of the number of shares of the Company’s
common stock outstanding as of such date or a lesser number of shares as determined by the Company’s board of directors with 2024 being
the last calendar year with an automa c annual increase under the 2014 Plan. All remaining shares under the Company’s 2010 Stock Plan (the
“2010 Plan”) were transferred to the 2014 Plan upon adop on and any addi onal shares that would otherwise return to the 2010 Plan as a
result of forfeiture, termina on or expira on of the awards will return to the 2014 Plan. The 2014 Plan provided for the Company to grant
shares and/or op ons to purchase shares of common stock to employees, directors, consultants and other service providers. While the 2014
Plan allows for non-qualified or incen ve stock op ons, primarily all op on grants made since June 2016 have been for non-qualified stock
op ons. Under the 2010 Plan, no awards have been issued since 2014, and there were no shares of common stock available for future issuance
as of December 31, 2023. There were 881,231 shares of common stock available for future issuance as of December 31, 2023 under the 2014
Plan.
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Table of Contents
In June 2016, the Company adopted the 2016 Employment Commencement Incen ve Plan. The 2016 Plan is designed to comply with
the inducement exemp on contained in Nasdaq’s Rule 5635(c)(4), which provides for the grant of non-qualified stock op ons, restricted stock
units, restricted stock awards, performance awards, dividend equivalents, deferred stock awards, deferred stock units, stock payment and stock
apprecia on rights to a person not previously an employee or director of the Company, or following a bona fide period of non-employment, as
an inducement material to the individual’s entering into employment with the Company. As of December 31, 2023, the Company had 1,773,921
shares of common stock available for future issuance for new employees. The 2016 Plan does not provide for any annual increases in the
number of shares available.
Stock op on exercises are se led with common stock from the plans’ previously authorized and available pool of shares. If any shares
subject to an award granted under the 2014 Plan or the 2016 Plan expire or become forfeited or canceled without the issuance of shares, the
shares subject to such awards are added back into the authorized pool on the same basis that they were removed. In addi on, shares withheld
to pay for minimum statutory tax obliga ons with respect to full-value awards are added back into the authorized pool. The annual grant to
eligible employees can vary depending on the type of award, and the award size is determined by the employee’s grade level.
Stock Op ons
Incen ve stock op ons and non-statutory stock op ons may be granted with exercise prices of not less than the fair value of the
common stock on the date of grant. These stock op ons generally vest over four years, expire in ten years from the date of grant and are
generally exercisable a er ves ng.
The following table sets forth the summary of op on ac vi es under the 2016 Plan and the 2014 Plan:
Outstanding at December 31, 2022
Granted - at fair value
Exercised
Forfeited/Canceled
Outstanding at December 31, 2023
Exercisable at December 31, 2023
Number of
Weighted-
Average
Exercise Price
Op ons
15.00
$
21,691,321
6.86
5,947,607
$
1.61
(430,504) $
14.25
(3,549,184) $
23,659,240
13.31
$
16,279,679
15.20
$
Op ons
Weighted-
Average
Remaining
Contractual Terms
(Years)
Aggregate
Intrinsic
Value
(in thousands)
5.7
4.3
$
$
2,337
1,815
Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the year in excess of the
exercise price mul plied by the number of op ons outstanding or exercisable.
Informa on on op ons outstanding and exercisable as of December 31, 2023 is summarized as follows:
Range of Exercise Prices
1.67 - $
5.86 - $
10.37 - $
14.03 - $
17.30 - $
19.85 - $
5.44
10.05
13.63
17.17
19.40
46.38
$
$
$
$
$
$
Number
Outstanding
4,288,840
4,493,996
4,143,765
4,436,113
3,827,172
2,469,354
23,659,240
Op ons Outstanding
Weighted-
Average
Remaining
Contractual Terms
(Years)
Weighted-
Average
Exercise
Price
3.92
9.20
12.41
15.82
17.96
26.90
13.31
$
$
$
$
$
$
$
6.9
6.5
5.6
5.8
5.5
2.1
5.7
128
Op ons Exercisable
Number
Exercisable
1,356,589
2,436,570
3,317,635
3,304,217
3,403,068
2,461,600
16,279,679
$
$
$
$
$
$
$
Weighted-
Average
Exercise
Price
2.32
9.45
12.53
15.86
17.95
26.91
15.20
Table of Contents
Addi onal informa on on op ons is summarized as follows:
(in thousands, except weighted-average grant-date fair value per share)
Total intrinsic value of op ons exercised
Total grant date fair value of op ons vested
Weighted-average grant date fair value per share of op ons granted
Year Ended December 31,
2023
2022
2021
$
$
$
425
30,467
4.19
$
$
$
914
34,916
7.04
$
$
$
9,726
40,365
9.80
As of December 31, 2023, total unrecognized stock-based compensa on expense related to unvested stock op ons was $37.4 million,
which is expected to be recognized over a weighted-average period of 2.3 years.
Restricted Stock Units
The Company grants RSUs primarily to its employees. RSUs are share awards that en tle the holder to receive freely tradable shares of
the Company’s common stock upon ves ng. The RSUs cannot be transferred and are subject to forfeiture if the holder’s employment
terminates prior to the release of the ves ng restric ons. The Company’s RSUs generally vest over one to three years from the applicable grant
date, provided the employee remains con nuously employed with the Company. The es mated fair value of RSUs is based on the closing price
of the Company’s common stock on the grant date.
The following table sets forth the summary of RSUs ac vity, under the 2014 Plan:
Balances at December 31, 2022
RSUs granted
RSUs vested
RSUs canceled
Balances at December 31, 2023
Addi onal informa on on RSUs is summarized as follows:
(in thousands, except weighted-average grant-date fair value per share)
Total grant date fair value of RSUs vested
Total grant date fair value of RSUs granted
Weighted-average grant-date fair value per share of RSUs granted
RSUs Outstanding
Number of
RSUs
2,333,307
1,274,753
(1,280,901)
(600,430)
1,726,729
Weighted-Average
Grant Date Fair
Value
$
$
$
$
$
14.66
8.93
14.35
11.02
11.93
Year Ended December 31,
2023
2022
2021
$
$
$
18,381
11,386
8.93
$
$
$
13,598
22,502
13.34
$
$
$
8,434
27,869
16.86
As of December 31, 2023, total unrecognized stock-based compensa on expense related to unvested RSUs was $10.8 million, which is
expected to be recognized over a weighted-average period of 1.5 years.
Employee Stock Purchase Plan
In October 2014, the Company’s board of directors and its stockholders approved the establishment of the ESPP. The ESPP provides for
annual increases in the number of shares available for issuance on the first business day of each fiscal year equal to the lesser of one percent
(1%) of the number of shares of the Company’s common stock outstanding as of such date or a number of shares as determined by the
Company’s board of directors. The ESPP had 2,541,769 shares of common stock available for future issuance as of December 31, 2023. Eligible
employees may purchase common stock at 85% of the lesser of the fair market value of the Company’s common stock on the first or last day of
the offering period. The offering periods of the ESPP are on May 16 and November 16. As of December 31, 2023, there was $0.4 million of
unrecognized compensa on expense associated with the ESPP, which is expected to be recognized over an es mated weighted-average period
of 4.5 months.
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Stock-Based Compensa on
The following table summarizes the classifica on of stock-based compensa on expense in the Company’s consolidated statements of
opera ons related to employees and nonemployees:
(in thousands)
Cost of goods sold (1)
Research and development
Selling, general and administra ve
Stock-based compensa on expense
Stock-based compensa on expense capitalized into inventory
Year Ended December 31,
2022
2023
$
$
$
632
14,596
27,882
43,110
1,062
$
$
$
736
18,999
31,002
50,737
1,187
$
$
$
2021
1,099
18,688
31,577
51,364
1,025
(1) Stock-based compensa on capitalized into inventory is recognized as cost of goods sold when the related product is sold.
The stock-based compensa on for the year ended December 31, 2023 includes restructuring charges described in Note 15 of
$1.1 million in research and development expense and a net forfeiture credit of $0.1 million in selling, general and administra ve expense.
The stock-based compensa on expense recorded in connec on with the Surface Acquisi on that was not included in the
considera on transferred was immaterial.
Valua on Assump ons of Awards Granted to Employees
The Company es mated the fair value of each stock op on and awards granted under the ESPP on the date of grant using the Black-
Scholes op on-pricing model. The following table illustrates the weighted-average assump ons for the Black-Scholes op on-pricing model used
in determining the fair value of the awards during the years ended December 31, 2023, 2022 and 2021:
Expected term (years)
Stock op ons
ESPP
Expected vola lity
Stock op ons
ESPP
Risk-free interest rate
Stock op ons
ESPP
Expected dividend yield
Stock op ons
ESPP
Year Ended December 31,
2022
2023
2021
6.0
0.5
6.1
0.5
64 %
105 %
62 %
70 %
6.1
0.5
65 %
42 %
3.92 %
5.35 %
2.37 %
3.77 %
0.89 %
0.06 %
— %
— %
— %
— %
— %
— %
Expected Term: The expected term represents the period for which the stock-based awards are expected to be outstanding and is
based on the op ons’ ves ng term and contractual term. Since January 1, 2021, the Company has used historical data to calculate the expected
term.
Expected Vola lity: The expected vola lity is calculated based on the Company’s daily stock closing prices for a period equal to the
expected life of the award.
Risk-Free Interest Rate: The risk-free interest rate is based on the United States Treasury constant maturity rate at the me of grant
using a term equal to the expected life.
Expected Dividends: The Company has not paid and does not an cipate paying any dividends in the near future, and therefore used an
expected dividend yield of zero in the valua on model.
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401(k) Re rement Plan
In 2019, the Company’s Compensa on Commi ee approved the Company’s matching of the employees 401(k) Plan whereby eligible
employees may elect to contribute up to the lesser of 90% of their annual compensa on or the statutorily prescribed annual limit allowable
under Internal Revenue Service regula ons. Beginning January 1, 2021, the Company made matching contribu ons of 100% of the first 4% of
eligible compensa on, up to a maximum of $7,500. The Company recorded compensa on expense related to the match of $1.8 million, $2.1
million and $1.7 million in 2023, 2022 and 2021, respec vely.
13.
Income Taxes
The components of loss before income taxes are as follows:
(in thousands)
Domes c
Foreign
Total
For the periods presented, the income tax provision (benefit) is as follows:
(in thousands)
Current:
Federal
State
Foreign
Subtotal
Deferred:
Federal
State
Foreign
Subtotal
Income tax provision (benefit)
2023
$ (238,272)
$ (238,272)
Year Ended December 31,
2022
$ (291,746)
(8)
$ (291,754)
—
2021
$ (287,058)
(42)
$ (287,100)
Year Ended December 31,
2022
2021
2023
$
$
$
$
$
— $
—
—
— $
(380)
$
—
—
$
(380)
— $
—
—
— $
— $
—
—
— $
(380)
$
— $
—
—
—
—
—
—
—
—
—
There was no income tax provision in 2022 and 2021 due to the Company’s history of losses and valua on of allowances against the
deferred tax assets.
A reconcilia on of the statutory United States federal rate to the Company’s effec ve tax rate is as follows:
Percent of pre-tax income:
United States federal statutory income tax rate
State taxes, net of federal benefit
Foreign rate differences
Permanent items
Research and development credit
Stock-based compensa on costs
Other
Change in valua on allowance
Effec ve income tax rate
131
Year Ended December 31,
2022
2021
2023
21.0 %
(1.2)
—
—
0.9
(3.5)
0.7
(17.7)
0.2 %
21.0 %
1.7
—
(0.1)
1.8
(2.3)
—
(22.1)
— %
21.0 %
2.6
—
0.2
2.6
(1.2)
—
(25.2)
— %
Table of Contents
The components of the Company’s net deferred tax assets as of December 31, 2023 and 2022 consist of the following:
(in thousands)
Net opera ng loss carryforwards
Research and development credits
Deprecia on and amor za on
Stock-based compensa on
Sales related accruals
Other accruals
Capitalized research and development
Gross deferred tax assets
Right-of-use asset
In-process research and development
Gross deferred tax liabili es
Total net deferred tax asset
Less valua on allowance
Net deferred tax assets (liabili es)
December 31,
2023
170,402
65,225
37,211
30,370
38,474
42,480
46,062
430,224
(1,538)
(6,403)
(7,941)
422,283
(423,385)
(1,102)
$
$
2022
131,423
63,164
51,877
32,561
23,864
19,717
17,673
340,279
(1,903)
(603)
(2,506)
337,773
(337,773)
—
$
$
The tax benefit of net opera ng losses, temporary differences and credit carry forwards is recorded as an asset to the extent that
management assesses that realiza on is “more likely than not.” The ul mate realiza on of deferred tax assets is dependent upon the
genera on of future taxable income during the periods in which the temporary differences represen ng net future deduc ble amounts become
deduc ble. Due to the Company’s history of losses, and lack of other posi ve evidence, the Company has determined that it is more likely than
not that its federal net deferred tax assets and certain state net deferred tax assets will not be realized, and therefore, the Company has offset
the federal and certain state net deferred tax assets by a valua on allowance as of December 31, 2023 and 2022.
The valua on allowance increased by $85.6 million, $64.4 million and $72.4 million during the years ended December 31, 2023, 2022
and 2021, respec vely.
As of December 31, 2023, the Company had net opera ng loss carryforwards for federal income of $774.9 million, which will start to
expire in the year 2036, and various states net opera ng loss carryforwards of $128.0 million, which have various expira on dates beginning in
2031.
As of December 31, 2023, the Company had federal research and development credit carryforwards for federal income tax purposes of
$60.6 million, which will start to expire in the year 2031, and state research and development credit carryforwards of $26.5 million, which have
no expira on date.
U liza on of the net opera ng loss and tax credit carryforwards may be subject to a substan al annual limita on due to ownership
change limita ons provided by Sec on 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual
limita on may result in the expira on of certain net opera ng loss and tax credit carryforwards before their u liza on. Under the new enacted
tax law, the carry forward period of net opera ng losses generated from 2018 forward is indefinite. However, the carryforward period for net
opera ng losses generated prior to 2018 remains the same. Therefore, the annual limita on may result in the expira on of certain net
opera ng losses and tax credit carryforwards before their u liza on. The Company files income tax returns in the United States federal
jurisdic on, various United States state jurisdic ons, and a foreign jurisdic on with varying statutes of limita ons. The tax years from incep on
in 2011 forward remain open to examina on due to the carryover of unused net opera ng losses and tax credits.
A reconcilia on of the Company’s unrecognized tax benefits during 2023, 2022 and 2021 is as follows:
(in thousands)
Balance at beginning of year
Addi ons based on tax posi ons related to current year
Addi ons (reduc ons) for tax posi ons of prior years
Balance at end of year
$
$
132
$
Year Ended December 31,
2022
15,495
1,385
(42)
16,838
2023
16,838
865
(286)
17,417
$
$
$
2021
13,243
2,038
214
15,495
Table of Contents
As of December 31, 2023, 2022 and 2021, the Company had $17.4 million, $16.8 million and $15.5 million, respec vely, of
unrecognized benefits, none of which would currently affect the Company’s effec ve tax rate if recognized due to the Company’s deferred tax
assets being fully offset by a valua on allowance. During 2023, 2022 and 2021, the Company did not recognize accrued interest and penal es
related to unrecognized tax benefits. The Company does not an cipate a material adjustment of unrecognized tax benefits during the next
twelve months from the balance sheet date as reduc ons for tax posi ons of prior years.
14.
Net Loss Per Share
The following outstanding dilu ve poten al shares were excluded from the calcula on of diluted net loss per share due to their an -
dilu ve effect:
Stock op ons, including shares subject to ESPP
Restricted stock units
Shares issuable upon conversion of 2022 Conver ble Notes
Shares issuable upon conversion of 2026 Conver ble Notes
Total
15.
Restructuring Charges
2023
24,083,222
2,266,387
—
11,942,152
38,291,761
Year Ended December 31,
2022
22,214,875
2,399,465
1,078,632
11,942,152
37,635,124
2021
19,895,097
1,811,607
4,473,871
11,942,152
38,122,727
On March 3, 2023, the Company commi ed to a plan to reduce its workforce to focus resources on strategic priori es including the
commercializa on of its diversified product por olio and development of innova ve immuno-oncology product candidates. The reduc on in
force impacted approximately 50 full- me and part- me employees, effec ve March 10, 2023 for most of these employees. In the first quarter
of 2023, non-recurring restructuring charges associated with the reduc on in force consisted of $3.9 million in cash expenses related to
personnel expenses such as salaries, severance payments and other benefits; and $1.5 million in non-cash stock-based compensa on related to
accelera on of ves ng and extension of the stock op on exercise windows for two impacted execu ves; par ally offset by $0.5 million in non-
cash stock-based compensa on forfeiture credits. The reduc on in force was completed during the second quarter of 2023.
For the year ended December 31, 2023, the consolidated statements of opera ons include $3.6 million in research and development
expense and $1.3 million in selling, general and administra ve expense related to the reduc on in force.
16.
Related Party Transac ons
Consul ng services
In October 2020, the Company entered into a consul ng agreement with Lanfear Advisors owned by Mr. Jonathan Lanfear who is the
brother of Dennis Lanfear, the Company’s President, Chief Execu ve Officer and Chairman of the Board of Directors. Mr. Jonathan Lanfear
provided consul ng services with respect to the Collabora on Agreement executed with Junshi Biosciences in February 2021 and the Le er
Agreement with Junshi Biosciences related to the Collabora on Agreement dated January 9, 2022 (See Note 7. Collabora ons and Other
Arrangements). In addi on to the hourly consul ng fee paid to Lanfear Advisors under the consul ng agreement, the Company granted fully
vested stock op ons to purchase 65,000 shares of common stock with an exercise price of $17.60 per share to Mr. Jonathan Lanfear in February
2021 upon the execu on of the Collabora on Agreement with Junshi Biosciences and recognized stock-based compensa on expense of
$0.8 million. The Company recorded cash consul ng expense of $0.2 million in 2021 with respect to these consul ng services. There have been
no subsequent material related party expenses. Total liabili es recognized in the consolidated balance sheets with respect to these services
were immaterial as of December 31, 2023 and 2022.
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17.
Subsequent Events
CIMERLI Sale Transac on
On January 19, 2024, the Company entered into the Purchase Agreement by and between the Company and Sandoz. Pursuant to the
terms and subject to the condi ons set forth in the Purchase Agreement, on March 1, 2024, the Company completed the Sale Transac on for
its CIMERLI ophthalmology franchise through the sale of its subsidiary, Coherus Ophthalmology LLC, to Sandoz for upfront, all-cash
considera on of $170.0 million plus an addi onal $17.8 million for CIMERLI product inventory and prepaid manufacturing assets. Such
considera on is subject to certain adjustments that will be finalized following the closing pursuant to the Purchase Agreement.
Par al Release and Third Amendment to 2027 Term Loan
On February 5, 2024, the Company, entered into the Consent and Amendment with the Collateral Agent and the Lenders, pursuant to
which the Lenders and the Collateral Agent provided certain consents, and released certain assets and subsidiaries of the Company from their
obliga ons under the 2027 Term Loans and the other loan documents in connec on therewith, and the par es thereto agreed to amend the
Loan Agreement.
Pursuant to and subject to terms and condi ons in the Consent and Amendment, among other things: (1) the Lenders and the
Collateral Agent provided consent to consumma on of the transac ons contemplated by the Purchase Agreement, and released certain
subsidiary of the Company from its obliga on and certain assets subject to the transac ons contemplated thereby, (2) the Lenders and the
Collateral Agent permi ed the Company to make a par al prepayment of the principal of the loans outstanding under the 2027 Term Loans in
the amount of $175.0 million upon consumma on of the transac ons contemplated by the Purchase Agreement, subject to certain condi ons
including a prepayment premium and makewhole amount calculated pursuant to the Consent and Amendment and (3) the par es thereto
agreed to adjust the minimum net sales covenant level under the 2027 Term Loans. Upon the closing of the Sale Transac on the Company
became liable to repay $175.0 million of the exis ng principal balance of $250.0 million of the loans outstanding under the Loan Agreement on
April 1, 2024 and the Company plans to repay $175.0 million and the prepayment premium and makewhole amount of $6.8 million to the
Lenders on or before April 1, 2024 pursuant to the Consent and Amendment.
Other terms of the 2027 Term Loans, as amended by the Consent and Amendment, remain generally iden cal to those under the 2027
Term Loans.
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Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accoun ng and Financial Disclosure
None.
Item 9A. Controls and Procedures
(a) Evalua on of Effec veness of Disclosure Controls and Procedures
We carried out an evalua on, under the supervision of our Chief Execu ve Officer and our Interim Chief Financial Officer, and
evaluated the effec veness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of
the end of the period covered by this Annual Report on Form 10-K. Based on that evalua on, our President and Chief Execu ve Officer and our
Interim Chief Financial Officer have concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure
controls and procedures were, in design and opera on, effec ve.
We maintain disclosure controls and procedures that are designed to ensure that informa on required to be disclosed in our Exchange
Act reports is recorded, processed, summarized and reported within the me periods specified in the Securi es and Exchange Commission’s
rules and forms and that such informa on is accumulated and communicated to our management, including our chief execu ve officer,
principal financial officer and principal accoun ng officer, as appropriate, to allow for mely decisions regarding required disclosure.
We intend to review and evaluate the design and effec veness of our disclosure controls and procedures on an ongoing basis and to
correct any material deficiencies that we may discover. Our goal is to ensure that our management has mely access to material informa on
that could affect our business. While we believe the present design of our disclosure controls and procedures is effec ve to achieve our goal,
future events affec ng our business may cause us to modify our disclosure controls and procedures. In designing and evalua ng the disclosure
controls and procedures, management recognizes that any controls and procedures, no ma er how well designed and operated, can provide
only reasonable assurance of achieving the desired control objec ves, and management is required to apply its judgment in evalua ng the cost-
benefit rela onship of possible controls and procedures.
(b) Management’s Annual Report on Internal Control Over Financial Repor ng
Our management is responsible for establishing and maintaining adequate internal control over financial repor ng, as such term is
defined in Exchange Act Rules 13a-15(f). Under the supervision and with the par cipa on of our management, including our principal execu ve
officer, principal financial officer and principal accoun ng officer, we conducted an evalua on of the effec veness of our internal control over
financial repor ng based on the framework in Internal Control—Integrated Framework issued by the Commi ee of Sponsoring Organiza ons of
the Treadway Commission (2013 Framework). Based on our evalua on under the framework in Internal Control—Integrated Framework, our
management concluded that our internal control over financial repor ng was effec ve as of December 31, 2023. Ernst & Young LLP, our
independent registered public accoun ng firm, has a ested to and issued a report on the effec veness of our internal control over financial
repor ng, which is included herein.
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Table of Contents
Report of Independent Registered Public Accoun ng Firm
To the Stockholders and the Board of Directors of Coherus BioSciences, Inc.
Opinion on Internal Control Over Financial Repor ng
We have audited Coherus BioSciences, Inc.’s internal control over financial repor ng as of December 31, 2023, based on criteria established in
Internal Control—Integrated Framework issued by the Commi ee of Sponsoring Organiza ons of the Treadway Commission (2013 framework)
(the COSO criteria). In our opinion, Coherus BioSciences, Inc. (the Company) maintained, in all material respects, effec ve internal control over
financial repor ng as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accoun ng Oversight Board (United States) (PCAOB), the
consolidated balance sheets of the Company as of December 31, 2023 and 2022, and the related consolidated statements of opera ons,
comprehensive loss, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2023, and the
related notes and our report dated March 15, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effec ve internal control over financial repor ng and for its assessment of the
effec veness of internal control over financial repor ng included in the accompanying Management’s Annual Report on Internal Control Over
Financial Repor ng. Our responsibility is to express an opinion on the Company’s internal control over financial repor ng based on our audit.
We are a public accoun ng firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securi es laws and the applicable rules and regula ons of the Securi es and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effec ve internal control over financial repor ng was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial repor ng, assessing the risk that a material weakness exists,
tes ng and evalua ng the design and opera ng effec veness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Defini on and Limita ons of Internal Control Over Financial Repor ng
A company’s internal control over financial repor ng is a process designed to provide reasonable assurance regarding the reliability of financial
repor ng and the prepara on of financial statements for external purposes in accordance with generally accepted accoun ng principles. A
company’s internal control over financial repor ng includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transac ons and disposi ons of the assets of the company; (2) provide reasonable
assurance that transac ons are recorded as necessary to permit prepara on of financial statements in accordance with generally accepted
accoun ng principles, and that receipts and expenditures of the company are being made only in accordance with authoriza ons of
management and directors of the company; and (3) provide reasonable assurance regarding preven on or mely detec on of unauthorized
acquisi on, use, or disposi on of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limita ons, internal control over financial repor ng may not prevent or detect misstatements. Also, projec ons of any
evalua on of effec veness to future periods are subject to the risk that controls may become inadequate because of changes in condi ons, or
that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
San Mateo, California
March 15, 2024
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Changes in Internal Control Over Financial Repor ng
There were no changes in our internal control over financial repor ng iden fied in connec on with the evalua on required by
Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2023 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial repor ng.
Item 9B. Other Informa on
(a)
Item 1.01 Entry into a Material Defini ve Agreement
Amendment No. 2 to Collabora on Agreement
On February 1, 2021, we announced that we had entered into the Collabora on Agreement with Junshi Biosciences for the co-
development and commercializa on of toripalimab, Junshi Biosciences’ an -PD-1 an body in the United States and Canada. We entered into an
amendment and waiver under the Collabora on Agreement on October 25, 2023 (Amendment No. 1 to Collabora on Agreement”). On March
13, 2024, we and Junshi Biosciences entered into Amendment No. 2 to the Collabora on Agreement (“Amendment No. 2 to Collabora on
Agreement”).
Under Amendment No. 2 to Collabora on Agreement, we agreed with Junshi Biosciences to change the $25.0 million milestone
payment to Junshi Biosciences that became due in connec on with the approval by the FDA of toripalimab for the treatment of pa ents with
NPC in the first quarter of 2024. We agreed to split the $25.0 million milestone payment into two equal installments of $12.5 million each, one
due in the second quarter of 2024 and one due in the first quarter of 2025. We also agreed to pay approximately $2.5 million in the first quarter
of 2024 to Junshi Biosciences for rou ne expenses incurred pursuant to the Collabora on Agreement.
The foregoing summary of Amendment No. 2 to Collabora on Agreement does not purport to be complete and is qualified in its
en rety by the full text of the Amendment No. 2 to Collabora on Agreement, a copy of which will be filed as an exhibit to our Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 2024.
Item 2.05 Costs Associated with Exit or Disposal Ac vi es
In addi on to our 35 former employees who transferred to Sandoz in connec on with the closing of the Sale Transac on, on March 11,
2024 we commi ed to a plan to reduce our workforce (the “Plan”) by approximately 26 employees effec ve March 18, 2024 to focus resources
on strategic priori es including the research, development and commercializa on of innova ve cancer treatments and the commercializa on of
our por olio of FDA-approved oncology products. One- me restructuring charges associated with the Plan are expected to be approximately
$1.5 million, primarily consis ng of personnel expenses such as salaries, one- me severance payments, and other benefits. Cash payments
related to these expenses will be paid out and the Plan is expected to be completed in the first half of 2024.
The es mated costs that we expect to incur in connec on with the Plan are subject to a number of assump ons, and actual results
may differ significantly from these es mates. We may also incur addi onal costs not currently contemplated due to events that may occur as a
result of, or that are associated with, the Plan.
(b) During the three months ended December 31, 2023, neither we nor any of our directors or officers adopted or terminated a “Rule
10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each such term is defined in Item 408(a) of Regula on S-K.
Item 9C. Disclosure Regarding Foreign Jurisdic ons that Prevent Inspec ons
Not applicable.
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PART III
Certain informa on required by Part III is omi ed from this Annual Report on From 10-K because we will file a Defini ve Proxy
Statement (the “Proxy Statement”) with the Securi es and Exchange Commission within 120 days a er the end of our fiscal year ended
December 31, 2023.
Item 10. Directors, Execu ve Officers and Corporate Governance
The informa on required by this Item is included in the Proxy Statement to be filed with the SEC within 120 days a er the end of
our fiscal year ended December 31, 2023, and is incorporated herein by reference.
Item 11. Execu ve Compensa on
The informa on required by this Item is included in the Proxy Statement to be filed with the SEC within 120 days a er the end of
our fiscal year ended December 31, 2023, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Ma ers
The informa on required by this Item is included in the Proxy Statement to be filed with the SEC within 120 days a er the end of
our fiscal year ended December 31, 2023, and is incorporated herein by reference.
Item 13. Certain Rela onships and Related Transac ons, and Director Independence
The informa on required by this Item is included in the Proxy Statement to be filed with the SEC within 120 days a er the end of
our fiscal year ended December 31, 2023, and is incorporated herein by reference.
Item 14. Principal Accoun ng Fees and Services
The informa on required by this Item is included in the Proxy Statement to be filed with the SEC within 120 days a er the end of
our fiscal year ended December 31, 2023, and is incorporated herein by reference.
138
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Item 15. Exhibits and Financial Statement Schedules
PART IV
(a)
(1) The financial statements required by Item 15(a) are filed in Item 8 of this Annual Report on Form 10-K.
(2) The financial statement schedules required by Item 15(a) are omi ed because they are not applicable, not required or the required
informa on is included in the financial statements or notes thereto as filed in Item 8 of this Annual Report on Form 10-K.
(3) We have filed, or incorporated into this report by reference, the exhibits listed on the accompanying Index to Exhibits immediately
preceding the signature page of this Annual Report on Form 10-K.
Item 16. Form 10-K Summary
None.
139
Table of Contents
INDEX TO EXHIBITS
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
10.1†
10.2(a)
10.2(b)
Exhibit Descrip on
Form
Date
Number
Herewith
Incorporated by Reference
Filed
Amended and Restated Cer ficate of Incorpora on.
Amended and Restated Bylaws.
Reference is made to Exhibits 3.1 and 3.2.
Form of Common Stock Cer ficate.
Descrip on of Coherus’ Securi es Registered Pursuant to Sec on 12 of the
Securi es Exchange Act of 1934.
8-K
11/13/2014
8-K
11/18/2020
S-1/A
10/24/2014
10-K
2/27/2020
3.1
3.1
4.2
4.3
Indenture, dated April 17, 2020, by and between Coherus BioSciences, Inc. and
U.S. Bank Na onal Associa on.
8-K
4/17/2020
4.1
Form of cer ficate represen ng the 1.5% Conver ble Senior Subordinated Notes
due 2026.
8-K
4/17/2020
4.1
No ce of Successor Trustee to Indenture dated February 7, 2022
10-Q
5/5/2022
4.5
Distribu on Agreement, effec ve December 26, 2012, by and between Orox
Pharmaceu cals B.V. and Coherus BioSciences, Inc.
S-1
9/25/2014
10.3
Standard Industrial/Commercial Mul -tenant Lease-Gross, effec ve December 5,
2011, by and between Howard California Property Camarillo 5 and
BioGenerics, Inc.
S-1
9/25/2014
10.9(a)
First Amendment to Lease, effec ve December 21, 2013, by and between Howard
California Property Camarillo 5 and Coherus BioSciences, Inc.
S-1
9/25/2014
10.9(b)
10.3(a)#
BioGenerics, Inc. 2010 Equity Incen ve Plan, as amended.
10.3(b)#
Form of Stock Op on Grant No ce and Stock Op on Agreement under the 2010
Equity Incen ve Plan, as amended.
S-1
S-1
9/25/2014
10.10(a)
9/25/2014
10.10(b)
10.4(a)#
Coherus BioSciences, Inc. 2014 Equity Incen ve Award Plan.
S-1/A
10/24/2014
10.11
10.4(b)#
10.4(c)#
10.4(d)#
10.5#
10.6#
10.7†
Form of Stock Op on Grant No ce and Stock Op on Agreement under the 2014
Equity Incen ve Award Plan.
S-1/A
11/4/2014
10.11(b)
Form of Restricted Stock Award Grant No ce and Restricted Stock Award
Agreement under the 2014 Equity Incen ve Award Plan.
S-1/A
11/4/2014
10.11(c)
Form of Restricted Stock Unit Award Grant No ce and Restricted Stock Unit
Award Agreement under the 2014 Equity Incen ve Award Plan.
S-1/A
11/4/2014
10.11(d)
Coherus BioSciences, Inc. 2014 Employee Stock Purchase Plan.
S-1/A
10/24/2014
10.12
Form of Indemnifica on Agreement between Coherus BioSciences, Inc. and each
of its directors, officers and certain employees.
S-1/A
10/24/2014
10.13
Master Services Agreement, effec ve January 23, 2012, by and between
Medpace, Inc. and BioGenerics, Inc.
S-1
9/25/2014
10.15
140
Table of Contents
Exhibit
Number
10.8
10.9
Exhibit Descrip on
Form
Date
Number
Herewith
Incorporated by Reference
Filed
New Office Lease, effec ve July 6, 2015, by and between Hudson 333 Twin
Dolphin Plaza, LLC and Coherus BioSciences, Inc.
10-Q
8/10/2015
10.3
First Amendment, effec ve August 10, 2015, by and between Hudson 333 Twin
Dolphin Plaza, LLC and Coherus BioSciences, Inc.
10-Q
8/10/2015
10.4
10.10(a)#
Coherus BioSciences, Inc. 2016 Employment Commencement Incen ve Plan.
10-Q
8/9/2016
10.1(a)
10.10(b)#
Form of Stock Op on Grant No ce and Stock Op on Agreement under the
Coherus BioSciences, Inc. 2016 Employment Commencement Incen ve Plan.
10-Q
8/9/2016
10.1(b)
10.10(c)#
10.10(d)#
10.11
10.12
10.13†
10.14
10.15
Form of Restricted Stock Unit Award Grant No ce and Restricted Stock Unit
Award Agreement under the Coherus BioSciences, Inc. 2016 Employment
Commencement Incen ve Plan.
Form of Restricted Stock Award Grant No ce and Restricted Stock Award
Agreement under the Coherus BioSciences, Inc. 2016 Employment
Commencement Incen ve Plan.
10-Q
8/9/2016
10.1(c)
10-Q
8/9/2016
10.1(d)
Second Amendment, dated September 21, 2016, by and between Hudson 333
Twin Dolphin Plaza, LLC and Coherus BioSciences, Inc.
8-K
9/26/2016
10.1
Le er Agreement to Master Service Agreement, dated as of September 6, 2017,
by and between Medpace, Inc. and Coherus BioSciences, Inc.
10-Q
11/06/2017
10.2
Confiden al Li ga on Se lement Agreement and Release, dated as of April 30,
2019 between Amgen Inc. and Amgen USA Inc. (collec vely “Amgen”), and
Coherus BioSciences Inc.
10-Q
8/5/2019
10.1
Third Amendment, effec ve May 24, 2019, by and between Hudson 333 Twin
Dolphin Plaza, LLC and Coherus BioSciences, Inc.
10-Q
11/8/2019
10.1
Fourth Amendment, effec ve September 4, 2019, by and between Hudson 333
Twin Dolphin Plaza, LLC and Coherus BioSciences, Inc.
10-Q
11/8/2019
10.2
10.16††
License Agreement, dated November 4, 2019, by and between Coherus
BioSciences, Inc. and Bioeq IP AG
10-K
2/27/2020
10.29
10.1
10.1
10.17††
Form of Confirma on for Base Capped Call Transac ons under the Indenture.
8-K
4/17/2020
10.18
10.19
10.20††
10.21††
10.22††
Exclusive License and Commercializa on Agreement, dated February 1, 2021, by
and between Coherus Biosciences, Inc. and Shanghai Junshi Biosciences, Co. Ltd.
10-Q
5/6/2021
Stock Purchase Agreement, dated February 1, 2021, by and between the Coherus
Biosciences, Inc. and Shanghai Junshi Biosciences, Co. Ltd.
10-Q
5/6/2021
10.2
Loan Agreement dated as of January 5, 2022 among Coherus BioSciences, Inc., the
Guarantors, the Collateral Agent and the Lenders party thereto.
8-K
1/7/2022
10.1
Le er Agreement, dated February 9, 2022, between Coherus BioSciences, Inc. and
Shanghai Junshi Biosciences, Co., Ltd.
10-Q
5/5/2022
10.1
First Amendment to Loan Agreement dated as of April 7, 2022, among Coherus
BioSciences, Inc., the Collateral Agent and the Lenders party thereto.
10-Q
8/4/2022
10.1
141
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Exhibit
Number
10.23††
10.24††
Exhibit Descrip on
Form
Date
Number
Herewith
Incorporated by Reference
Filed
License Agreement, dated June 22, 2022, among Coherus BioSciences, Inc., Bioeq
AG and Genentech Inc.
10-K
3/6/2023
10.25
Second Amendment and Waiver to Loan Agreement dated as of February 6, 2023,
among Coherus BioSciences, Inc., the Collateral Agent and the Lenders party
thereto.
10-Q
5/8/2023
10.1
10.25#
Execu ve Change in Control and Severance Plan, effec ve January 1, 2023.
10-Q
5/8/2023
10.26#††
Le er Agreement between Coherus BioSciences, Inc. and Vladimir Vexler, dated
as of March 27, 2023.
10-Q
5/8/2023
10.2
10.3
10.27
10.28††
10.29††
10.30
10.31††
10.32††
10.33††
10.34††
10.35††
10.36††
10.37††
Amendment No. 1 to Sales Agreement between Coherus BioSciences, Inc. and
Cowen and Company, LLC, dated May 15, 2023.
10-Q
8/2/2023
10.1
Agreement and Plan of Merger, by and among Coherus BioSciences, Inc., Crimson
Merger Sub I, Inc., Crimson Merger Sub II, LLC and Surface Oncology, Inc., dated
June 15, 2023 (Form of CVR Agreement included as Exhibit A thereto)
8-K
6/16/2023
2.1
Se lement and License Agreement among Coherus BioSciences, Inc., AbbVie Inc.
and AbbVie Biotechnology Ltd dated January 24, 2019.
10-Q
11/6/2023
10.1
Amendment No. 2 to Sales Agreement between Coherus BioSciences, Inc. and
Cowen and Company, LLC dated September 11, 2023.
10-Q
11/6/2023
10.2
First Amended and Restated Development and Op on Agreement between
Adimab, LLC and Surface Oncology, Inc., dated October 3, 2018.
Collabora on Agreement between Novar s Ins tutes for BioMedical Research,
Inc. and Surface Oncology, Inc., dated January 9, 2016, as amended on May 6,
2016, as further amended on July 14, 2017, and as further amended on
September 18, 2017.
Amendment No. 4 to the Collabora on Agreement between Novar s Ins tutes
for BioMedical Research, Inc. and Surface Oncology, Inc., dated October 9, 2018.
License Agreement, dated as of December 16, 2020, by and between Surface
Oncology, Inc. and GLAXOSMITHKLINE INTELLECTUAL PROPERTY (No. 4) LIMITED.
Amendment No. 1, dated as of August 11, 2021, to License Agreement, dated as
of December 16, 2020, by and between Surface Oncology,
Inc. and
GLAXOSMITHKLINE INTELLECTUAL PROPERTY (No. 4) LIMITED.
Sixth Amendment, effec ve October 24, 2023, by and between Hudson 333 Twin
Dolphin Plaza, LLC and Coherus BioSciences, Inc.
Amendment to and Waiver, dated October 25, 2023, under the Exclusive License
and Commercializa on Agreement, dated February 1, 2021, by and between
Coherus Biosciences, Inc. and Shanghai Junshi Biosciences, Co. Ltd.
142
X
X
X
X
X
X
X
Exhibit Descrip on
Form
Date
Number
Herewith
Incorporated by Reference
Filed
Table of Contents
Exhibit
Number
10.38
Coherus BioSciences, Inc. Insider Trading Compliance Policy and Procedures,
effec ve February 27, 2023.
10.39#††
Le er Agreement between Coherus BioSciences, Inc. and McDavid S lwell, dated
as of December 11, 2023.
10.40††
Exclusive Product License Agreement, dated March 23, 2021, by and between
Vaccinex, Inc. and Surface Oncology, Inc.
21.1
23.1
24.1
31.1
31.2
32.1
Subsidiaries of Coherus BioSciences, Inc.
Consent of Independent Registered Public Accoun ng Firm.
Power of A orney (included in the signature page to this Form 10-K).
Cer fica on of Principal Execu ve Officer Required Under Rule 13a-14(a) and
15d-14(a) of the Securi es Exchange Act of 1934, as amended.
Cer fica on of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-
14(a) of the Securi es Exchange Act of 1934, as amended.
Cer fica on of Principal Execu ve Officer and Principal Financial Officer Required
Under Rule 13a-14(b) of the Securi es Exchange Act of 1934, as amended, and 18
U.S.C. §1350.
97.1
Coherus BioSciences, Inc. Clawback Policy, effec ve December 1, 2023.
101.INS
Inline XBRL Instance Document – the instance document does not appear in the
Interac ve Data File because its XBRL tags are embedded within the Inline XBRL
document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calcula on Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Defini on Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presenta on Linkbase Document
104
Cover page Interac ve Data File (forma ed in Inline XBRL and contained in Exhibit
101)
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
†
Por ons of this exhibit (indicated by asterisks) have been omi ed pursuant to a request for confiden al treatment and this exhibit has
been filed separately with the SEC.
†† Por ons of this exhibit (indicated by asterisks) have been omi ed pursuant to a request for confiden al treatment or pursuant to
Regula on S-K, Item 601(b)(10). Such omi ed informa on is not material and would likely cause compe ve harm to the registrant if
publicly disclosed. Addi onally, schedules and a achments to this exhibit have been omi ed pursuant to Regula on S-K, Item 601(a)(5).
#
Indicates management contract or compensatory plan.
143
Table of Contents
SIGNATURES
Pursuant to the requirements of Sec on 13 or 15(d) the Securi es Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 15, 2024
COHERUS BIOSCIENCES, INC.
/s/ Dennis M. Lanfear
By:
Name: Dennis M. Lanfear
Title: President and Chief Execu ve Officer
(Principal Execu ve Officer)
144
Table of Contents
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below cons tutes and appoints Dennis M.
Lanfear and Bryan McMichael, his or her a orneys-in-fact, for him or her in any and all capaci es, to sign any amendments to this Annual
Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connec on therewith, with the U.S. Securi es and
Exchange Commission, hereby ra fying and confirming all that said a orneys-in-fact, or their subs tute, may do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securi es Exchange Act of 1934, as amended, this report has been signed below by the following
persons on behalf of the registrant and in the capaci es and on the dates indicated.
/s/ Dennis M. Lanfear
Dennis M. Lanfear
/s/ Bryan McMichael
Bryan McMichael
/s/ Georgia Erbez
Georgia Erbez
/s/ Lee N. Newcomer
Lee N. Newcomer
/s/ Charles Newton
Charles Newton
/s/ Jill O’Donnell-Tormey
Jill O’Donnell-Tormey
/s/ Michael Ryan
Michael Ryan
/s/ Ali J. Satvat
Ali J. Satvat
/s/ Mark D. Stolper
Mark D. Stolper
/s/ Kimberly J. Tzoumakas
Kimberly J. Tzoumakas
/s/ Mats Wahlström
Mats Wahlström
Chairman, President and Chief Execu ve Officer
(Principal Execu ve Officer)
March 15, 2024
March 15, 2024
March 15, 2024
March 15, 2024
March 15, 2024
March 15, 2024
March 15, 2024
March 15, 2024
March 15, 2024
March 15, 2024
March 15, 2024
Interim Chief Financial Officer, Execu ve Vice
President, Accoun ng and Corporate Controller
(Principal Financial Officer and
Principal Accoun ng Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
145
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
Exhibit 10.31
Execution Copy
CONFIDENTIAL
FIRST AMENDED AND RESTATED
DEVELOPMENT AND OPTION AGREEMENT
THIS FIRST AMENDED AND RESTATED DEVELOPMENT AND OPTION AGREEMENT (this “Agreement”)
made effective as of October 3, 2018 (the “Amended Effective Date”), is entered into by and
between Adimab, LLC, a Delaware limited liability company having an address at 7 Lucent Drive,
Lebanon, NH 03766 (“Adimab”), and Surface Oncology, Inc., a Delaware corporation having an
address at 25 First Street, Suite 303, Cambridge, MA 02141 (“Surface”).
BACKGROUND
WHEREAS, Adimab is a leader in yeast-based, fully human antibody discovery and optimization
using its proprietary core technology platform;
WHEREAS, Surface wishes to discover and optimize certain proprietary antibodies as potential
therapeutic product candidates directed against disease-related biological targets to be identified by
Surface;
WHEREAS, the Parties previously entered into that certain Development and Option Agreement,
dated as of June 3, 2014, as amended (the “Original Agreement” and such date, the “Effective
Date”), pursuant to which the Parties collaborated to have Adimab discover and optimize
antibodies, and Surface obtained a research license to determine the activity of such antibodies and
to evaluate such antibodies, as well as an option to a license for commercial rights to certain of the
antibodies to each such target for development and commercialization as a pharmaceutical product;
and
WHEREAS, the Parties now desire to amend and restate the Original Agreement in its entirety and
replace the Original Agreement with this Agreement to, among other things, expand the right of
Surface to evaluate and use antibodies for diagnostic purposes.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants set forth
below, and for other good and valuable consideration, the receipt of which is hereby
acknowledged, Adimab and Surface hereby agree as follows:
ARTICLE 1
DEFINITIONS.
The following initially capitalized terms have the following meanings (and derivative forms of
them shall be interpreted accordingly):
1.1“AAA” has the meaning set forth in Section 10.2(c)(i).
1.2“Adimab” has the meaning set forth in the recitals.
1.3“Adimab Diagnostic Product” means any Licensed Antibody that [***]. For clarity, “Adimab
Diagnostic Product” as defined herein (i) includes Companion Diagnostics and (ii) excludes (A)
prophylactic or therapeutic Products containing [***] Licensed Antibodies and (B) any Other
Diagnostic Product.
1.4 “Adimab Indemnitees” has the meaning set forth in Section 8.2.
1.5“Adimab Materials” means any tangible biological or chemical materials (including all [***]
and other [***] in the form of tangible biological or chemical materials) provided by Adimab to
Surface under the Research Program, [***].
1.6“Adimab Platform Patents” means all Patents [***] the [***] that [***]
1.7“Adimab Platform Technology” means (a) the discovery and optimization of antibodies via
methods that include the use of synthetic DNA antibody libraries and engineered strains of yeast,
(b) all methods, materials and other Know-How used in the foregoing and (c) platforms
embodying, components, component steps and other portions of any of the foregoing in (a) or (b).
For clarity, Adimab Platform Technology includes technology used in the discovery, and
optimization of any Program Antibody, in each case not based on the specific composition of such
Program Antibody (or product containing a Program Antibody), but based instead on the manner
in which such Program Antibody was discovered or optimized under a Research Program.
1.8“Adimab Platform Technology Improvement” means all Program Inventions that [***]
Adimab Platform Technology, including any and all improvements, enhancements, modifications,
substitutions, alternatives or alterations to Adimab Platform Technology.
1.10“Affiliate” means an entity that, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with a Party. For this purpose, “control”
means the ownership of fifty percent (50%) or more of the voting securities entitled to elect the
directors or management of the entity, or the actual power to elect or direct the management of the
entity. Moreover, notwithstanding anything in this Agreement to the contrary, any venture capital
fund, private equity fund or other investor who is not primarily an operating biopharmaceutical,
pharmaceutical, diagnostics, or medical device research and development and/or marketing
company (a “Non-affiliate Investor”) shall not be considered an Affiliate of a Party, and any
person or entity that directly or indirectly controls or is controlled by a Non-affiliate Investor
(except for any entity directly or indirectly controlled by a Party, controlling a Party, or under
common control with a Party, in each case other than through Non-affiliate Investor(s)) shall not be
considered an Affiliate of a Party solely by reason of being controlled by the same Non-affiliate
Investors.
1.11“Agreement” has the meaning set forth in the recitals.
1.12“Bankruptcy Code” has the meaning set forth in Section 9.7.
1.13“Binding Sequence Information” has the meaning set forth in Section 1.60.
1.14“Change of Control” means any transaction or series of transactions in which Surface (a)
sells, conveys or otherwise disposes of all or substantially all of its property or business to a single
entity or set of Affiliated entities; or (b) (i) merges with, consolidates with, acquires or is acquired
by any other entity; or (ii) effects any other transaction or series of related transactions; in the case
of each of clause (i) and clause (ii), such that the members, stockholders or shareholders of Surface
immediately prior thereto, in the aggregate, no longer own, directly or indirectly, at least fifty
percent (50%) of the outstanding voting securities or capital stock (including membership
interests) of the surviving entity following the closing of such merger, consolidation, other
transaction or series of related transactions, other than a capital-raising transaction with a Non-
Affiliate Investor.
1.15“Combination Product” means a product containing a Licensed Antibody as well as one or
more other active therapeutic ingredient. Notwithstanding the foregoing, [***].
1.16“Commercial Option” has the meaning set forth in Section 3.3(a).
1.17“Commercial Option Fee” has the meaning set forth in Section 4.3.
1.18“Commercially Reasonable Efforts” means the level of efforts required to carry out a task in
a diligent and sustained manner without undue interruption, pause or delay; which level is at least
commensurate with the level of efforts that a similarly situated biopharmaceutical company would
devote to a product of similar potential and having similar commercial and scientific advantages
and disadvantages resulting from the company’s own research efforts (i.e., explicitly ignoring the
royalty, milestone and other payments due Adimab under this Agreement), taking into account
safety and efficacy; the competitiveness of alternative products; the proprietary position of the
product; pricing and reimbursement; and all other relevant commercial factors.
1.19“Companion Diagnostic” means any Adimab Diagnostic Product used with or in connection
with a particular prophylactic or therapeutic Product containing [***] Licensed Antibodies.
1.20“Confidential Information” has the meaning set forth in Section 6.1(a).
1.21“Control” means, with respect to any Know-How or Patent [***] (other than pursuant to this
Agreement), of the [***] as provided for in this Agreement without violating the terms of any
written agreement with any Third Party.
1.22 “Controlled Contractor” has the meaning set forth in Section 2.1(b).
1.23“Cover” means, with respect to a particular item and a particular Patent, that such Patent
[***].
1.24“Diagnostic Product” means any Adimab Diagnostic Product or Other Diagnostic Product.
For clarity, “Diagnostic Product” as defined herein excludes prophylactic or therapeutic Products
containing [***] Licensed Antibodies.
1.25“Discovery Term” means the term beginning on the Effective Date and ending on [***].
1.26“Dispute” has the meaning set forth in Section 10.2(a).
1.27“Effective Date” has the meaning set forth in the recitals.
1.28“External Product” means any compound or product other than (a) a Licensed Antibody or
(b) Product containing [***] Licensed Antibodies.
1.29“Evaluation Term” means, with respect to each Target, the time period beginning at the end
of the Research Term for such Target and ending [***] thereafter, unless otherwise extended by
mutual agreement of the Parties.
1.30“Field” means diagnostic, therapeutic or prophylactic uses in human or other animal disease.
1.31“First Commercial Sale” means, with respect to a Licensed Product in any country, the first
sale, transfer or disposition for value or for end use or consumption of such Licensed Product in
such country after Marketing Approval for such Licensed Product has been received in such
country, but excluding any distribution or other sale solely for so-called treatment investigational
new drug sales, named patient sales, compassionate or emergency use sales and pre-license sales.
1.32“Force Majeure” means conditions beyond a Party’s reasonable control or ability to plan for,
including acts of God, war, terrorism, civil commotion, labor strike or lock-out; epidemic; failure
or default of public utilities or common carriers; and destruction of facilities or materials by fire,
earthquake, storm or like catastrophe; provided, however, the payment of invoices due and owing
under this Agreement shall not be excused by reason of a Force Majeure affecting the payor.
1.33“FTE” means the equivalent of a full-time employee’s working days over a twelve (12) month
period (taking account of normal vacations, sick days and holidays not being considered working
days), which equates to a total of [***] hours per twelve (12) month period of work performed by
a fully qualified Adimab employee or consultant in a Research Program. To provide an FTE over a
given time period that is less than a year means to provide the proportionate share (corresponding
to the proportion that such time period bears to a full year) during such time period of a full year’s
FTE. In no event shall the work over the course of a year of one individual person account for
more than one (1) FTE year.
1.34“FTE Rate” means [***] per FTE.
1.35“Indemnify” has the meaning set forth in Section 8.1.
1.36“Interest Payment” has the meaning set forth in Section 4.5.
1.37“Joint Inventions” means any and all Program Inventions made jointly by employees of, or
others obligated to assign Program Inventions to, each of Adimab (or any of its Affiliates) and
Surface (or any of its Affiliates).
1.38“Joint Serendipitous Inventions” means all Joint Inventions other than those Covered by
Program Antibody Patents or constituting Adimab Platform Technology Improvements.
1.39“Know-How” means all technical information and know-how, including (i) inventions,
discoveries, trade secrets, data, specifications, instructions, processes, formulae, materials
(including cell lines, DNA, vectors, plasmids, nucleic acids and the like), methods, protocols,
expertise and any other technology, including the applicability of any of the foregoing to
formulations, compositions or products or to their manufacture, development, registration, use or
marketing or to methods of assaying or testing them or processes for their manufacture,
formulations containing them or compositions incorporating or comprising them, and (ii) all data,
instructions, processes, formula, strategies, and expertise, whether biological, chemical,
pharmacological, biochemical, toxicological, pharmaceutical, physical, analytical, or otherwise and
whether related to safety, quality control, manufacturing or other disciplines.
1.40“Licensed Antibodies” means those Program Antibodies that are selected by Surface pursuant
to Section 3.3(a), and any Program-Benefited Antibody generated from such Program Antibodies.
1.41“Licensed Research Antibodies” means those Program Antibodies that are selected by
Surface pursuant to Section 3.2(a), and any Program-Benefited Antibody generated from such
Program Antibodies.
1.42“Licensed Product” means a Product that [***] Licensed Antibodies, and includes
Combination Products containing any one or more Licensed Antibodies or any Adimab Diagnostic
Product. [***].
1.43“Licensed Program Antibody Patents” means those Program Antibody Patents that Cover
any Licensed Antibodies or Licensed Research Antibodies.
1.44“Losses” has the meaning set forth in Section 8.1.
1.45“Major Markets” means each of the [***].
1.46“Marketing Approval” each means approval to market a Licensed Product legally as a drug
or biologic, including approval of a Biologics License Application (as defined in the Federal Food,
Drug, and Cosmetic Act, the Public Health Service Act and the regulations promulgated
thereunder) in the United States, or license, approval, registration, or authorization of a comparable
filing in any other jurisdiction, or the clearance, approval, license, registration, or authorization of
a comparable filing for medical device, diagnostic or animal use. [***].
1.47“Milestone Event” has the meaning set forth in Section 4.4.
1.48“Milestone Payment” has the meaning set forth in Section 4.4.
1.49“Naïve Antibody Library” has the meaning set forth in Section 2.6(a).
1.50“Net Sales” means [***]
If any Licensed Antibody is sold as part of a Combination Product, the Net Sales for such Licensed
Antibody shall be determined by [***]
1.51“Non-Affiliate Investor” has the meaning set forth in Section 1.9.
1.52“Optimization Antibody Library” has the meaning set forth in Section 2.6(a).
1.53“Other Diagnostic Product” means any assay, medical device, product or compound that (a)
does not comprise, incorporate, contain or use a Licensed Antibody and (b) [***]. For clarity,
“Other Diagnostic Product” as defined herein excludes (A) Adimab Diagnostic Products and (B)
prophylactic or therapeutic Products containing Licensed Antibodies.
1.54“Party” means Adimab or Surface.
1.55“Patent” means any patent application or patent anywhere in the world, including all of the
following categories of patents and patent applications, and their foreign equivalents: provisional,
utility, divisional, continuation, continuation-in-part, and substitution applications; and utility, re-
issue, re-examination, renewal and extended patents, and patents of addition, and any
Supplementary Protection Certificates, patent extensions, restoration of patent terms and other
similar rights.
1.56“Permitted Comparison” has the meaning set forth in Section 1.60.
1.57“Product” means any actual or potential product [***] that [***] Program-Benefited
Antibodies [***]. For clarity, it is possible that there will be multiple Products against a single
Target.
1.58“Program Antibody” means, with respect to each Target, each antibody [***] under a
Research Program for such Target. It is understood and agreed that [***].
1.59“Program Antibody Patents” means, for each Target, Patents that, [***].
1.60“Program-Benefited Antibody” means any Program Antibody or any modified or derivative
form of any such Program Antibody that comprises or contains either [***] (“Binding Sequence
Information”). Notwithstanding the foregoing, an antibody product will not be deemed a
Program-Benefited Antibody [***] (“Permitted Comparisons”).
1.61“Program Deliverables” means, for each Target, the deliverables for a given part of the
Research Plan as defined in the Research Plan for such Target.
1.62“Program Inventions” means, for each Target, any invention or Know-How that is [***] in
the course of performing or as a result of the activities conducted under a Research Program.
1.63“Program Patent” means, for each Target, any Patent Covering a Program Invention.
1.64“Prosecute” has the meaning set forth in Section 5.4(d)(i).
1.65“Research Committee” has the meaning set forth in Section 2.2(a).
1.66“Research License Term” has the meaning set forth in Section 3.2(b)(i).
1.67“Research Option” has the meaning set forth in Section 3.2(a).
1.68“Research Plan” means the research plan to be agreed upon by the Parties with respect to a
Target in accordance with Section 2.1(a) hereof.
1.69“Research Program” means the program of research conducted under this Agreement in
accordance with a Research Plan, and, as applicable, all programs of research conducted under this
Agreement in accordance with all Research Plans.
1.70“Research Term” means the period beginning on the Effective Date and ending, on a
Research Program-by-Research Program basis, when Adimab delivers final antibodies under a
Research Plan.
1.71“Royalty Term” means, on a Licensed Product-by-Licensed Product and country-by-country
basis, the term ending at the later to occur of (a) the expiration of the last Valid Claim Covering the
Licensed Product in the country in which such Licensed Product is manufactured or sold, or (b) ten
(10) years after the First Commercial Sale of such Licensed Product in such country.
1.72“Senior Executive Discussions” has the meaning set forth in Section 10.2(a).
1.73“Surface” has the meaning set forth in the recitals.
1.74“Surface Indemnitees” has the meaning set forth in Section 8.1.
1.75“Surface Materials” means (a) any tangible biological or chemical materials (including
antigen samples and other Know-How in the form of tangible biological or chemical materials)
provided by Surface to Adimab under a Research Program (other than commercial material
purchased by Surface and delivered to Adimab), and (b) from and after the time of the Commercial
Option exercise for a Target, the quantities of Licensed Antibody to such Target (and DNA
encoding that Licensed Antibody) provided to Surface by Adimab under this Agreement.
1.76“Surface Program Inventions” means all Program Inventions made solely by employees of,
or others obligated to assign Program Inventions to, Surface (or any of its Affiliates).
1.77“Target” means a target selected by Surface pursuant to Section 2.1(a).
1.78“Target Questionnaire” means the form of target questionnaire attached hereto as Exhibit A.
1.79“Third Party” means an entity other than a Party or the Affiliate of a Party.
1.80“Third Party Claims” has the meaning set forth in Section 8.1.
1.81“Third Party Patent Licenses” means Patent licenses obtained by Surface after Surface
determines in good faith that one or more such Patent licenses from Third Parties are [***], in
order to avoid Third Party claims of patent infringement [***] of a Licensed Antibody, [***]. For
clarity, Third Party Patent Licenses explicitly excludes licenses to any of the foregoing:
(1)[***]
(2)[***]
(3)[***]
(4)[***]
(5)[***]
(6)[***]
(7)[***]
1.82“Valid Claim” means a claim of a Licensed Program Antibody Patent, which claim [***].
1.83References in the body of this Agreement to “Sections” and “Articles” refer to the sections and
articles of this Agreement. The terms “include,” “includes,” “including” and derivative forms of
them shall be deemed followed by the phrase “without limitation” regardless of whether such
phrase appears there (and with no implication being drawn from its inconsistent inclusion or non-
inclusion), and the use of the word “or” shall not be exclusive.
1.84To avoid doubt, the term “antibody” as used everywhere else in this Agreement includes both
full-length antibodies, functional fragments thereof, and chemically modified versions thereof
(including pegylated versions and regardless of whether containing amino acid substitutions), all of
the foregoing whether naturally occurring, artificially produced, raised in an artificial system, or
created through modification of an antibody produced in any of the foregoing ways or otherwise.
ARTICLE 2
PROGRAM.
2.1Research Programs.
(a)Target Selection. Surface shall nominate the first Target by providing notice of such Target to
Adimab before the Effective Date. At any time prior to the expiration of the Discovery Term,
Surface may initiate Research Programs with respect to additional Targets by notifying Adimab. In
each case, such notice shall be in writing on a Target-by-Target basis, and shall be in the form of a
completed Target Questionnaire with respect to each such Target and delivery of Surface’s antigen
for such Target. Adimab’s obligation to perform such additional Research Programs shall be
subject to the availability of Adimab researchers. Upon receipt of such notice by Adimab and
Adimab’s confirmation of availability, the Parties shall work together to prepare the content of a
Research Plan with respect to such Target, including the relevant Deliverables and success criteria.
Such Research Plan shall be based upon the form of Research Plan attached hereto as Exhibit B,
and shall include Adimab’s responsibilities with respect to the discovery and optimization of
antibodies with respect to each Target. Each Research Plan shall be agreed upon in writing by the
Parties, and each Research Program shall be conducted in accordance therewith. Neither Party is
required to perform a Research Program under this Agreement if the Parties do not mutually agree
in writing on Research Plan.
(b)Conduct of Research. Each Party shall use its commercially reasonable efforts to perform the
Research Program activities assigned to such Party in each Research Plan and to achieve the
timeline(s) set forth in such Research Plan. Adimab’s performance obligations under each
Research Program shall be contingent upon Surface providing the Surface Materials, if any, set
forth in the applicable Research Plan. Such Surface Materials are expected to include Target
antigen. Adimab’s obligations with regard to the performance of a particular Research Program
shall expire at the end of the applicable Research Term. Adimab shall have the right to use Third
Parties in the performance of its obligations hereunder, subject to Surface’s prior written consent if
such Third Party is not identified and the applicable work not described in the Research Plan (any
such permitted Third Party, a “Controlled Contractor”).
2.2Project Management.
(a)Scientific Research Committee. Promptly after the completion of the first Research Plan, the
Parties shall form a steering committee consisting of [***] representatives from each Party with
respect to the relevant Research Program (the “Research Committee”) to oversee the Research
Programs. The Research Committee’s role is to facilitate communication regarding progress in
relation to the Research Programs and the collaboration generally. Either Party may change its
Research Committee members upon written notice to the other Party. The Research Committee
may meet in person or by teleconference or videoconference. Each Party shall designate one of its
Research Committee members as co-chair. The Research Committee shall meet from time to time
promptly after the date of a written request by either Party. Additional members representing either
Party may attend any Research Committee meeting. The co-chairs shall be responsible to circulate,
finalize and agree on minutes of each meeting within [***] days after the meeting date. Upon
expiration of the final Research Term, the Research Committee shall be disbanded.
(b)Decision Making. The Research Committee shall operate by consensus but solely within the
limits specified in this Section 2.2, it being understood that if the co-chairs cannot agree with
regards to a specific matter within their decision-making authority, no decision of the Research
Committee shall be deemed taken by the Research Committee. The Research Committee shall
have the limited authority to amend the Research Plans in a manner not substantially affecting
resources required to perform, timing for performance, or success criteria. Except for the limited
authority set forth in this Section 2.2, the Research Committee shall not have any decision-making
authority and in no event shall the Research Committee shall have the power to amend or waive
compliance with this Agreement.
(c)Alliance Managers. Each Party shall designate in writing within [***] days after signing an
“Alliance Manager” to be the primary contact for such Party. The Alliance Manager shall be
responsible for managing communications between the Parties with respect to a Research Program,
including responsibility for scheduling teleconferences and coordinating Research Committee
meetings.
(d)Exclusive Use of Campaign Manager. During the applicable Research Term and for a period
of [***] year after, the person whom Adimab has designated as the “Campaign Manager” for a
given Research Program shall not perform, or supervise the performance of, research relating to
the same Target using Adimab Platform Technology for Adimab or its Affiliates (whether for their
own account or on behalf of any Third Party). It is understood and agreed that if such a person is
no longer in Adimab’s or its Affiliate’s employ, then such person’s activities for another employer
are beyond the scope of (and are not Adimab’s responsibility to prevent under) the foregoing
sentence.
2.3Reports; Records.
(a)By Adimab. During the applicable Research Term, at the junctures specified in the applicable
Research Plan, Adimab shall provide written reports to Surface regarding the Research Plan.
Notwithstanding the foregoing or anything express or implied anywhere in this Agreement,
Adimab shall not be required to disclose any Adimab Platform Technology or Adimab Platform
Technology Improvements to Surface. Adimab shall maintain records, in sufficient details and in
good scientific manner appropriate for patent purposes, which shall be complete and accurate and
shall fully and properly reflect all work done and results achieved in the performance of a Research
Program, by or on behalf of Adimab or any of its Affiliates or Controlled Contractors. All such
records shall be kept in sufficient detail to identify and report those research activities conducted
by Adimab, and shall be made available for inspection or copies provided to Surface upon
Surface’s request. In the event that such records and data include disclosure of Adimab Platform
Technology or Adimab Platform Technology Improvements, Adimab may redact those portions as
is necessary to protect Adimab Platform Technology or Adimab Platform Technology
Improvements prior to any review or inspection by or delivery to Surface.
(b)By Surface. During the applicable Research Term, at the junctures set forth in the applicable
Research Plan, for so long as Surface or any of its Affiliates, licensees or sublicensees continue to
generate or test any Program-Benefited Antibodies, Surface shall provide written reports to
Adimab which provide any data Surface is required to provide under the applicable Research Plan
and shall disclose information regarding the existence and progress of all Program-Benefited
Antibodies since the date of the last report. For clarity, the information reported by Surface after
the Research Term shall be solely for the purpose of allowing Adimab to monitor Surface’s
obligations under this Agreement.
2.4Use of Adimab Materials. With respect to each Target, Surface and its Affiliates shall only use
Adimab Materials (a) as is necessary to conduct a Research Program during the Research Term
and the Evaluation Term, (b) pursuant to the license granted under Section 3.1(a) and Section
3.2(b) of this Agreement while such licenses are in effect, including for Permitted Comparisons, or
(c) to generate and test Program-Benefited Antibodies in accordance with Section 9.4. Surface and
its Affiliates shall not use Adimab Materials for any other purposes. Without limiting the
foregoing, Adimab acknowledges and agrees that upon receipt of Program Antibodies, Surface
may conduct testing on such Program Antibodies to optimize such Program Antibodies (and, to
avoid doubt, the optimized versions thus created shall be Program-Benefited Antibodies).
Adimab retains title to the Adimab Materials, including all quantities of Program Antibodies that it
provides under a Research Program, including during the Evaluation Term. During the Evaluation
Term, such quantities of Program Antibodies are (i) for use solely in assessing whether to exercise
the Commercial Option or Research Option for the applicable Target and for Permitted
Comparisons, and (ii) shall not be used in humans or for any commercial purpose. Should Surface
exercise neither its Research Option pursuant to Section 3.2(a) nor its Commercial Option pursuant
to Section 3.3(a), Surface shall return to Adimab or destroy any Program-Benefitted Antibodies in
its possession on expiration of the Evaluation Term for such Target. Surface shall destroy any
Licensed Research Antibodies in its possession on expiration of the relevant Research License
Term. Without limiting the generality of the foregoing, during the Evaluation Term and after
expiration of the Options, if unexercised, Surface shall not provide Program-Benefitted Antibodies
to Third Parties, except as permitted by this Agreement.
2.5Use of Surface Materials. Adimab shall use the Surface Materials solely to perform the
Research Program for the applicable Target. Adimab shall not transfer the Surface Materials
outside of Adimab nor, for clarity, provide the Surface Materials to any Third Party. Within [***]
days after the Research Term for such Target ends, Adimab will return to Surface or destroy any
remaining Surface Materials (at Surface’s direction).
2.6Certain Restrictions on the Use of Antibodies.
(a)Adimab Restrictions. For each Target, until the earlier of expiration of the Evaluation Term for
such Target or Surface’s exercise of its Commercial Option for such Target, Adimab shall not
provide any of the Program Antibodies (or any of their Binding Sequence Information) to any
Third Party in connection with performing a funded or sponsored research program for such Third
Party. In addition, even if Surface does not exercise its Commercial Option for a particular Target,
Adimab shall not file Program Antibody Patents for such Target or any patent application Covering
any Program Antibody, unless independently rediscovered as contemplated below. For purposes of
this Section 2.6, the performance of a program by Adimab means use of any of the Adimab
Platform Technology to discover or optimize antibodies to the applicable Target based on activity
against or with respect to such Target. Further, at all times, unless independently rediscovered
without the use of (i) Surface Materials, (ii) Confidential Information of Surface (subject to
Section 6.2(e)), (iii) any antibody library that is (A) [***] and (B) [***] (any such antibody library
satisfying clauses (A) and (B)(1), a “Naive Antibody Library”) or (2) created specifically for use
in the Research Program and [***] from a Naive Antibody Library in a Research Program (any
such antibody library satisfying clauses (A) and (B)(2) an “Optimization Antibody Library”) and
or any antibodies identified therefrom (including Program Antibodies), or any of their partial or
whole sequences, or (iv) any Program Inventions to the extent solely owned by Surface based on
the terms of this Agreement (subject to Section 6.2(e)), Adimab and its Affiliates shall not (I)
provide the Program Antibodies or their Binding Sequence Information to any Third Party at any
time, or any other antibody or their Binding Sequence Information identified from any Naive
Antibody Library or Optimization Antibody Library under a Research Program or (II) use the
Program Antibodies, any other antibody identified from any Naive Antibody Library or
Optimization Antibody Library under a Research Program, or any of their Binding Sequence
Information, to research, develop, manufacture or commercialize any biologic or drug products in
for Adimab, its Affiliates or any Third Parties. Further, Adimab shall not perform any research,
discovery or development with respect to a Target using any Naive Antibody Library or
Optimization Antibody Library for which research, discovery or development was pursued with
respect to such Target under a Research Program, and Adimab shall not provide (by any means,
such as sale, license or transfer), any Naive Antibody Library or Optimization Antibody Library
(or any substantial portion thereof) to any others.
To avoid doubt and notwithstanding anything to the contrary in this Agreement:
(i)nothing herein shall prevent Adimab from licensing or transferring some or all of the Adimab
Platform Technology and/or Adimab Platform Technology Improvements to a Third Party
(including technical support in connection therewith) nor shall anything herein require Adimab to
in any way limit the use of the Adimab Platform Technology and/or Adimab Platform Technology
Improvements by a Third Party, subject to the restrictions above regarding any Naive Antibody
Library or Optimization Antibody Library and antibodies identified therefrom (including Program
Antibodies), or any of their Binding Sequence Information; and
(ii)nothing herein shall require Adimab to physically remove from its libraries, or to prevent from
being included in future libraries, any Program-Benefited Antibodies, but Adimab is limited with
respect to the use of any Naive Antibody Library and Optimization Antibody Library as provided
above. This Agreement expressly provides for a reserved right for Adimab, its Affiliates, and those
deriving rights from them (a) to include Program-Benefited Antibodies in antibody library(ies)
(other than Naive Libraries) transferred or licensed by Adimab to Third Parties (including the
transfer of physical possession of samples of Program-Benefited Antibodies to a Third Party as
part of such transactions) and (b) to conduct any activity with respect to Program-Benefited
Antibodies that are not Licensed Antibodies under this Agreement if Adimab (or such other party)
arrives at such Program-Benefited Antibodies in a manner fully compliant with Adimab’s other
covenants and obligations in this Agreement.
(iii)Adimab may independently regenerate Binding Sequence Information for any Program
Antibodies without use or reference to any Program Inventions or any Naive Antibody Library or
Optimization Antibody Library, other than Adimab Platform Technology Improvements (which
nothing in this Agreement shall be read to restrict Adimab from using). In the case of independent
rediscovery as provided above, Adimab shall be unrestricted in its use of and ability to provide the
applicable independently rediscovered or independently regenerated antibodies to others.
(b)Surface Restrictions. Surface hereby covenants that it and its Affiliates shall not seek to or
actually clinically develop or commercialize any Program-Benefited Antibody, or product
containing either of the foregoing (other than the activities permitted hereunder during the
Research Term and the Evaluation Term for the purpose of determining whether or not to exercise
an Option for such Target), without first executing the Commercial Option with Adimab with
respect to the applicable Target.
2.7Amendment and Restatement. The Parties hereby agree and acknowledge that this Agreement
amends and restates the Original Agreement in its entirety and the Original Agreement is replaced
with, and superseded by, this Agreement; provided, however, that, for the avoidance of doubt, any
activities conducted under the Original Agreement shall be deemed to have been conducted under
this Agreement.
ARTICLE 3
LICENSES; OPTION; DEVELOPMENT & COMMERCIALIZATION
3.1Mutual Research Program Licenses.
(a)To Surface. During the Research Term and Evaluation Term for each Target, Adimab hereby
grants to Surface a non-exclusive, non-sublicensable license with respect to such Target, under the
Adimab Platform Patents, Program Antibody Patents and Know-How Controlled by Adimab (or its
Affiliates) during the term of this Agreement, to perform research, and to design, research,
preclinically develop, make, import and use Program-Benefited Antibodies and Adimab Materials
pertaining thereto in the Field, including for Surface to (i) evaluate Program-Benefited Antibodies,
(ii) perform Permitted Comparisons and Surface’s responsibilities under the Research Plan and this
Agreement for each Target, and (iii) design, research, preclinically develop, make, import and use
Program-Benefited Antibodies and Adimab Materials as Adimab Diagnostic Products. For clarity,
the license to Surface excludes the right to [***] but includes the right to (1) perform Permitted
Comparisons and (2) have others perform the licensed activities on behalf of Surface.
(b)To Adimab. During the Research Term and Evaluation Term for each Target, Surface hereby
grants to Adimab a non-exclusive, nontransferable (except in connection with a permitted
assignment of this Agreement) license (without the right to grant sublicenses except to Controlled
Contractors) with respect to such Target under all Patents and Know-How Controlled by Surface
(or its Affiliates) which Cover or relate to the Targets (including any that so relate by claiming
antibodies directed to the Targets or a mechanism of action via the Targets) or any Surface
Materials, solely to perform Adimab’s responsibilities as provided for in the applicable Research
Plan.
3.2Research Rights.
(a)Research Option. On a Target-by-Target basis, Adimab hereby grants to Surface the exclusive
option (for each Target, a "Research Option") to obtain the licenses set forth in Section 3.2(b) for
Licensed Research Antibodies to the Target, exercisable by written notice to Adimab and (i)
payment by Surface to Adimab of [***] on or before the date that is [***] months after the date on
which Technical Milestone 1 is achieved for the Target, or (ii) payment of Technical Milestone 2
with respect to the Target and on or before the expiry of the Evaluation Term. Surface shall, in its
written notice to exercise the Research Option for a Target, specify up to ten (10) Program
Antibodies against the Target as the “Licensed Research Antibodies”. Upon such Research
Option exercise, Adimab will provide to Surface sufficient materials to allow Surface to express
any such Licensed Research Antibodies.
(b)Research License. Adimab hereby, effective on Surface's exercise of the Research Option for a
Target and the applicable Licensed Research Antibodies:
(i)grants to Surface a worldwide, fully paid-up, sublicenseable through multiple tiers (solely as
provided in Section 3.2(b)(ii)) license, under (A) the Adimab Platform Patents and, (B) any
Licensed Program Antibody Patents, and (C) Know-How and other Patents Covering the Adimab
Platform Technology, Adimab Platform Technology Improvements or Program Inventions, in each
case, Controlled by Adimab (or its Affiliates) as of the start of and during the applicable Research
License Term, to make, have made, import, have imported, export and have exported, in each case,
for research purposes only, the Licensed Research Antibodies for such Target for a period
beginning on the date of Surface’s exercise of the Research Option for such Target and expiring on
the date [***] years after such exercise (subject to Section 9.1) (the “Research License Term”).
Such license shall be non-exclusive and shall exclude the use of any Licensed Research
Antibodies in humans. This license grant is granted by Adimab as of the Effective Date as a
current license grant, subject only to the Research Option exercise by Surface but not any other
action by Adimab.
(ii)The license granted under Section 3.2(b)(i) shall be sublicensable solely to (x) Controlled
Contractors or (y) in connection with the sublicensing of commercial rights to a therapeutic
product against the same Target, in either case, pursuant to sublicenses that are consistent with all
relevant terms and conditions of this Agreement, including Sections 2.4 and 9.4 hereof. Surface
shall remain responsible for all payments and other performance obligations due under this
Agreement, notwithstanding any license or sublicense that it may grant.
3.3Commercial Rights.
(a)Commercial Option. On a Target-by-Target basis, Adimab hereby grants to Surface the
exclusive option (for each Target, a “Commercial Option”) to obtain the licenses of Section 3.3(b)
for Licensed Antibodies to the Target, exercisable by payment of the Commercial Option Fee with
respect to such Target to Adimab on or before the expiry of the Evaluation Term. Surface shall, in
its written notice to exercise the Commercial Option for a Target, specify up to twenty (20)
Program-Benefited Antibodies against the Target as the “Licensed Antibodies.” Additionally,
Surface shall have the exclusive option to obtain licenses for up to five (5) additional Licensed
Antibodies (“Additional Licensed Antibodies”), up to a total of twenty-five (25) Licensed
Antibodies, with each Additional Licensed Antibody beyond the initial twenty (20) increasing the
Commercial Option Fee in accordance with Section 4.3. For clarity, Additional Licensed
Antibodies shall be classified as “Licensed Antibodies” under this Agreement. Upon such
Commercial Option exercise, Adimab will provide to Surface sufficient materials to allow Surface
to express any such Licensed Antibodies that were generated in the Research Program.
Notwithstanding the foregoing, Surface may elect to partially exercise the Commercial Option by
paying sixty five percent (65%) of the Commercial
Option Fee and designating up to ten (10) Program-Benefited Antibodies as Licensed Antibodies;
provided, however, that prior to the expiration of the Evaluation Term, Surface shall either (i) pay
the remaining thirty five percent (35%) of the Commercial Option Fee and, at any time prior to the
expiration of the Evaluation Term (even if after payment of the remaining thirty five percent (35%)
of the Commercial Option Fee) designate additional Program-Benefited Antibodies as Licensed
Antibodies such that the total number of Licensed Antibodies does not exceed twenty (20) or (ii)
fail to pay the remaining thirty five percent (35%) of the Commercial Option Fee, in which case
the Commercial Option shall be deemed not to have been exercised with respect to such Target and
no Program-Benefited Antibodies against such shall be deemed Licensed Antibodies from that
point forward.
(b)Development and Commercialization License and Assignment. Adimab hereby, effective on
Surface’s exercise of the Commercial Option for a Target and the applicable Licensed Antibodies:
(i)assigns to Surface, subject to the terms and conditions of this Agreement and without any further
action required of either Party, all right, title and interest in and to those Licensed Program
Antibody Patents that solely Cover those Licensed Antibodies, and at Surface’s request, Adimab
will execute title transfer and recordation assignments for any such Licensed Program Antibody
Patents; and
(ii)grants to Surface a worldwide, royalty-bearing, sublicenseable through multiple tiers (solely as
provided in Section 3.3(b)(iii)) license, under (A) the Adimab Platform Patents, (B) those Licensed
Program Antibody Patents which are not assigned to Surface pursuant to Section 3.3(b)(i) (for any
reason, including bankruptcy and other like proceedings described in Section 9.7), and (C) Know-
How Covering the Adimab Platform Technology, Adimab Platform Technology Improvements or
Program Inventions, in each case, Controlled by Adimab (or its Affiliates) as of the start of and
during the term of this Agreement, in the Field, to research, have researched, develop, have
developed, commercialize, have commercialized, make, have made, use, have used, sell, have sold,
offer to sell, have offered to sell, import, have imported, export and have exported the Licensed
Antibodies and Licensed Products for such Target during the term of this Agreement (subject to
Section 9.1). Such license shall be non-exclusive under the Adimab Platform Patents and Know-
How, and exclusive (even as to Adimab and its Affiliates) under the Licensed Program Antibody
Patents. This license grant is granted by Adimab as of the Effective Date as a current license grant,
subject only to the Commercial Option exercise by Surface but not any other action by Adimab.
(iii)The license granted under Section 3.3(b)(ii) shall be sublicensable solely pursuant to
sublicenses that are consistent with all relevant terms and conditions of this Agreement, including
Section 9.4 hereof. Surface shall remain responsible for all payments and other performance
obligations due under this Agreement, notwithstanding any license or sublicense that it may grant.
3.4Diligent Development and Commercialization. Surface shall, if it exercises the Commercial
Option with respect to a Target, devote Commercially Reasonable Efforts to preclinically and
clinically develop, seek Marketing Approval for in the Major Markets, and launch and actively
commercialize in the Major Markets at least one (1) Licensed Antibody against such Target.
Annually, Surface will provide Adimab with a written report of Licensed Product progress in
development and commercialization, by Surface’s and its Affiliates’ activities in that regard. If
requested by Adimab, Surface shall meet with Adimab to discuss such report once annually.
3.5No Implied Licenses. Other than the licenses, options and assignments explicitly set forth in
this Agreement, neither Party grants any intellectual property licenses, options or assignments to
the other Party under this Agreement. This Agreement does not create any implied licenses.
ARTICLE 4
FINANCIAL TERMS.
4.1Research Stage Fees.
(a)Research Funding. For each Research Program, Surface shall pay Adimab (i) an amount equal
to [***] percent [***] of the estimated FTEs (at the FTE Rate) for the Research Program, such
amount to be paid within [***] business days of agreement on a Research Plan, and (ii) within
[***] business days of completion of a Research Program, an amount equal to [***] percent [***]
of the actual FTEs expended by Adimab on the Research Program (at the FTE Rate) less the
amount previous paid with respect to such Research Program pursuant to clause (i); provided,
however, that (1) such actual FTEs do not exceed the FTEs set forth in the applicable Research
Plan (as amended from time to time) for such Research Program by more than [***] percent [***]
and (2) Adimab has provided Surface with an invoice for each of such payments. Upon Surface’s
reasonable request, Adimab shall provide customary and reasonable documentation to evidence
that all such amounts so paid by Surface were used on FTE’s for the applicable Research Program.
(b)Technical Milestones. Surface shall pay Adimab two technical milestone fees with respect to
each Research Program on each Target, as follows:
(i)The first technical milestone fee shall be equal to [***] for each Research Program, and such fee
will be paid to Adimab by Surface within [***] business days of the later of (1) [***] and (2)
provision by Adimab of an invoice for such payment to Surface; and
(ii)The second technical milestone fee shall be equal to [***] for each Research Program, and such
fee will be paid to Adimab by Surface within [***] business days of the later of (1) [***] and (2)
provision by Adimab of an invoice for such payment to Surface. In the event that the second
technical milestone is met in the initial delivery, or in the event that the second technical milestone
is met without payment of the first technical milestone, then, in either case, Surface shall pay both
technical milestones.
4.2Research License Maintenance Fee. For each Research Option that is exercised by Surface,
Surface shall pay an annual maintenance fee of [***] on each of the [***] anniversaries of the date
of exercise of the relevant Research Option, subject to early termination as provided in this
Agreement.
4.3Commercial Option Fee. In order to exercise the Commercial Option under Section 3.3(a) for
a Target, Surface shall pay to Adimab a non-creditable, nonrefundable option exercise fee of [***]
for each such Target (each, a “Commercial Option Fee”). If Surface elects to license Additional
Licensed Antibodies, each Additional Licensed Antibody will increase the Commercial Option Fee
by [***] up to a maximum Commercial Option Fee of [***] for each such Target.
4.4Milestone Payments. Subject to Section 4.7, for each Target, Surface shall report in writing to
Adimab the achievement of each event (each, a “Milestone Event”) and pay the corresponding
development milestone payment (each, a “Milestone Payment”) to Adimab, each within [***]
days after the achievement of the corresponding milestone event in the following table (whether
achieved by or on behalf of Surface or its Affiliates or any other entity acting on behalf of any of
them or having received a license, sublicense or other rights from any of the foregoing with respect
to a Licensed Product):
Milestone Event for each Licensed Product for a Target
[***]
[***]
[***]
[***]
[***]
Milestones Payments are payable one time only per Licensed Product, the first time each is
achieved for such Licensed Product. If a subsequent Milestones Event is achieved for any Licensed
Milestone Payment
[***]
[***]
[***]
[***]
[***]
Product without a prior Milestone Event having been achieved for that Licensed Product, then
Surface shall pay the Milestone Payment for such previous Milestone Event along with the
payment for the most recently achieved Milestone Event. Notwithstanding the foregoing, if a
Milestone Payment has been paid by Surface with respect to a Product that is then abandoned prior
to the receipt of Marketing Approval by Surface, and Surface subsequently elects to research,
develop and commercialize a back-up Product against the same Target, then no Milestone Payment
shall be due for such previously paid Milestone Payment with respect to such back-up Product.
4.5Deferred Payment Option. The Commercial Option Fee and the Milestone Payments with
respect to the first two Milestone Events set forth in Section 4.4 (i.e., those related to (a) [***] and
(b) [***]) shall be deemed met and accrue when the Commercial Option is exercised or the
applicable Milestone Event is achieved for a given Licensed Product, respectively and as the case
may be. Surface may pay the Commercial Option Fee or the corresponding Milestone Payment, or
Surface may provide written notice prior to the due date for such Commercial Option Fee or
Milestone Payment of its election to delay payment of such amount until the earlier of (i) [***] (ii)
[***] (iii) [***]. If Surface opts to delay any such payment, Surface shall pay Adimab, on the first
business day of every calendar year, interest (each, an “Interest Payment”) accrued on all such
deferred amounts at a rate of [***] per [***] (calculated on a daily basis), from the date any such
Commercial Option Fee and/or Milestone Payments are due hereunder until such Commercial
Option Fee and/or Milestone Payments, and any interest thereon, are paid in full; provided,
however, that if Surface ceases all research and development activities with respect to Program-
Benefited Antibodies against the same Target for which a payment is delayed, then Surface shall
not be obligated to make such Interest Payment and the applicable Commercial Option Fee and
Milestone Payments, all of which are hereby forgiven in such circumstances; and provided, further,
however, that in the event that Surface (or its Affiliate or licensee) subsequently resumes research
or development on Program-Benefited Antibodies against such Target, Surface shall immediately
pay to Adimab any unpaid Interest Payments (including any interest which has accrued on such
Interest Payments during the period since Surface last made an Interest Payment to Adimab with
respect to such Program-Benefited Antibody), and Surface shall resume the payment of Interest
Payments on the first business day of the next calendar year.
4.6Royalties.
(a)Royalty Payments. Subject to Section 4.7, as to each Licensed Product sold during the
applicable Royalty Term in a country, on a Licensed Product-by-Licensed Product basis, Surface
shall pay Adimab the following royalties, based on the royalty rate applicable to the relevant
portion of annual worldwide Net Sales for such Licensed Product during the applicable Royalty
Term for such Licensed Product in such country (“Royalty Payments”):
Portion of Worldwide Calendar Year Net Sales
[***]
[***]
(b)Other Royalty Provisions. Only one royalty will be due with respect to the same unit of
Licensed Product, even if such Licensed Product unit is comprised of more than one Licensed
Antibody or any modified or derivative forms thereof.
Royalty Rate
[***]
[***]
(c)Adjustment for Third Party IP. If Surface or any of its Affiliates enters into any Third Party
Patent Licenses, then [***] of the net sales royalties actually paid to the Third Party under the
Third Party Patent License with respect to Net Sales of any given Licensed Product in any given
calendar quarter in any given country may be offset against the royalty that would otherwise have
been payable to Adimab with respect to such same Net Sales; provided, however, that in no event
shall the royalty owed to Adimab be reduced by more than [***] than the payment which would
otherwise be due hereunder with any excess carried over to future royalty period(s) until such
excess may be used in compliance with this proviso.
It is understood, agreed and acknowledged that Adimab’s allowing Surface to claim the credit of
this Section 4.6 as to any particular Third Party Patent License: [***].
(d)Milestone Payments and Royalty Payments for Certain [***]. In the event that a single
Licensed Product contains [***] Program Antibodies, [***], then (i) Surface shall owe only one
Milestone Payment for the achievement of a given Milestone Event with respect to such Licensed
Product, and (ii) Surface shall owe only one Royalty Payment with respect to any specific portion
of Net Sales of such Licensed Product.
4.7Milestone Payments and Royalty Payments for Adimab Diagnostic Products for use with
or in connection with External Products. Surface shall make the following payments with
respect to Adimab Diagnostic Products for use with or in connection with External Products in lieu
of the payments set forth in Sections 4.4 and 4.6(a).
[***]
[***]
[***]
[***]
[***]
[***]
For clarity, no payment is due under this Agreement (including under Section 4.4 or 4.6) with
respect to (a) any Companion Diagnostic or Other Diagnostic Product (although payments shall be
due under Sections 4.4 and 4.6(a) with respect to any applicable therapeutic Licensed Product(s))
or (b) any External Product. In addition, except as expressly provided in this Section 4.7, (i)
milestone payments due for Adimab Diagnostic Products for use with or in connection with
External Products are subject to the remaining terms and conditions of Section 4.4 (mutatis
mutandis), and (ii) royalty payments due for Adimab Diagnostic Products for use with or in
connection with External Products are subject to the remaining terms and conditions of Section 4.6
(mutatis mutandis).
4.8Quarterly Payment Timings. All royalties due under this Agreement shall be paid quarterly
within [***] days after the end of the relevant calendar quarter for which royalties are due.
4.9Royalty Payment Reports. With respect to each calendar quarter, within [***] days after the
end of the calendar quarter, Surface shall provide to Adimab a written report stating the number
and description of all Licensed Products sold during the relevant calendar quarter; the gross sales
associated with such sales; and the calculation of Net Sales on such sales. The report shall provide
all such information on a country-by-country and Licensed Product-by-Licensed Product basis if
reasonably available.
4.10Payment Method. All payments due under this Agreement to Adimab shall be made by bank
wire transfer in immediately available funds to an account designated by Adimab. All payments
hereunder shall be made in the legal currency of the United States of America, and all references to
“$” or “dollars” shall refer to United States dollars (i.e., the legal currency of the United States).
4.11Taxes. The Parties agree to cooperate with one another and use reasonable efforts to minimize
obligations for any and all income or other taxes required by applicable law to be withheld or
deducted from any royalties, milestone payments or other payments made by Surface to Adimab
under this Agreement, including by completing all procedural steps, and taking all reasonable
measures, to ensure that any withholding tax is reduced or eliminated to the extent permitted under
applicable law, including income tax treaty provisions and related procedures for claiming treaty
relief. To the extent that Surface is required to deduct and withhold taxes on any payment to
Adimab, Surface shall deduct and withhold such taxes and pay the amounts of such taxes to the
proper government authority in a timely manner and promptly submit to Adimab an official tax
certificate or other evidence of such withholding sufficient to enable Adimab to claim such
payment of taxes. Surface shall provide Adimab with reasonable assistance in order to allow
Adimab to recover, as permitted by applicable law, withholding taxes, value added taxes or similar
obligations resulting from payments made hereunder or to obtain the benefit of any present or
future treaty against double taxation which may apply to such payments. Adimab shall provide
Surface with any tax forms that may be reasonably necessary in order for Surface to not withhold
tax or to withhold tax at a reduced rate under an applicable bilateral tax income treaty.
4.12Records; Inspection.
(a)Surface shall keep and ensure that its Affiliates keep complete and accurate records of its sales
and other dispositions (including use in clinical trials, or provision on a compassionate use basis or
as marketing samples) of Licensed Antibody and Licensed Product including all records that may
be necessary for the purposes of calculating all payments due under this Agreement for a period of
at least [***] years. Surface shall make such records available for inspection by an accounting firm
selected by Adimab (and which is reasonably acceptable to Surface) at Surface’s premises in the
United States on reasonable notice during regular business hours as provided in Section 4.11(b).
(b)At Adimab’s expense no more than [***] per calendar year, Adimab has the right to retain an
independent certified public accountant from a nationally recognized (in the U.S.) accounting firm
to perform on behalf of Adimab an audit, conducted in accordance with U.S. generally accepted
accounting principles (GAAP), of such books and records of Surface and its Affiliates as are
deemed necessary by the independent public accountant to report on Net Sales, for the period or
periods requested by Adimab within the [***] most recent calendar years as of the date of the audit
performance, and the correctness of any report or payments made under this Agreement. No period
may be audited more than once. Prior to any review, such accounting firm shall have entered into a
written agreement with Surface (or its Affiliates, licensees or sublicensees) limiting the use of such
records to verification of the accuracy of payments due under this Agreement and prohibiting the
disclosure of any information contained in such records to a Third Party and to Adimab for a
purpose other than as set forth in this Section 4.11(b). The report of such accounting firm shall be
limited to a certificate stating whether any report made or invoice or payment submitted by Surface
during such period is accurate or inaccurate and the actual amounts owed by or due under this
Agreement to Adimab for such period.
(c)If the audit reveals an underpayment, Surface shall promptly pay to Adimab the amount of such
underpayment plus interest in accordance with Section 4.15. Any overpayment made by Surface
shall be fully creditable against amounts payable in subsequent payment periods or promptly
refunded, at Adimab’s election. Any audit by an independent certified public accounting firm
under this Section 4.11 is to be made at the expense of Adimab, but if the audit reveals that the
monies owed by Surface to Adimab has been understated by more than [***] percent [***] for the
period audited, Surface shall, in addition, pay the reasonable out-of-pocket costs incurred by
Adimab of such audit.
(d)The Parties agree that all information provided in a royalty payment report, all records kept by
Surface or its Affiliates, licensees and sublicensees under this Section 4.11 or Section 4.12, and
any information provided by the independent certified public accounting firm to Adimab are
Confidential Information of Surface.
4.13Licensee/Sublicensee Reports, Records and Audits. If Surface grants any Product licenses
or sublicenses, the agreements for such licenses and sublicenses shall include an obligation for the
licensee or sublicensee to (i) maintain records adequate to document and verify the proper
payments (including milestones and royalties) to be paid to Adimab; (ii) provide reports with
sufficient information to allow such verification; and (iii) allow Adimab (or Surface if requested by
Adimab) to verify the payments due (such audit right is not required to be any stronger than that of
Section 4.11).
4.14Foreign Exchange. If any currency conversion shall be required in connection with the
calculation of amounts payable hereunder, such conversion shall be made using the exchange rates
(a) used by Surface (or the selling entity) for its own financial reporting purposes in its worldwide
accounting system (which shall be consistent with applicable accounting standards), if Surface (or
the selling entity) is a public company, or (b) if Surface is not a public company, then shall be
determined the same way except that the rates shall be the average of the purchase and sale rates
for U.S. Dollars for such day as reported on the fifth (5th) business day prior the payment due date
for the purchase and sale of U.S. dollars, as reported by the Wall Street Journal, Eastern Edition (or
if it no longer exists, a similarly authoritative source). With any payment in relation to which a
currency conversion is performed to calculate the amount of payment due, Surface shall provide to
Adimab a true, accurate and complete copy of the exchange rates used in such calculation.
4.15Non-refundable, non-creditable payments. Each payment that is required under this
Agreement is non-refundable and non-creditable.
4.16Late Payments. Any amount owed by Surface to Adimab under this Agreement that is not
paid within the applicable time period set forth herein will accrue interest at the rate of [***]
percent [***] above the then-applicable short-term three-month London Interbank Offered Rate
(LIBOR) as quoted in the Wall Street Journal, Eastern Edition (or if it no longer exists, a similarly
authoritative source) calculated on a daily basis, or, if lower, the highest rate permitted under
applicable law.
ARTICLE 5
Patent Ownership.
5.1Ownership and Inventorship.
(a)Program Patents. Adimab shall solely own, regardless of inventorship, all Patents Covering
Adimab Platform Technology Improvements and, prior to Commercial Option exercise, all
Program Antibody Patents. Surface shall own, regardless of inventorship, from and after the date
of Commercial Option exercise, all Licensed Program Antibody Patents, subject to the terms and
conditions of this Agreement. Ownership of all Program Patents other than those referred to in the
foregoing two (2) sentences shall be owned based on inventorship. Program Inventions (to the
extent not Patented and addressed above) that constitute Adimab Platform Technology
Improvements shall be owned by Adimab and all other Program Inventions shall be owned by the
Party that created it.
(b)Other Patents. To avoid doubt, nothing in this Agreement shall alter the ownership of the
Parties’ pre-existing Patents. Section 5.1(a) speaks only to ownership of Program Patents.
(c)Inventorship. Inventorship for purposes of this Agreement, and all intellectual property-related
definitions in this Agreement, shall be determined in accordance with United States patent law for
all Patents worldwide.
5.2Implementation.
(a)Assignments. Each Party hereby assigns to the other Party Program Inventions and associated
Patents as necessary to achieve ownership as provided in Section 5.1. Each assigning Party shall
execute and deliver all documents and instruments reasonably requested by the other Party to
evidence or record such assignment or to file for, perfect or enforce the assigned rights. Each
assigning Party hereby appoints the other Party as attorney-in-fact solely to execute and deliver the
foregoing documents and instruments if such other Party after making reasonable inquiry does not
obtain them from the assigning Party. Each Party (and its Affiliates) shall perform its activities
under this Agreement through personnel who have made a similar assignment and appointment to
and of such Party or any of its Affiliate. Each assigning Party shall make its relevant personnel
(and their assignments and signatures on such documents and instruments) reasonably available to
the other Party for assistance in accordance with this Article at no charge.
(b)Joint Ownership Implementation. As regards Joint Serendipitous Inventions and the Program
Patents to the extent claiming them, either Party is entitled to practice and license them without
consent of and without a duty of accounting to the other Party in accordance with the co-ownership
rights of co-inventors under U.S. law, subject to the terms of this Agreement. Each Party hereby
grants all permissions, consents and waivers with respect to, and all licenses under, the Joint
Serendipitous Inventions and the Program Patents claiming them as necessary to achieve
throughout the world the nature of joint ownership rights of the foregoing as described in Section
5.1 and the foregoing sentence and otherwise subject to the terms of this Agreement. To avoid
doubt, this Section 5.2(b) does not imply any permission, consent or waiver with respect to, or
license under, any Patent or item of Know-How other than the Joint Serendipitous Inventions and
the Program Patents to the extent claiming them.
5.3Disclosure. During the term of the Agreement, each Party shall promptly disclose to the other
Party [***] any Program Inventions that would be Covered by Program Antibody Patents or in
Surface’s case that are Adimab Platform Technology Improvements (which, to avoid doubt, are
assigned to Adimab under this Agreement). Such disclosure shall occur as soon as possible, but in
any case within [***] days after the Party determines such Program Inventions have been invented.
To avoid doubt, this Section 5.3 shall not be read to require Adimab to disclose Program
Inventions constituting Adimab Platform Technology Improvements to Surface.
5.4Program Patent Prosecution.
(a)Adimab Platform Technology. Adimab shall have the sole right (but not the obligation) to
Prosecute all Adimab Platform Patents, all at its own expense.
(b)Program Antibody Patents. Surface shall have the sole right (but not obligation except as
provided below) to Prosecute all Program Antibody Patents, at Surface’s expense, and prior to
Commercial Option exercise, in Adimab’s name, and after Commercial Option exercise, in
Adimab’s name to the extent that any Licensed Program Antibody Patent is not assigned to Surface
pursuant to Section 3.3(b)(i). Such right shall continue for the duration of the longer of the
Evaluation Term and, if Surface exercises the Commercial Option, the term of the license under
Section 3.3(b)(ii), subject to all of the following:
(i)Prior to Commercial Option exercise, [***].
(ii)Prior to Commercial Option exercise, [***].
(iii)Both prior to and after Commercial Option exercise, Adimab shall have the right to review and
comment on prosecution of the Program Antibody Patents, and Surface shall reasonably consider
but is not required to accept any such comments. Adimab shall grant Surface the necessary
authority to Prosecute the Program Antibody Patents (including that Adimab shall join any suit or
action regarding the foregoing at Surface’s request). Surface shall provide Adimab with copies of
all correspondence with patent offices relating thereto (including office actions and the like)
promptly after receipt and drafts of all filings and correspondence with such offices no less than
[***] in advance of filing.
(iv)If Surface does not exercise the Commercial Option for a Target, then [***].
(v)If Surface does exercise the Commercial Option for a Target, then [***].
(vi)[***].
(vii)Surface shall use Commercially Reasonable Efforts to Prosecute at least one Licensed
Program Antibody Patent in at least each country of the Major Markets.
(viii)Surface shall be solely responsible for all costs of the activities under this Section 5.4(b),
except (A) as expressly provided under this Section 5.4(b) or (B) that to the extent Adimab hires
counsel to review and comment on Surface’s prosecution then Adimab shall be solely responsible
for the fees to such counsel.
(ix)Except as provided in this Agreement, Adimab shall not disclose or claim (or have or license
any others to disclose or claim) any Program Antibody (or the Binding Sequence Information
thereof) or any other antibody or their Binding Sequence Information identified from any Naive
Antibody Library or Optimization Antibody Library, unless independently invented in a manner in
compliance with the terms of this Agreement (including the restrictions on Naive Antibody
Libraries and Optimization Antibody Libraries contained herein). For clarity, (1) Adimab shall not
nor allow any others to refile or Prosecute any Patent applications [***] and (2) the foregoing
prohibitions shall not prevent Adimab from filing broad Patents (such as, for example, Patents
which Cover an antibody library) which Cover a Program Antibody or its Binding Sequence
Information so long as Adimab does recite in any claim the such Program Antibody or its Binding
Sequence Information in such Patent, and so long as Adimab does not disclose such Program
Antibody or its Binding Sequence Information in such Patent.
(c)Responsibility. It is understood and agreed that searching for, identification and evaluation of
Third-Party Patents that may apply to any Program Antibodies based on sequence, Target or the
like is the responsibility of Surface and Adimab shall have no responsibility for the foregoing nor
liability if any such Third-Party Patents exist.
(d)Serendipitous Program Inventions.
(i)Adimab Program Inventions. As between the Parties, Adimab shall have the sole right, at its
sole expense, to prepare, file, prosecute, enforce and maintain (including conducting or
participating in interferences and oppositions and the like) (collectively “Prosecute”) all Patents
directed to Adimab Program Inventions but not falling within the Program Antibody Patents or the
Adimab Platform Technology Improvements (which, to avoid doubt, are both addressed above).
(ii)Surface Program Inventions. Surface shall be responsible, at its sole expense, to Prosecute all
Program Patents directed to Surface Program Inventions but not falling within Program Antibody
Patents or the Adimab Platform Technology Improvements (which, to avoid doubt, are both
addressed above).
(iii)Serendipitous Joint Program Inventions. The Parties shall mutually agree which of them
shall be responsible for either using its in-house patent attorneys or through mutually agreed upon
outside counsel to Prosecute Program Patents directed to Joint Serendipitous Inventions, and how
the costs of such activities will be shared.
5.5Patent Term Restoration. The Parties shall cooperate with each other, including by providing
necessary information and assistance as the other Party may reasonably request, to obtain patent
term restoration or supplemental protection certificates or their equivalents in any country where
applicable to Licensed Program Antibody Patents. After Commercial Option exercise, if elections
with respect to obtaining such patent term restoration are to be made with respect to Licensed
Program Antibody Patents, and the Parties do not agree, Surface shall have the right to make the
election and Adimab agrees to abide by such election.
5.6Cooperation of the Parties. At the reasonable request of the responsible (as provided for in
this Article 5) Party, the other Party agrees to cooperate fully in the Prosecution of any Program
Patents under this Agreement. Such cooperation includes executing all papers and instruments (or
causing its personnel to do so) reasonably useful to enable the other Party to apply for and to
prosecute patent applications in any country; and promptly informing the other Party of any
matters coming to such Party’s attention that may affect the Prosecution of any such Patents.
Adimab shall not be required pursuant to this Section to disclose Adimab Platform Technology to
Surface.
5.7Patent Challenges. If Surface or its Affiliates challenges in a court the validity, enforceability
or scope of any Adimab Platform Patents or any Program Antibody Patent, then: [***].
ARTICLE 6
CONFIDENTIALITY; PUBLICITY.
6.1General.
(a)Any and all information disclosed or submitted in writing or in other tangible form -- or if
disclosed orally, that is indicated to be confidential at the time of disclosure and confirmed in
writing as such within [***] days after initial disclosure -- to one Party by the other Party under
this Agreement or that certain Mutual Confidentiality Agreement between the Parties dated March
27, 2014 is the “Confidential Information” of the disclosing Party. In addition, information
embodied in Adimab Materials is Adimab’s Confidential Information, and information embodied
in the Surface Materials is Surface’s Confidential Information, and Program Antibodies will be
treated as Surface’s Confidential Information after Commercial Option exercise.
(b)To avoid doubt, sequence information (whether as to amino acid sequence or nucleic acid
sequence) with respect to Program Antibodies shall be deemed the Confidential Information of
Adimab, except that from and after the date of Commercial Option exercise, the sequence
information as to the Licensed Antibodies shall be Confidential Information of Surface.
(c)Each Party shall receive and maintain the other Party’s Confidential Information in strict
confidence. Neither Party shall disclose any Confidential Information of the other Party to any
Third Party. Neither Party shall use the Confidential Information of the other Party for any purpose
other than as required to perform its obligations or exercise its rights hereunder. Each Party may
disclose the other Party’s Confidential Information to the receiving Party’s directors, employees,
contractors and advisors requiring access thereto for the purposes of this Agreement, provided,
however, that prior to making any such disclosures, each such person shall be bound by written
agreement to maintain Confidential Information in confidence, and not to use such information for
any purpose other than, in accordance with the terms and conditions of this Agreement. Surface
may disclose sequence data and other data generated under the Research Program to legal,
financial and investment banking advisors, and potential and actual investors, lenders, financing
sources, Change of Control counterparties, acquirers, collaborators, sublicensees and licensees and
counsel for the foregoing, that are under legally binding obligations of confidence and limited use
and to national patent offices in accordance with Section 5.4. Each Party agrees to take all steps
necessary to ensure that the other Party’s Confidential Information shall be maintained in
confidence including such steps as it takes to prevent the disclosure of its own proprietary and
confidential information of like character. Each Party agrees that this Agreement shall be binding
upon its Affiliates, and upon the employees and contractors involved in the Research Program of
such Party and its Affiliates. Each Party shall take all steps necessary to ensure that its Affiliates
and employees and contractors shall comply with the terms and conditions of this Agreement. The
foregoing obligations of confidentiality and non-use shall survive, and remain in effect for a period
of [***] years from, the termination or expiration of this Agreement in accordance with Article 9.
6.2Exclusions from Nondisclosure Obligation. The nondisclosure and nonuse obligations in
Section 6.1 shall not apply to any Confidential Information to the extent that the receiving Party
can establish by competent written proof that it:
(a)at the time of disclosure is publicly known;
(b)after disclosure, becomes publicly known by publication or otherwise, except by breach of this
Agreement by such Party;
(c)was in such Party’s possession in documentary form at the time of the earlier of disclosure
hereunder and disclosure under the agreement referred to in Section 6.1;
(d)is received by such Party from a Third Party who has the lawful right to disclose the
Confidential Information and who shall not have obtained the Confidential Information either
directly or indirectly from the disclosing Party; or
(e)is independently developed by such Party (i.e., without reference to Confidential Information of
the disclosing Party).
6.3Required Disclosures. If either Party is required to disclose any Confidential Information of
the other Party, pursuant to a governmental law, regulation or order, or an order of a court of
competent jurisdiction or to defend or prosecute litigation or as part of an arbitration; provided,
however, that the receiving Party (i) shall give advance written notice to the disclosing Party, (ii)
shall make a reasonable effort to assist the disclosing Party to obtain a protective order requiring
that the Confidential Information so disclosed be used only for the purposes for which the law or
regulation required and (iii) shall use and disclose the Confidential Information solely to the extent
so required.
6.4Terms of Agreement. The terms of this Agreement are the Confidential Information of both
Parties. However, each Party shall be entitled to disclose the terms of this Agreement under legally
binding obligations of confidence and limited use to: legal, financial and investment banking
advisors; and potential and actual investors, lenders, financing sources, Change of Control
counterparties, acquirers, collaborators, sublicensees and licensees and counsel for the foregoing.
In addition, if legally required, a copy of this Agreement may be filed by either Party with the SEC
(or relevant ex-U.S. counterpart). In that case, the filing Party will if requested by the other Party
diligently seek confidential treatment for terms of this Agreement for which confidential treatment
is reasonably available, and shall provide the non-filing Party reasonable advance notice of the
terms proposed for redactions and a reasonable opportunity to request that the filing Party make
additional redactions to the extent confidential treatment is reasonably available under the law.
The filing Party shall seek and diligently pursue such confidential treatment requested by the non-
filing Party.
6.5Return of Confidential Information. Promptly after the termination or expiration of this
Agreement for any reason, each Party shall return to the other Party all tangible manifestations of
such other Party’s Confidential Information at that time in the possession of the receiving Party;
provided, however, that the receiving Party shall be entitled to retain one (1) copy of such
information solely for the purpose of monitoring such Party’s surviving obligations under this
Agreement. Electronic copies of Confidential Information contained in backups or electronic
archives made in the normal course of the receiving Party’s business shall not be required to be
destroyed or returned in accordance with this Section 6.5.
6.6Publicity. Each of Adimab and Surface may publish a press release describing the
collaboration, but without identifying the targets to be worked on or the economic terms of the
collaboration. The Parties will agree on specific press release language promptly following the
Effective Date. Other than repeating information in such press release (or any subsequent mutually
agreed press release), neither Party will generate or allow any further publicity regarding this
Agreement or the transaction or research contemplated hereunder in which the other Party is
identified, without giving the other Party the opportunity to review and comment on the press
release. The Parties recognize the importance of announcing Commercial Option exercise and the
achievement of Milestones, and that Adimab is entitled to disclose these occurrences; provided,
however, that Adimab may disclose the identity of Surface but will not disclose the identity of any
of Surfaces’ licensees, sublicensees or collaborators (if applicable) or the identity of the Target or
the possible indication(s) (although the class of protein of the Target (but not the family) may be
disclosed). Accordingly, the Parties hereby agree that each such event shall be publicly announced
by the Parties if requested by Adimab, and the Parties shall mutually agree upon the text of a press
release to announce each such event. Surface shall not unreasonably withhold its consent to the
manner in which Adimab proposes to make such disclosure. It is understood and agreed that
Adimab sometimes issues press releases that group multiple achievements of the company, and
that if Adimab chooses to group the initially approved text or the announcement of Commercial
Option exercise and/or a milestone achievement under this Agreement with other accomplishments
or events not relating to this Agreement, then the only portion of the press release into which the
Surface shall have a consent right (such consent not to be unreasonably withheld), shall be those
portions that relate to this Agreement.
6.7Certain Data. Notwithstanding this Article 6, without disclosing Surface’s (or any of its
Affiliates’ or licensees’, sublicensees’ or collaborators’) identity or the identity of the Target or the
possible indication(s), or information making such identities or indications reasonably discernable
(although the class of protein of the Target (but not the family) may be disclosed), or the sequence
of any Program Antibody, in order to describe the general capabilities and performance of the
Adimab platform, Adimab shall be entitled to disclose generally Program Antibody attributes ,
including the following: (a) Program Antibody binding affinities (KD), (b) expression range
regarding Program Antibodies, and (c) germline distribution of Program Antibodies.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES.
7.1Mutual. Each of Adimab and Surface hereby represents and warrants to the other of them that
the representing and warranting Party is duly organized in its jurisdiction of incorporation; that the
representing and warranting Party has the full power and authority to enter into this Agreement;
that this Agreement is binding upon the representing and warranting Party; that this Agreement has
been duly authorized by all requisite corporate action within the representing and warranting Party;
and that the execution, delivery and performance by the representing and warranting Party of this
Agreement and its compliance with the terms and conditions hereof does not and shall not conflict
with or result in a breach of any of the terms and conditions of or constitute a default under (a) any
agreement or other instrument binding or affecting it or its Affiliate or the property of either of
them, (b) the provisions of its bylaws or other governing documents or (c) any order, writ,
injunction or decree of any governmental authority entered against it or by which any of its
property is bound.
7.2Adimab. Adimab hereby represents, warrants and covenants to Surface that:
(a)[***]
(b)[***]
7.3DISCLAIMER OF WARRANTIES. OTHER THAN THE EXPRESS WARRANTIES OF
SECTIONS 7.1 AND 7.2, EACH PARTY DISCLAIMS ALL WARRANTIES OF ANY KIND,
EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR THAT ANY PRODUCTS DEVELOPED
UNDER THIS AGREEMENT ARE FREE FROM THE RIGHTFUL CLAIM OF ANY THIRD
PARTY, BY WAY OF INFRINGEMENT OR THE LIKE OR THAT ANY PROGRAM PATENTS
WILL ISSUE OR BE VALID OR ENFORCEABLE.
ARTICLE 8
INDEMNIFICATION
8.1By Adimab. Adimab hereby agrees to indemnify, defend and hold harmless (collectively,
“Indemnify”) Surface, its Affiliates and its and their directors, officers, agents and employees
(collectively, “Surface Indemnitees”) from and against any and all liability, loss, damage or
expense (including without limitation reasonable attorney’s fees) (collectively, “Losses”) they may
suffer as the result of Third-Party claims, demands and actions (collectively, “Third-Party
Claims”) arising out of or relating to (a) any breach of a representation or warranty or covenant
made by Adimab under Article 7 or otherwise of this Agreement, or (b) arising out of or in
connection with or attributable to Adimab’s negligence, gross negligence or willful misconduct in
performance of any Research Plan, except to the extent of any Losses [***].
8.2By Surface. Surface hereby agrees that it and its licensees and sublicensees shall Indemnify
Adimab, its Affiliates and its and their directors, officers, agents and employees (collectively,
“Adimab Indemnitees”) from and against any and all Losses they may suffer as the result of
Third-Party Claims arising out of or relating to (a) any breach of a representation or warranty or
covenant made by Surface under Article 7 or otherwise of this Agreement, (b) Surface’s research,
testing, development, manufacture, use, sale, distribution, licensing and/or commercialization of
Program Antibodies and/or Licensed Products (or Program-Benefited Antibodies or products
incorporating them), (c) Target-related intellectual property (including Patents directed to
antibodies based on their interaction with a Target), (d) Target-related or Surface Materials-related
contractual obligations of Surface and its Affiliates, or (e) intellectual property applying to any
Program Antibody based on its sequence or other characteristics (it being understood and agreed in
accordance with Section 5.4(c) that Adimab does not perform intellectual property searches on
Program Antibodies (including sequence-based searches) and this is the responsibility of Surface),
except in each case to the extent of any Losses [***].
8.3Procedures. Each of the foregoing agreements to Indemnify is conditioned on the relevant
Adimab Indemnitees or Surface Indemnitees (i) providing prompt written notice of any Third-
Party Claim giving rise to an indemnification obligation hereunder, (ii) permitting the
indemnifying Party to assume full responsibility to investigate, prepare for and defend against any
such Third-Party Claim, (iii) providing reasonable assistance in the defense of such claim at the
indemnifying Party’s reasonable expense, and (iv) not compromising or settling such Third-Party
Claim without the indemnifying Party’s advance written consent. If the Parties cannot agree as to
the application of the foregoing Sections 8.1 and 8.2, each may conduct separate defenses of the
Third-Party Claim, and each Party reserves the right to claim indemnity from the other in
accordance with this Article 8 upon the resolution of the underlying Third-Party Claim.
8.4Limitation of Liability. EXCEPT TO THE EXTENT SUCH PARTY MAY BE REQUIRED
TO INDEMNIFY THE OTHER PARTY UNDER THIS ARTICLE 8 (INDEMNIFICATION) OR
AS REGARDS A BREACH OF A PARTY’S RESPONSIBILITIES PURSUANT TO ARTICLE 6
(CONFIDENTIALITY; PUBLICITY), NEITHER PARTY NOR ITS RESPECTIVE AFFILIATES
SHALL BE LIABLE FOR ANY SPECIAL, INDIRECT, EXEMPLARY, CONSEQUENTIAL OR
PUNITIVE DAMAGES HEREUNDER, WHETHER IN CONTRACT, WARRANTY, TORT,
STRICT LIABILITY OR OTHERWISE.
ARTICLE 9
TERM.
9.1Term. The term of this Agreement shall commence on the Effective Date and shall expire upon
the later of (a) the earlier of (i) the expiration of the Commercial Option(s) and Research Option(s)
(if they expire without being exercised), and (ii) expiration of 12 months from the Effective Date
without Surface providing Surface Materials that successfully pass Adimab’s QC; or (b) if at least
one Research Option has been exercised but no Commercial Option has been exercised, upon the
expiration of the last to expire Research License Term; or (c) on a country-by-country and
Licensed Product-by-Licensed Product basis on the expiration of the last Royalty Term for a
Licensed Product in the particular country, in each case, unless earlier terminated by a Party as set
forth below in this Article 9. On expiration under (c) in a particular country, the license of Section
3.3(b)(ii) for the corresponding Licensed Product and its Licensed Antibody shall automatically
convert to be perpetual, irrevocable, non-exclusive and fully-paid up in such country.
9.2Material Breach.
(a)Either Party may terminate this Agreement for the material breach of this Agreement by the
other Party, if such breach remains uncured [***] days following notice from the non-breaching
Party to the breaching Party specifying such breach.
(b)For Targets for which the Commercial Option or Research Option has been exercised, the
foregoing Section 9.2(a) applies on a Target-by-Target basis to the extent that a breach relates to
specific Targets, and such termination shall be applicable to only those Targets (and its associated
Patents, Licensed Antibodies, Licensed Research Antibodies, and Licensed Products) to which the
uncured the material breach relates.
(c)If there is a good faith dispute as to the existence or cure of a breach or default pursuant to
Section 9.2(a), all applicable cure periods will be tolled during the existence of such good faith
dispute and no termination for a breach which is disputed in good faith will become effective until
such dispute is resolved pursuant to the process set forth in Section 10.2 and a [***] day cure
period offered thereafter.
9.3Termination for Convenience. Surface may terminate this Agreement in its entirety on [***]
prior written notice to Adimab. On a Target-by-Target basis, after Commercial Option or Research
Option exercise, Surface may also terminate this Agreement as to all Licensed Antibodies,
Licensed Research Antibodies and Licensed Products to a particular Target by [***] prior written
notice to Adimab.
9.4Commitments Regarding Program-Benefited Antibodies. The Parties intend that if Surface,
its licensees, or its sublicensees, or the Affiliate of any of the foregoing, will pursue any Program-
Benefited Antibodies, they shall do so under this Agreement paying fees to Adimab as provided in
Article 4. This Agreement gives Surface, its licensee, its sublicensee or the Affiliate of any of the
foregoing the right to modify the Program Antibodies, by including modified versions of them and
derivatives of them in the definition of “Licensed Antibodies” provided above. Surface, its
licensee, its sublicensee or the Affiliate of any of the foregoing shall even be entitled to choose to
pursue or use information obtained under this Agreement from Adimab to pursue an antibody not
covered by the Program Antibody Patents, but only if Surface, its licensee, its sublicensee or the
Affiliate of any of the foregoing treats the pursued antibody as milestone- and royalty-bearing
under this Agreement to the extent such pursued antibody is a Program-Benefited Antibody. The
Parties intend that Surface, its licensee, its sublicensee or the Affiliate of any of the foregoing shall
not develop or commercialize a Program-Benefited Antibody, except in accordance with this
Agreement (including exercising the Commercial Option and paying Adimab the Commercial
Option Fee, Milestone Payments and royalties on the Program-Benefited Antibody product as (or
as if) a Licensed Product under this Agreement). Accordingly, even if this Agreement expires or
terminates (other than an expiration under Section 9.1 following a Commercial Option exercise
after all Royalty Terms have expired for the applicable Program-Benefited Antibody or Licensed
Product), Surface hereby covenants that Surface, its licensees and sublicensees and the Affiliates
of any of the foregoing (a) shall not research, develop or commercialize any Program-Benefited
Antibody or Licensed Product containing such an antibody except as a Licensed Product under this
Agreement, and (b) shall not license or otherwise grant rights to any entity to do the foregoing.
9.5Survival in All Cases. Termination of this Agreement shall be without prejudice to or
limitation on any other remedies available to nor any accrued obligations of either Party. In
addition, Sections 2.3, 2.4, 2.5, 2.6, 3.5, 4.8 through 4.16 (with respect to payment obligations
outstanding or having accrued as the effective date of termination or expiration), 5.1, 5.2, 5.4, 5.6,
and 7.3, and Articles 1, 6, 8, 9 and 10 shall survive any expiration or termination of this
Agreement. Further, upon termination of this Agreement by either Party under Section 9.2 or 9.3,
Surface, its licensees and sublicensees, and their Affiliates will no longer develop or
commercialize any Licensed Antibody or Licensed Product (subject to Section 9.2(b) for partial
terminations).
9.6Survival of Sublicenses. In the event that the licenses granted to Surface under this Agreement
are terminated, any granted sublicenses to Third Parties will remain, at any such Third Party’s
election, in full force and effect; provided, that the sublicense agreement is consistent with the
terms of this Agreement, the sublicensee is not then in breach of its sublicense agreement, and such
Third Party agrees to be bound to Adimab as a licensor under the terms and conditions of this
Agreement (including payment obligations as reflected in this Agreement with respect to Adimab).
In such event, Adimab will negotiate and enter into an appropriate license agreement with such
Third Party incorporating the terms and conditions of this Agreement.
9.7Bankruptcy. All licenses and rights to licenses granted under or pursuant to this Agreement by
Adimab to Surface are, and will otherwise be deemed to be, for purposes of Section 365(n) of the
United States Bankruptcy Code (the “Bankruptcy Code”), licenses of rights to “intellectual
property” as defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that
Surface, as a licensee of such rights under this Agreement, will retain and may fully exercise all of
its rights and elections under the Bankruptcy Code. The Parties further agree that that upon
commencement of a bankruptcy proceeding by or against Adimab under the Bankruptcy Code,
Surface will be entitled to a complete duplicate of, or complete access to (as Surface deems
appropriate), all such intellectual property and all embodiments of such intellectual property. Such
intellectual property and all embodiments of such intellectual property will be promptly delivered
to Surface (a) upon any such commencement of a bankruptcy proceeding and upon written request
by Surface, unless Adimab elects to continue to perform all of its obligations under this
Agreement, or (b) if not delivered under (a) above, upon the rejection of this Agreement by or on
behalf of Adimab and upon written request by the Surface. Adimab (in any capacity, including
debtor-in-possession) and its successors and assigns (including any trustee) agrees not to interfere
with the exercise by Surface or its Affiliates of its rights and licenses to such intellectual property
and such embodiments of intellectual property in accordance with this Agreement, and agrees to
assist Surface and its Affiliates in obtaining such intellectual property and such embodiments of
intellectual property in the possession or control of Third Parties as reasonably necessary or
desirable for Surface to exercise such rights and licenses in accordance with this Agreement. The
foregoing provisions are without prejudice to any rights Surface may have arising under the
Bankruptcy Code or other applicable law. Notwithstanding the foregoing in this Section 9.7,
nothing in this Section 9.7 shall be read to entitle Surface to obtain disclosure of or access to
Adimab Platform Technology (including Adimab Platform Technology Improvements), whether or
not as an “embodiment,” “update,” or otherwise, at any time, and Surface shall not under any
circumstances notwithstanding anything express or implied in this Agreement be entitled to
disclosure of Adimab Platform Technology or Adimab Platform Technology Improvements.
9.8Return of Adimab Materials. Except as otherwise provided in Section 2.4, on a Target-by-
Target basis, Surface shall either return to Adimab or destroy all Adimab Materials (other than
Adimab Materials relating to Licensed Antibodies) upon expiration or termination of the
Evaluation Term without any Commercial Option or Research Option being exercised, and all
Adimab Materials on expiration (other than for any Licensed Product and the corresponding
Licensed Antibody an expiration under Section 9.1 following a Commercial Option exercise and
after all Royalty Terms for such Licensed Product have expired) or termination of this Agreement.
ARTICLE 10
MISCELLANEOUS.
10.1Independent Contractors. The Parties shall perform their obligations under this Agreement
as independent contractors. Nothing contained in this Agreement shall be construed to be
inconsistent with such relationship or status. This Agreement and the Parties’ relationship in
connection with it shall not constitute, create or in any way be interpreted as a joint venture,
fiduciary relationship, partnership or agency of any kind.
10.2Dispute Resolution.
(a)Initial Dispute Resolution. Either Party may refer any dispute in connection with this
Agreement (“Dispute”) not resolved by discussion of the BD/Contract Liaisons to senior
executives of the Parties (for Adimab, its CEO or his designee and for Surface, its CEO or his
designee) for good-faith discussions over a period of not less than sixty (60) days (the “Senior
Executives Discussions”). Each Party will make its executives reasonably available for such
discussions.
(b)Disputes Not Resolved Between the Parties. If the Parties are unable to resolve the dispute
through the Senior Executives Discussions within such sixty (60) days, then either Party may, as
the sole and exclusive means for resolving disputes under this Agreement, proceed to demand
confidential arbitration by written notice to the other Party and making a filing with the AAA in
accordance with Section 10.2(c). For clarity, each Party hereby acknowledges that both the fact of
and nature of a dispute is the Confidential Information of both Parties, and any disclosure of the
fact of or the nature of such a dispute would be highly damaging to the non-disclosing Party.
(c)Arbitration.
(i)Any Dispute referred for arbitration shall be finally resolved by binding arbitration in
accordance with the most applicable rules of the American Arbitration Association (“AAA”) and
judgment on the arbitration award may be entered in any court having jurisdiction.
(ii)The arbitration shall be conducted by a panel of three (3) people experienced in the business of
biopharmaceuticals. If the issues in dispute involve scientific, technical or commercial matters,
then any arbitrator chosen under this Agreement shall have educational training and/or industry
experience sufficient to demonstrate a reasonable level of relevant scientific, technical and
commercial knowledge as applied to the pharmaceutical industry. If the issues in dispute involve
patent matters, then at least one (1) of the arbitrators shall be a licensed patent attorney or
otherwise
knowledgeable about patent law matters. Within [***] days after a Party demands arbitration, each
Party shall select one person to act as arbitrator, and the two Party-selected arbitrators shall select a
third arbitrator within [***] days after their own appointment. If the arbitrators selected by the
Parties are unable or fail to agree upon the third arbitrator, then the third arbitrator shall be
appointed by the AAA. The place of arbitration shall be Boston, Massachusetts. All proceedings
and communications as part of the arbitration shall be in English. Following selection of the third
arbitrator, the arbitrators shall complete the arbitration proceedings and render an award within
[***] months after the last arbitrator is appointed.
(iii)Each Party shall bear its own costs and expenses and attorneys’ fees and an equal share of the
arbitrators’ fees and any administrative fees or arbitration, unless in each case the arbitrators agree
otherwise, which they are hereby empowered, authorized and instructed to do if they determine
that to be fair and appropriate.
(iv)Except to the extent necessary to confirm an award or as may be required by law, regulation, or
the requirement of any exchange on which a Party’s shares are traded, neither Party shall disclose
the existence, content or results of an arbitration under this Agreement without the prior written
consent of the other Party.
(v)In no event shall an arbitration be initiated after the date when commencement of a legal or
equitable proceeding based on the subject matter of the Dispute would be barred by the applicable
statute of limitations under New York law.
10.3Governing Law. This Agreement shall be governed by and interpreted in accordance with the
laws of the Commonwealth of Massachusetts, excluding its conflicts of laws principles; provided,
however, that matters of Patent law will be determined in accordance with the United States federal
law. Any and all judicial resolutions of disputes in connection with this Agreement shall be in
federal or state court located in Massachusetts, and each Party hereby consents to the jurisdiction
and venue of such courts, and waives all defenses it may have to such jurisdiction and venue,
including that the court cannot assert personal jurisdiction over the defendant and forum non
conveniens.
10.4Entire Agreement. This Agreement (including its Exhibits) set forth all the covenants,
promises, agreements, warranties, representations, conditions and understandings between the
Parties with respect to the subject matter hereof and supersedes and terminates all prior agreements
and understandings between the Parties with respect to such subject matter (including that certain
Mutual Confidentiality Agreement between the Parties dated March 27, 2014). No subsequent
alteration, amendment, change or addition to this Agreement shall be binding upon the Parties
unless reduced to writing and signed by the respective authorized officers of the Parties.
10.5Assignment. Neither Party may assign in whole or in part this Agreement without the advance
written consent of the other Party, except as set forth in the following sentence. Either Party may
assign this Agreement in its entirety to the successor to all or substantially all of its stock or assets
to which this Agreement relates in connection with its merger with, or the sale of all or
substantially all of its stock or assets to which this Agreement relates to, another entity, regardless
of the form of the transaction (including any Change of Control). In addition, Adimab may assign
this
Agreement or any of its rights under this Agreement, in connection with the sale of, monetization
of, transfer of, or obtaining financing on the basis of the payments due to Adimab under this
Agreement or debt or project financing in connection with this Agreement. Also, Surface may
assign its rights and obligations under this Agreement on a Target-by-Target basis, at any time after
Commercial Option exercise for the particular Target, to any entity to which Surface assigns all or
substantially all of its assets with respect to such Target (and its related Patents, Licensed
Antibodies and Licensed Products); provided, however, [***]. Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective
successors and permitted assigns. Notwithstanding the foregoing, Adimab may not assign or
otherwise transfer (by operation of law or otherwise) this Agreement if the assignee does not
assume all of Adimab’s obligations under this Agreement or Adimab does not remain bound to
perform all obligations that are not assigned to the assignee. Any assignment of this Agreement not
made in accordance with this Agreement is prohibited hereunder and shall be null and void.
10.6Severability. If one or more of the provisions in this Agreement are deemed unenforceable by
law, then such provision shall be deemed stricken from this Agreement and the remaining
provisions shall continue in full force and effect.
10.7Force Majeure. Both Parties shall be excused from the performance of their obligations under
this Agreement to the extent that such performance is prevented by a Force Majeure and the
nonperforming Party promptly provides notice of the prevention to the other Party. Such excuse
shall be continued so long as the condition constituting Force Majeure continues and the
nonperforming Party takes reasonable efforts to remove the condition, but no longer than [***],
whereupon the other Party may assert breach by the nonperforming Party.
10.8Notices. Any notice required or permitted to be given under this Agreement shall be in
writing, shall specifically refer to this Agreement and shall be deemed to have been sufficiently
given for all purposes if mailed by first class certified or registered mail, postage prepaid, delivered
by express delivery service or personally delivered. Unless otherwise specified in writing, the
mailing addresses of the Parties shall be as described below.
If to Adimab:
Adimab, LLC
7 Lucent Drive
Lebanon, NH 03766
Attention: General Counsel
with a required copy to:
Attention: Head, Business Development at the same address.
In the case of Surface:
Surface Oncology, Inc.
25 First Street
Suite 303
Cambridge, MA 02141
Attn: Chief Executive Officer
10.9Construction. This Agreement has been prepared jointly and shall not be strictly construed
against either Party. Ambiguities, if any, in this Agreement shall not be construed against any
Party, irrespective of which Party may be deemed to have authored the ambiguous provision.
10.10Headings. The headings for each article and section in this Agreement have been inserted for
convenience of reference only and are not intended to limit or expand on, nor to be used to
interpret, the meaning of the language contained in the particular article or section.
10.11No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to
a particular default or other matter shall not constitute a waiver of such Party’s rights to the
subsequent enforcement of its rights under this Agreement, excepting only as to an express written
and signed waiver as to a particular matter for a particular period of time executed by an
authorized officer of the waiving Party.
10.12Performance by Affiliates. A Party may perform some or all of its obligations under this
Agreement through Affiliate(s) or may exercise some or all of its rights under this Agreement
through Affiliates, or in the case of Adimab, Controlled Contractors, which will be treated as
“Affiliates” for purposes of this Section 10.12. However, each Party shall remain responsible and
be guarantor of the performance by its Affiliates and shall cause its Affiliates to comply with the
provisions of this Agreement in connection with such performance. In particular and without
limitation, all Affiliates of a Party that receive Confidential Information of the other Party pursuant
to this Agreement shall be governed and bound by all obligations set forth in Article 6, and shall
(to avoid doubt) be subject to the intellectual property assignment and other intellectual property
provisions of Article 5 as if they were the original Party to this Agreement (and be deemed
included in the actual Party to this Agreement for purposes of all intellectual property-related
definitions). A Party and its Affiliates shall be jointly and severally liable for their performance
under this Agreement.
10.13Counterparts. This Agreement may be executed in one or more identical counterparts, each
of which shall be deemed to be an original, and which collectively shall be deemed to be one and
the same instrument. In addition, signatures may be exchanged by facsimile or PDF.
[Remainder of Page Left Intentionally Blank; Signature Page Follows]
IN WITNESS WHEREOF, the Parties have by duly authorized persons executed this Agreement as of
the Effective Date.
SURFACE ONCOLOGY, INC.:
By:
/s/ J. Jeffrey Goater
Title: CEO
Date: 10/4/2018
A - TARGET QUESTIONNAIRE
/s/ Tillman Gerngross
ADIMAB, LLC:
By:
Title: CEO
Date: 10/3/2018
EXHIBITS LIST
B - FORM OF RESEARCH PLAN
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
Partner Target Questionnaire
Selection of Human Antibodies Binding To Target
Adimab Confidential - Sample Work Plan
Page 1
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
Partner Completed Target Questionnaire
Information you are able to provide about your target will help Adimab design a customized
selection strategy and detailed work plan. This will ultimately allow Adimab to deliver antibodies
that fit your desired properties.
Overview
The primary factors that determine the successful outcome of an IgG library screen are
(i) the quality of the antibody library
(ii) the quality and consistency of the antigens used in the selection process
While Adimab has taken extensive steps to ensure the quality of its libraries, the antigen used to
interrogate our library is provided by the Partner and must be properly characterized to meet
screening requirements. Adimab has compiled the following set of criteria to help ensure the
quality of the antigen(s) used in the selection process which will ultimately lead to a successful
campaign. Any additional information the Partner can provide relating to your antigen is valuable.
When multiple forms of the antigen are available, and are used in the selection, it increases
the potential success of the campaign. As an example, an RTK-ECD can be supplied as both an
Fc-fusion protein and as a tagged monomeric protein, or produced and purified using preferred
host expression systems and purification tags.
Target (sample answers provided below in blue)
• What is the nature of your target (e.g., extracellular domain of a membrane protein)?
• Serum enzyme
• Does your target protein have an affinity tag?
•
If yes, what tag?
• C-terminus His-tag
• Are you aware of any post-translational modification to your target protein (e.g., N-
glycosylation, O-glycosylation or phosphorylation)?
• None
Adimab Confidential - Sample Work Plan
•
Is your target a chimeric protein (e.g., Fc-fusion protein)?
• No
• Does your target protein interact with other proteins or form complexes?
• Yes
• Does your target exist naturally as a monomer, dimer, trimer, etc.?
• Target is naturally monomeric
•
Is your target available in multiple formats (e.g., monomeric, dimeric, multiple tags, etc.)?
• No
• How stable is your target protein (e.g., stability @ 4°C, freeze thaw cycle data)?
• Stable at +4°C for months
• Do you have access to 10 nmol quantities (e.g., ~1 mg of 75 kDa protein) of your target
protein?
• Yes
• Do you have cell-based or other assays to determine the bioactivity of your target?
• Yes, there are cell-based assays in place
•
Is cross-reactivity of your final antibody essential (e.g., cross-reactivity to murine,
cynomolgus or macaque target)?
•
• Cross-reactivity to murine and macaca ortholog mandatory
If yes, what is the homology between antigens?
• Specificity versus family members is mandatory. Family members are also
available
Adimab Confidential - Sample Work Plan
Mode of action
• Could you describe the profile of your “ideal antibody” (e.g., affinity, specificity,
mechanism of action, expressability, etc.)?
• Affinity to human and murine targets: KD ≤ 10 nM and koff ≤ 5x10-4s-1
• Specificity: selective versus family members and cross reactive with murine and
macaca targets. Competes with control mAb provided
• Do you wish to disrupt a protein-protein interaction (e.g., a receptor-ligand interaction or
dimerization)?
• We do not know at this stage
• Do you have an existing antibody (murine or other) that binds to your target?
•
• Yes
If yes, does the antibody have the “biology” you are looking for?
• We have already mAbs close to what we are looking for, that we’ll use internally
for comparison
• Are you looking to discover an antibody against a known epitope?
• No
• Can you describe the desired biological mode of action for the antibodies to be discovered?
• No
• What in vitro and in vivo screening assays are you planning to do in-house with purified
•
IgGs discovered by Adimab?
Is ADCC expected to be important?
• ADCC not important
Adimab Confidential - Sample Work Plan
Work Plan
Human Antibodies Binding To
Goal:
Adimab Confidential - Work Plan
TABLE OF CONTENTS
Profile of Desired Antibody
SECTION A - RESEARCH PLAN
Research Materials Provided by Partner
Overview of Project
Phase 1: Reagent Generation
Phase 2: Naïve Selection and Characterization of Human Antibodies Binding To Target
3
4
4
5
6
7
Phase 3: Assessment of IgGs
Phase 4: Optimization of nominated IgGs
Phase 5: Analysis of IgGs
Phase 6: Scaling of IgGs or Fabs
8
9
10
11
Adimab Confidential - Work Plan
Profile of Desired Antibody
Adimab Confidential - Work Plan
Section A: RESEARCH PLAN
Research Materials
Adimab Confidential - Work Plan
Overview of Project Flow
Adimab Confidential - Work Plan
Phase 1: Reagent Generation
Adimab Confidential - Work Plan
Phase 2: Naïve Selection and Characterization of Human Antibodies Binding To Target
Adimab Confidential - Work Plan
Phase 3: Assessment of IgGs
Adimab Confidential - Work Plan
Phase 4: Optimization of nominated IgGs
Adimab Confidential - Work Plan
Phase 5: Analysis of IgGs
Adimab Confidential - Work Plan
Phase 6: Scaling of IgGs or Fabs
Adimab Confidential - Work Plan
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
Exhibit 10.32
COLLABORATION AGREEMENT
by and between
SURFACE ONCOLOGY, INC.
and
NOVARTIS INSTITUTES FOR BIOMEDICAL RESEARCH, INC.
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
TABLE OF CONTENTS
1. DEFINITIONS
2. GOVERNANCE
3. RESEARCH
4. OPTION PURCHASE, GRANT AND EXERCISE OF OPTIONS
5. DEVELOPMENT
6. COMMERCIALIZATION
7. REGULATORY
8. MANUFACTURE
9. LICENSES
10. PAYMENTS
11. CONFIDENTIALITY AND PUBLICATION
12. REPRESENTATIONS, WARRANTIES AND COVENANTS
13. INDEMNIFICATION; LIMITATION OF LIABILITY; INSURANCE
14. INTELLECTUAL PROPERTY
1
30
43
46
52
68
76
86
95
107
123
126
137
140
15. TERM AND TERMINATION
16. MISCELLANEOUS
EXHIBITS AND SCHEDULES
157
165
Exhibit A-1: Determination of Component Values
Exhibit A-2: Manufacturing Costs for Combinations
Exhibit B: Manufacturing Costs
Exhibit C: Form of Option Exercise Notice
Exhibit D: Form of Option Purchase Notice
Exhibit E: Initial JSC Representatives
Exhibit F: T1 Research Plan
Exhibit G: Surface T1 Target Third Party Agreements
Exhibit H-1: CD47 Research Plan
Exhibit H-2: IL-27 Research Plan
Exhibit H-3: [***] Research Plan
Exhibit H-4: [***] Research Plan
Exhibit I: Surface Option Target Third Party Agreements
Exhibit J: Form of Option Selection Notice
Exhibit K: Surface Manufacturing Third Party Agreements
Exhibit L: Form of Invoice
Exhibit M: Royalty Calculation Examples
Exhibit N: Disclosure Obligation
Schedule 1.1.158: Option IND Package Information
Schedule 1.1.167: Option Tox Package Information
Schedule 12.2: Exceptions to Representations and Warranties
COLLABORATION AGREEMENT
THIS COLLABORATION AGREEMENT (this “Agreement”), entered into as of January 9, 2016 (the “Effective
Date”), is entered into by and between Surface Oncology, Inc., a corporation organized and existing under the Laws of
the State of Delaware (“Surface”), and Novartis Institutes for BioMedical Research, Inc., a corporation organized and
existing under the Laws of the State of Delaware (“Novartis”). Surface and Novartis are referred to in this Agreement
individually as a “Party” and collectively as the “Parties”.
RECITALS:
WHEREAS, Surface discovers, researches and develops next-generation approaches to cancer immunotherapy based
on proprietary insights about novel immunotherapy targets and emerging areas of cancer immuno-biology;
WHEREAS, Novartis and its Affiliates possess expertise in discovering, developing, manufacturing, marketing, and
selling pharmaceutical products worldwide; and
WHEREAS, Surface and Novartis desire to collaborate to research, develop and commercialize new cancer
immunotherapies, and Novartis would obtain certain rights to the technology and products discovered in such
collaboration.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the
Parties hereby agree as follows:
1. DEFINITIONS
1.1. Definitions.
Unless specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, will
have the respective meanings set forth below:
1.1.1. “AAA” has the meaning set forth in Section 16.3.3.
1.1.2. “Accounting Standards” means, GAAP, with respect to Surface and IFRS, with respect to Novartis, in each
case, as generally and consistently applied throughout the Party’s organization. Each Party shall promptly notify the
other in the event that it changes the Accounting Standards pursuant to which its records are maintained; provided,
however, that each Party may only use internationally recognized accounting principles (e.g. IFRS, GAAP, etc.).
1.1.3. “Acquirer” means, collectively, the Third Party referenced in the definition of Change of Control and such
Third Party’s Affiliates, other than the applicable Party in the definition of Change of Control and such Party’s
Affiliates, determined as of immediately prior to the closing of such Change of Control.
1.1.4. “Adimab Agreement” means that certain Development and Option Agreement, dated as of July 3, 2014, by and
between Adimab, LLC (“Adimab”) and Surface, as such agreement may be amended, restated or otherwise replaced
from time to time to the extent permitted under Section 12.4.3 of this Agreement.
1.1.5. “Additional Development Activities” has the meaning set forth in Section 5.2.2.4(a).
1.1.6. “Additional Development Data Package” has the meaning set forth in Section 5.2.2.4(d).
1.1.7. “Additional Development Opt-In Date” has the meaning set forth in Section 5.2.2.4(d).
1.1.8. “Additional Development Opt-In Notice” has the meaning set forth in Section 5.2.2.4(d).
1.1.9. “Additional Development Proposal” has the meaning set forth in Section 5.2.2.4(a).
1.1.10. “Affiliate” means, with respect to a Person, any other Person that controls, is controlled by, or is under
common control with such Person. For purposes of this Agreement, a Person will be deemed to control another Person
if it owns or controls, directly or indirectly, more than fifty percent (50%) of the equity securities of such other Person
entitled to vote in the election of directors (or, in the case that such other Person is not a corporation, for the election of
the corresponding managing authority), or otherwise has the power to direct the management and policies of such
other Person. The Parties acknowledge that in the case of certain entities organized under the laws of certain countries
outside the United States, the maximum percentage ownership permitted by law for a foreign investor may be less than
fifty percent (50%), and that in such case such lower percentage will be substituted in the preceding sentence, provided
that such foreign investor has the power to direct the management and policies of such entity.
1.1.11. “Alliance Manager” has the meaning set forth in Section 2.1.
1.1.12. “Annual Net Sales” mean Net Sales recorded in a given Calendar Year.
1.1.13. “Antibody” means any [***] provided however, that solely for purposes of Section 12.5, the term “Antibody”
shall be deemed to include those molecules that meet the criteria of (a) through (c) and for which [***] For clarity,
[***]
1.1.14. “Antibody Candidates” means the T1 Antibody Candidates, the Option Target Antibody Candidates, the
Regional Antibody Candidates and the Global Antibody Candidates.
1.1.15. “Antitrust Laws” means any federal, state or foreign law, regulation or decree, including the HSR Act,
designed to prohibit, restrict or regulate actions for the purpose or effect of monopolization or restraint of trade.
1.1.16. “Audited Party” has the meaning set forth in Section 10.12.3.
1.1.17. “Auditing Party” has the meaning set forth in Section 10.12.3.
1.1.18. “Auditor” has the meaning set forth in Section 10.12.3.
1.1.19. “Bankruptcy Code” has the meaning set forth in Section 15.4.
1.1.20. “Bankrupt Party” has the meaning set forth in Section 9.7.
1.1.21. “Biosimilar Application” means an application submitted to the FDA under subsection (k) of Section 351 of
the PHSA, or any analogous application submitted to a Regulatory Authority in the United States or in another country
in the world.
1.1.22. “Biosimilar Product” means, with [***] a product that [***]
1.1.23. “BLA” means (a) a Biologics License Application as defined in the FD&C Act and the regulations
promulgated thereunder, (b) a Marketing Authorization Application (“MAA”) in the EU, or (c) any equivalent or
comparable application, registration or certification in any other country or region.
1.1.24. “Brief” has the meaning set forth in Section 16.3.4.2(b).
1.1.25. “Business Day” means a day other than a Saturday, Sunday or a bank or other public holiday in Massachusetts
or New York in the United States or Basel, Switzerland.
1.1.26. “Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending on March
31, June 30, September 30 and December 31 of each Calendar Year.
1.1.27. “Calendar Year” means each successive period of twelve (12) months commencing on January 1 and ending
on December 31.
1.1.28. “cGCP” means the ethical, scientific, and quality standards required by FDA for designing, conducting,
recording, and reporting trials that involve the participation of human subjects, as set forth in FDA regulations in 21
C.F.R. Parts 11, 50, 54, 56, and 312 and related FDA guidance documents, and by the International Conference on
Harmonization E6: Good Clinical Practices Consolidated Guideline, or as otherwise required by applicable Laws.
1.1.29. “cGLP” means current good laboratory practice as required by the FDA under 21 C.F.R. part 58 and all
applicable FDA rules, regulations, orders and guidances, and the requirements with respect to current good laboratory
practices prescribed by the European Community, the OECD (Organization for Economic Cooperation and
Development Council) and the ICH Guidelines, or as otherwise required by applicable Laws.
1.1.30. “cGMP” means current good manufacturing practices as required by the FDA under provisions of 21 C.F.R.
parts 210 and 211 and all applicable FDA rules, regulations, orders and guidances, and the requirements with respect
to current good manufacturing practices prescribed by the European Community under provisions of “The Rules
Governing Medicinal Products in the European Community, Volume 4, Good Manufacturing Practices, Annex 13,
Manufacture of Investigational Medicinal Products, July 2003,” or as otherwise required by applicable Laws.
1.1.31. “Change of Control” means, with respect to a Party, (a) a merger or consolidation of such Party with a Third
Party that results in the voting securities of such Party outstanding immediately prior thereto, or any securities into
which such voting securities have been converted or exchanged, ceasing to represent at least fifty percent (50%) of the
combined voting power of the surviving entity or the parent of the surviving entity immediately after such merger or
consolidation, (b) a transaction or series of related transactions in which a Third Party, together with its Affiliates,
becomes the direct or indirect beneficial owner of fifty percent (50%) or more of the combined voting power of the
outstanding securities of such Party, or (c) the sale or other transfer to a Third Party of all or substantially all of such
Party’s and its controlled Affiliates’ assets.
1.1.32. “Clinical Study” means a Phase 1 Study, Phase 2 Study, Phase 3 Study, Post-Marketing Study, Supplemental
Study or other study (including a non-interventional study) in humans to obtain information regarding the product,
including information relating to the safety, tolerability, pharmacological activity, pharmacokinetics, dose ranging or
efficacy of the product.
1.1.33. “Clinical Study Phase” means a Phase 1 Study, Phase 2 Study or Phase 3 Study, as applicable.
1.1.34. “Collaboration” means the collaboration of the Parties under this Agreement, including the Research,
Development, Commercialization and Manufacture of Antibody Candidates and Licensed Products in the Field.
1.1.35. “Collaboration Component” means, with respect to a Combination, the portion of such Licensed Product
comprising an Antibody Candidate. If the applicable Combination includes more than one Antibody Candidate, then
“Collaboration Component” shall refer to each such Antibody Candidate.
1.1.36. “Collaboration In-License” has the meaning set forth in Section 9.5.1.3.
1.1.37. “Combination” means any Combination Product or Combination Therapy.
1.1.38. “Combination Product” means a product that includes an Antibody Candidate and at least one (1) additional
active ingredient that is not an Antibody Candidate that is either co-formulated or administered through a single
formulation, including, for clarity, an Antibody Candidate comprising a bi-specific Antibody. [***] For clarity [***]
1.1.39. “Combination Therapy” means a therapy that includes an Antibody Candidate and at least one (1) additional
active ingredient that is not an Antibody Candidate [***]
1.1.40. “Combination Trial” means a Clinical Study that is designed to provide safety, dose ranging, dose selection or
efficacy data for a Combination.
1.1.41. “Commercialization” or “Commercialize” means any and all activities directed to marketing, promoting,
distributing, importing, exporting, using, offering to sell or selling a product, and activities directed to obtaining
Pricing Approvals, as applicable.
1.1.42. “Commercialization Plans” means, collectively, the T1 Commercialization Plan, the Novartis
Commercialization Plan, the Surface Commercialization Plan and the Global Licensed Product Commercialization
Plan.
1.1.43. “Commercially Reasonable Efforts” means, with respect to a Party [***]
1.1.44. “Committee” means the Joint Steering Committee, Joint Research Committee, Joint Development Committee
or Joint Commercialization Committee, or any other subcommittee established under Section 2.2.3.11, as applicable.
1.1.45. “Competing Program” means a Surface Competing Program or a Novartis Competing Program, as applicable.
1.1.46. “Competitive Infringement” means, [***] where the making, using, selling, offering for sale, or importing, by
any Third Party (other than any Sublicensee or authorized purchaser or other transferee of such Licensed Product), of
any pharmaceutical product comprising [***] For clarity, [***]
1.1.47. “Competitive (Novartis) Infringement” means Competitive Infringement with respect to any Licensed
Product in the Novartis Territory, but does not include any Competitive (Surface) Infringement.
1.1.48. “Competitive (Surface) Infringement” any means Competitive Infringement with respect to any Regional
Licensed Product in the Surface Territory, and does not include any Competitive (Novartis) Infringement.
1.1.49. “Completion” means, with respect to a Phase 1 Safety Study of a Licensed Product, [***] days from the date
of the last patient last dose for such Phase 1 Safety Study (and for clarity not any later portions of the applicable Phase
1 Study, other than such Phase 1 Safety Study as so defined).
1.1.50. “Component” means a Collaboration Component or a Party Component.
1.1.51. “Component Value” means, with respect to a Component of a Combination, the value of such Component as
determined in accordance with Exhibit A-1.
1.1.52. “Confidential Information” means any and all confidential or proprietary information and data and all other
scientific, pre-clinical, clinical, regulatory, manufacturing, marketing, financial and commercial information or data,
whether communicated in writing or orally or by any other method, which is or has been provided by one Party to the
other Party in connection with this Agreement.
1.1.53. “Control” means, with respect to any Patents or Know-How, the possession (whether by ownership, license or
sublicense, other than by a license, sublicense or other right granted (but not assignment) pursuant to this Agreement)
by a Party of the ability to assign or grant to the other Party the licenses, sublicenses or rights to access and use such
Patents or Know-How as provided for in this Agreement, without, other than with respect to any In-Licenses, paying
any consideration to any Third Party (now or in the future) or violating the terms of any agreement or other
arrangement with any Third Party in existence as of the time such Party would be required hereunder to grant such
license, sublicense, or rights of access and use. Notwithstanding anything in this Agreement to the contrary, [***]
1.1.54. “Cover”, “Covering” or “Covered” with respect to each Licensed Product, means that, but for a license
granted to a Person under a claim included in a Patent, the use, sale, offer for sale or importation of such Licensed
Product in the Field in the Territory by such Person would infringe such claim.
1.1.55. “CREATE Act” has the meaning set forth in Section 14.1.2.
1.1.56. “CRO” means a contract research organization.
1.1.57. “Develop” and “Development” means any and all clinical drug development activities conducted before or
after obtaining Regulatory Approval that are reasonably related to or leading to the development, preparation, and
submission of data and information to a Regulatory Authority for the purpose of obtaining, supporting or expanding
Regulatory Approval or to the appropriate body for obtaining, supporting or expanding Pricing Approval, including all
activities related to pharmacokinetic profiling, design and conduct of Clinical Studies, regulatory affairs, statistical
analysis, report writing, and regulatory filing creation and submission (including the services of outside advisors and
consultants in connection therewith).
1.1.58. “Development Costs” means, with respect to a Licensed Target, those costs and expenses [***]
1.1.59. “Developmental Milestone Event” has the meaning set forth in Section 10.7.
1.1.60. “Developmental Milestone Payment” has the meaning set forth in Section 10.7.
1.1.61. “Development Plans” means, collectively, the T1 Development Plan, the RLP Development Plan, and the
Global Development Plan.
1.1.62. “Disputes” has the meaning set forth in Section 16.3.1.
1.1.63. “DOJ” means the U.S. Department of Justice.
1.1.64. “Dollars” or “$” means the legal tender of the United States of America.
1.1.65. “Early Global Development Term” means, on a Global Target-by-Global Target basis, the time period
commencing on the [***] and ending upon the date of [***]
1.1.66. “Early RLP Development Term” means, on a Regional Target-by-Regional Target basis, the time period
commencing on [***] and ending upon the [***]
1.1.67. “Effective Date” has the meaning set forth in the preamble.
1.1.68. “EMA” means the European Medicines Agency and any successor Governmental Authority having
substantially the same function.
1.1.69. “Equity Agreements” means (a) Series A-1 Stock Purchase Agreement, by and among Surface and the
Purchaser listed on Schedule 1 thereto, dated as of the Effective Date; (b) Amendment No. 1 to Investors’ Rights
Agreement, by and among Surface and the investors party thereto, dated as of the Effective Date; (c) Amendment No.
1 to Voting Agreement, by and among Surface and the stockholders party thereto, dated as of the Effective Date; (d)
Amendment No. 1 to Right of First Refusal and Co-Sale Agreement, by and among Surface and the stockholders party
thereto, dated as of the Effective Date; and (e) Participation Agreement, by and between Surface and Novartis, dated as
of the Effective Date, in each case ((a)-(e)) as may be amended or restated from time to time.
1.1.70. “EU” means the European Union, as its membership may be constituted from time to time, and any successor
thereto.
1.1.71. “Exclusivity Period” means (a) for each Option Target, from the [***] until the earliest of [***]
1.1.72. “Executive Officer” means, for Surface, its Chief Executive Officer, and for Novartis, its President or another
senior executive designee with responsibilities and seniority comparable thereto; provided that any of the foregoing
individuals may designate the Chief Financial Officer as his/her designee for financial related matters. In the event that
the position of any of the Executive Officers identified in this Section 1.1.72 no longer exists due to a Change of
Control, corporate reorganization, corporate restructuring or the like that results in the elimination of the identified
position, the applicable Executive Officer will be replaced with another executive officer with responsibilities and
seniority comparable to the eliminated Executive Officer.
1.1.73. “Existing Novartis In-License” means any agreements entered into by Novartis or an Affiliate with a Third
Party prior to the Effective Date, including any amendments or restatements thereto during the Term in accordance
with Section 12.4.3, pursuant to which Novartis or any of its Affiliates Controls any Novartis Technology, but
excluding any Collaboration In-License to which Novartis or its Affiliates is a Party.
1.1.74. “Existing Surface In-License” means any agreements entered into by Surface or an Affiliate with a Third
Party prior to the Effective Date, including any amendments or restatements thereto during the Term in accordance
with Section 12.4.3, pursuant to which Surface or any of its Affiliates Controls any Surface Technology, but excluding
any Collaboration In-License to which Surface or its Affiliates is a Party.
1.1.75. “Expedited Arbitration” has the meaning set forth in Section 16.3.4.1.
1.1.76. “Expedited Dispute” has the meaning set forth in Section 16.3.4.1.
1.1.77. “FDA” means the United States Food and Drug Administration or any successor agency thereto.
1.1.78. “FD&C Act” means the United States Federal Food, Drug and Cosmetic Act, as amended.
1.1.79. “Field” means [***]
1.1.80. “Finance Officers” has the meaning set forth in Section 10.6.1.
1.1.81. “First Commercial Sale” means, on a Licensed Product-by-Licensed Product, and country-by-country basis,
the first commercial sale in an arms’ length transaction of a Licensed Product to a Third Party by a Party or any of its
Related Parties in such country following receipt of applicable Regulatory Approval of such Licensed Product in such
country. For clarity, the First Commercial Sale shall not include any distribution or other sale solely for patient
assistance, named patient use, compassionate use, or test marketing programs or non-registrational studies or similar
programs or studies where the Licensed Product is supplied without charge or at the actual manufacturing cost thereof
(without allocation of indirect costs or any markup).
1.1.82. “FTC” means the U.S. Federal Trade Commission or any successor agency thereto.
1.1.83. “FTE” means a full-time scientific or technical person, or in the case of less than a full-time scientific or
technical person, a full-time equivalent scientific or technical person year, carried out by an appropriately qualified
employee of a Party or its Related Parties, based on [***] person-hours per year. For clarity, indirect personnel
(including support functions such as managerial, financial, legal or business development) shall not constitute FTEs.
1.1.84. “FTE Costs” means, for any period, the FTE Rate multiplied by the number of FTE’s in such period. For
clarity, FTEs will be pro-rated on a daily basis if necessary.
1.1.85. “FTE Rate” means [***] per one (1) full FTE per full twelve (12) month Calendar Year, [***]
Notwithstanding the foregoing, for any Calendar Year during the Term that is less than a full year, the above referenced
rate will be proportionately reduced to reflect such portion of FTEs for such full Calendar Year.
1.1.86. “GAAP” means generally accepted accounting principles as practiced in the United States, as consistently
applied.
1.1.87. “Global Antibody Candidate” means, on a Global Target-by-Global Target basis, any Antibody that [***]
1.1.88. “Global Development Plan” has the meaning set forth in Section 5.3.2.
1.1.89. “Global Licensed Product” means, on a Global Target-by-Global Target basis [***]
1.1.90. “Global Licensed Product Commercialization Plan” has the meaning set forth in Section 6.3.2.
1.1.91. “Global Net Sales Royalty” has the meaning set forth in Section 10.9.2.
1.1.92. “Global Option” means an Option that is (a) designated as a Global Option in accordance with Section 4.2.3,
or (b) otherwise designated as or converted into a Global Option in accordance with the terms of this Agreement.
1.1.93. “Global Royalty Rates” has the meaning set forth in Section 10.9.2.
1.1.94. “Global Target” means an [***]
1.1.95. “GLP Toxicology Study” means a toxicology study, in species that satisfies applicable regulatory
requirements, using applicable cGLP that meets the standard necessary for submission as part of an IND Filing with
the applicable Regulatory Authority.
1.1.96. “Global Transition Activities” has the meaning set forth in Section 5.3.3.
1.1.97. “Global Transition Plan” has the meaning set forth in Section 5.3.3.
1.1.98. “Governmental Authority” means any applicable government authority, court, tribunal, arbitrator, agency,
department, legislative body, commission or other instrumentality of (a) any government of any country or territory,
(b) any nation, state, province, county, city or other political subdivision thereof or (c) any supranational body.
1.1.99. “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
1.1.100. “HSR Filing” has the meaning set forth in Section 4.2.6.6.
1.1.101. “IFRS” means International Financial Reporting Standards, as consistently applied.
1.1.102. “IL-27” means [***]
1.1.103. “IND” means an Investigational New Drug application, clinical trial application or similar application or
submission for approval to conduct human clinical investigations filed with or submitted to a Regulatory Authority in
conformance with the requirement of such Regulatory Authority, and any amendments thereto.
1.1.104. “IND Acceptance” means the acceptance by a Regulatory Authority in a Major Market Country of an IND.
1.1.105. “IND Filing” means the filing with a Regulatory Authority in a Major Market Country of an IND.
1.1.106. “Indemnified Party” has the meaning set forth in Section 13.4.
1.1.107. “Indemnifying Party” has the meaning set forth in Section 13.4.
1.1.108. “Indication” means a disease or pathological condition for which clinical results for such disease or condition
and a separate BLA application or a supplement (or other addition) to an existing BLA application is required for the
purpose of obtaining Regulatory Approval in a country.
1.1.109. “Initiation” means, with respect to a Clinical Study of a Licensed Product, [***]
1.1.110. “In-Licenses” means, collectively, all Existing Surface In-Licenses, all Existing Novartis In-Licenses and all
Collaboration In-Licenses.
1.1.111. “IP Committee” means the intellectual property advisory committee as more fully described in Section
14.3.1.
1.1.112. “JCC” has the meaning set forth in Section 2.5.1.
1.1.113. “JDC” has the meaning set forth in Section 2.4.1.
1.1.114. “Joint Collaboration IP” means, collectively, (a) [***]
1.1.115. “JRC” has the meaning set forth in Section 2.3.1.
1.1.116. “JSC” has the meaning set forth in Section 2.2.1.
1.1.117. “Know-How” means all commercial, technical, scientific and other know-how and information, trade secrets,
knowledge, technology, methods, processes, practices, formulae, instructions, skills, techniques, procedures,
experiences, ideas, technical assistance, designs, drawings, assembly procedures, computer programs, specifications,
data and results (including biological, chemical, pharmacological, toxicological, pharmaceutical, physical and
analytical, preclinical, clinical, safety, manufacturing and quality control data and know-how, including regulatory
data, study designs and protocols), and Materials, in all cases, whether or not confidential, proprietary, patented or
patentable, in written, electronic or any other form now known or hereafter developed.
1.1.118. “Late Global Development Term” means, on a Global Target-by-Global Target basis, the time period
commencing [***] and ending upon [***]
1.1.119. “Late RLP Development Term” means, on a Regional Target-by-Regional Target basis, the time period
commencing [***] and ending [***]
1.1.120. “Laws” means all applicable laws, statutes, rules, regulations, orders, judgments, injunctions, ordinances or
other pronouncements having the binding effect of law of any Governmental Authority, including if either Party is or
becomes subject to a legal obligation to a Regulatory Authority or other Governmental Authority (such as a corporate
integrity agreement or settlement agreement with a Governmental Authority).
1.1.121. “Lead Party” has the meaning set forth in Section 14.4.2.3(a).
1.1.122. “Licensed Products” means collectively, the T1 Licensed Products, the Global Licensed Products, and the
Regional Licensed Products.
1.1.123. “Licensed Targets” means the T1 Target, the Regional Targets and the Global Targets.
1.1.124. “Losses” has the meaning set forth in Section 13.1.
1.1.125. “Loss of Market Exclusivity” shall mean [***]
1.1.126. “MAA” shall have the meaning in Section 1.1.23.
1.1.127. “Major Market Countries” means the [***]
1.1.128. “Manufacturing” or “Manufacture” means all activities related to the manufacture of Antibody Candidates
or Licensed Products, including, but not limited to, manufacturing supplies for Research, Development or
Commercialization, packaging, in-process and finished product testing, release of product or any component or
ingredient thereof, quality assurance and quality control activities related to manufacturing and release of product,
ongoing stability tests, storage, shipment, and regulatory activities related to any of the foregoing.
1.1.129. “Manufacturing Costs” has the meaning set forth on Exhibit B, subject to Section 8.3.2.3.
1.1.130. “Mark-Up” means a [***]
1.1.131. “Materials” means all tangible compositions of matter, devices, articles of manufacture, assays, biological,
chemical or physical materials and other similar materials.
1.1.132. “Milestone Payments” has the meaning set forth in Section 10.8.
1.1.133. “Net Sales” means, with respect to a Licensed Product, the net sales on behalf of a Party and any of its
Related Parties for any Licensed Product sold to Third Parties (other than Sublicensees) in bona fide, arms-length
transactions, as determined in accordance with such Party’s Accounting Standards as consistently applied, less a
deduction of [***] percent [***%] for direct expenses related to the sales of
Licensed Product(s), distribution and warehousing expenses and uncollectible amounts on previously sold Licensed
Products. The deductions booked on an accrual basis by such Party and its Affiliates under its Accounting Standards to
calculate the recorded net sales from gross sales include the following:
1.1.133.1. [***]
1.1.133.2. [***]
1.1.133.3. [***]
1.1.133.4. [***]
1.1.133.5. [***]
1.1.133.6. [***]
1.1.133.7. [***] and
1.1.133.8. [***]
With respect to a Combination, [***]
1.1.134. “Net Sales Royalties” means the Regional Net Sales Royalty, the T1 Net Sales Royalty and the Global Net
Sales Royalty.
1.1.135. “Non-Bankrupt Party” has the meaning set forth in Section 9.7.
1.1.136. “Non-Proposing Party” has the meaning set forth in Section 5.2.2.4(a).
1.1.137. “Novartis Collaboration IP” means [***]
1.1.138. “Novartis Competing Program” has the meaning set forth in Section 12.5.2.2(a).
1.1.139. “Novartis Component” means a Party Component Controlled by Novartis or its Related Parties.
1.1.140. “Novartis Deferral Notice” has the meaning set forth in Section 4.2.3.2.
1.1.141. “Novartis Election” has the meaning set forth in Section 8.3.1.3.
1.1.142. “Novartis Indemnitees” has the meaning set forth in Section 13.2.
1.1.143. “Novartis In-Licenses” means any Existing Novartis In-License or any Collaboration In-License to which
Novartis is a party.
1.1.144. “Novartis Know-How” means Know-How Controlled by Novartis or its Affiliates during the Term that is
reasonably necessary for Surface to Research, Develop, Commercialize or Manufacture Antibody Candidates or
Licensed Products in the Field in the Surface Territory, other than Novartis’s interest in Joint Collaboration IP, and
Novartis Collaboration IP.
1.1.145. “Novartis Option Target Manufacturing Election” has the meaning set forth in Section 8.2.3.
1.1.146. “Novartis Patents” means [***]
1.1.147. “Novartis Regional Net Sales Royalty” has the meaning set forth in Section 10.9.3.1.
1.1.148. “Novartis Regional Royalty Rate” has the meaning set forth in Section 10.9.3.1.
1.1.149. “Novartis RLP Trademarks” has the meaning set forth in Section 14.9.2.2.
1.1.150. “Novartis Technology” means, collectively, Novartis Know-How, Novartis Patents, Novartis Collaboration
IP and Novartis’s interest in Joint Collaboration IP.
1.1.151. “Novartis Territory” means (a) with respect to any T1 Licensed Product, worldwide, (b) with respect to any
Regional Licensed Product, all countries and territories of the world other than the Surface Territory, and (c) with
respect to any Global Licensed Product, worldwide.
1.1.152. “Novartis Territory Commercialization Plan” has the meaning set forth in Section 6.2.3.
1.1.153. “Other Patents” has the meaning set forth in Section 14.3.3.1.
1.1.154. “Option” has the meaning set forth in Section 4.1.1.
1.1.155. “Option Exercise Date” means, on an Option-by-Option basis, the date on which an Option Exercise Notice
delivered by Novartis to Surface for such Option pursuant to Section 4.2.6 takes effect.
1.1.156. “Option Exercise Notice” means the written notice Novartis delivers to Surface to exercise an Option with
respect to an Option Target, in the form set forth on Exhibit C, containing the information set forth in such form.
1.1.157. “Option Exercise Period” means, on an Option-by-Option basis, [***]
1.1.158. “Option IND Package” means, on an Option Target-by-Option Target basis, [***] the information set forth
on Schedule 1.1.158 for such Option Target.
1.1.159. “Option Purchase Fee” has the meaning set forth in Section 10.3.
1.1.160. “Option Purchase Notice” means the written notice Novartis delivers to Surface to purchase an Option for an
Option Target, in the form set forth on Exhibit D, containing the information set forth in such form.
1.1.161. “Option Purchase Period” means, on an Option Target-by-Option Target basis, the time period commencing
[***] and ending [***].
1.1.162. “Option Selection Notice” has the meaning set forth in Section 4.2.3.1.
1.1.163. “Option Target” means any of the following: (a) CD47 (NCBI Entrez Gene ID:961), [***] (d) IL-27.
1.1.164. “Option Target Antibody Candidate” means, on an Option Target-by-Option Target basis, any Antibody
that (a) Specifically Binds to such Option Target, and (b) is Researched by or on behalf of Surface or its Related
Parties pursuant to this Agreement under the applicable Option Target Research Program; provided that after a Change
of Control of a Party, [***]
1.1.165. “Option Target Research Plan” has the meaning set forth in Section 3.2.1.
1.1.166. “Option Target Research Program” has the meaning set forth in Section 3.2.1.
1.1.167. “Option Tox Package” means, on an Option Target-by-Option Target basis, the information set forth on
Schedule 1.1.167 for such Option Target.
1.1.168. “Opt-Out Notice” has the meaning set forth in Section 5.2.9.
1.1.169. “Opt-Out Right” means Surface’s right to opt-out of the Development and Commercialization of all
Regional Antibody Candidates and Regional Licensed Products for a Regional Target in accordance with Section
5.2.9.
1.1.170. “Out-of-Pocket Costs” means, with respect to certain activities hereunder [***]
1.1.171. “Party Component” means, with respect to a Combination, the portion of such Licensed Product comprising
any active ingredient(s) other than an Antibody Candidate. If the applicable Combination includes more than one such
active ingredient, then “Party Component” shall refer to each such active ingredient.
1.1.172. “Patent” means all patents and patent applications and all substitutions, divisions, continuations,
continuations-in-part, any patent issued with respect to any such patent applications, any reissue, reexamination, utility
models or designs, renewal or extension (including any supplementary protection certificate) of any such patent, and
any confirmation patent or registration patent or patent of addition based on any such patent, and all counterparts
thereof in any country.
1.1.173. “Patent(s) Costs” means the out-of-pocket costs and expenses paid to outside legal counsel and other Third
Parties (including to any licensor pursuant to any in-license), and filing and maintenance expenses, incurred in
Prosecuting and Maintaining Patents and enforcing and defending them.
1.1.174. “Person” means any natural person, corporation, unincorporated organization, partnership, association, sole
proprietorship, joint stock company, joint venture, limited liability company, trust or government, or Governmental
Authority, or any other similar entity.
1.1.175. “Phase 1 Safety Study” means [***]
1.1.176. “Phase 1 Study” means a clinical study of an investigational product in patients with the primary objective of
characterizing its safety, tolerability, and pharmacokinetics and identifying a recommended dose and regimen for
future studies as described in 21 C.F.R. 312.21(a), or a comparable Clinical Study prescribed by the relevant
Regulatory Authority in a country other than the United States. The investigational product can be administered to
patients as a single agent or in combination with other investigational or marketed agents and [***]
1.1.177. “Phase 2 Study” means a clinical study of an investigational product in patients with the primary objective of
characterizing its activity in a specific disease state as well as generating more detailed safety, tolerability, and
pharmacokinetics information as described in 21 C.F.R. 312.21(b), or a comparable Clinical Study prescribed by the
relevant Regulatory Authority in a country other than the United States including a human clinical trial that is also
designed to satisfy the requirements of 21 C.F.R. 312.21(a) or corresponding foreign regulations and is subsequently
optimized or expanded to satisfy the requirements of 21 C.F.R. 312.21(b) (or corresponding foreign regulations) or
otherwise to enable a Phase 3 Clinical Study (e.g., a phase 1/2 trial). The investigational product can be administered
to patients as a single agent or in combination with other investigational or marketed agents and [***]
1.1.178. “Phase 3 Study” means a clinical study of an investigational product in patients that incorporates accepted
endpoints for confirmation of statistical significance of efficacy and safety with the aim to obtain Regulatory Approval
in any country as described in 21 C.F.R. 312.21(c), or a comparable Clinical Study prescribed by the relevant
Regulatory Authority in a country other than the United States. The investigational product can be administered to
patients as a single agent or in combination with other investigational or marketed agents [***]
1.1.179. “PHSA” means the United States Public Health Service Act, as amended.
1.1.180. “Potential In-License” has the meaning set forth in Section 9.5.1.3.
1.1.181. “Post-Marketing Study” means a non-human or human clinical study of a Licensed Product initiated after
receipt of Regulatory Approval for such Licensed Product in a country or territory, that is required by the Regulatory
Authority in such country or territory to maintain the Regulatory Approval for such Licensed Product in such country
or territory, but excluding any Supplemental Study.
1.1.182. “Pricing Approval” means such governmental approval, agreement, determination or decision establishing
prices for a Licensed Product that can be charged or reimbursed in regulatory jurisdictions where the applicable
Governmental Authorities approve or determine the price or reimbursement of pharmaceutical products.
1.1.183. “Pricing Matters” means all issues and decisions regarding (a) price, price terms and other contract terms
with respect to Licensed Product sales, including discounts, rebates, other price concessions and service fees to payors
and purchasers and (b) reimbursement programs applicable to a Licensed Product. For clarity, [***]
1.1.184. “Product Global Trademarks” means the Trademarks used, or intended for use, in connection with the
distribution, marketing, promotion and sale of the T1 Licensed Products and Global Licensed Products by Novartis
and its Related Parties in the Novartis Territory. Product Global Trademarks specifically exclude the corporate names
and logos of the Parties and their Affiliates.
1.1.185. “Promotional Materials” has the meaning set forth in Section 6.2.5.2.
1.1.186. “Proposing Party” has the meaning set forth in Section 5.2.2.4(a).
1.1.187. “Prosecution and Maintenance” means, with regard to a particular Patent, the preparation, filing,
prosecution and maintenance of such Patent, as well as re-examinations, reissues and the like with respect to that
Patent, together with the conduct of interferences, the defense of oppositions and other similar proceedings with
respect to that Patent.
1.1.188. “Prosecution Patents” means (a) all Patents within the Surface Technology that are Controlled by Surface as
of the Effective Date and (b) all Patents within the Surface Collaboration IP that, in each case ((a) and (b)), [***]
1.1.189. “Regional [***] Activities” has the meaning set forth in Section 4.2.6.4.
1.1.190. “Regional [***] Candidate” has the meaning set forth in Section 4.2.6.4.
1.1.191. “Regional Antibody Candidate” means, on a Regional Target-by-Regional Target basis, any Antibody that
[***]
1.1.192. “Regional Licensed Product” means, on a Regional Target-by-Regional Target basis, a [***]
1.1.193. “Regional Option” means an Option that is designated as a Regional Option in accordance with Section
4.2.3.
1.1.194. “Regional Net Sales Royalty” has the meaning set forth in Section 10.9.3.2.
1.1.195. “Regional Royalty Rates” has the meaning set forth in Section 10.9.3.2.
1.1.196. “Regional Target” means an Option Target that is designated as a Regional Target in accordance with Section
4.2.6.2 and with respect to which an Option has been exercised pursuant to Section 4.2.6.4.
1.1.197. “Regulatory Approval” means a BLA, together with all other approvals (including, but not limited to, where
applicable, Pricing Approval and schedule classifications), product or establishment licenses, registrations or
authorizations (including, but not limited to, marketing authorizations) of any Regulatory Authority that may be
necessary for the marketing, sale and commercialization of a pharmaceutical product in any country or region in the
Territory.
1.1.198. “Regulatory Authority” means any Governmental Authority involved in granting approvals for the
Development, Manufacturing, Commercialization, Pricing Approval of Licensed Products, including the FDA, the
EMA, the Japanese Ministry of Health, Labour and Welfare and the Pharmaceuticals and Medical Devices Agency in
Japan.
1.1.199. “Regulatory Materials” means any regulatory application, submission, notification, communication,
correspondence, registration, Regulatory Approvals and other filings made to, received from or otherwise conducted
with a Regulatory Authority related to Developing, Manufacturing, obtaining marketing authorization, marketing,
selling or otherwise Commercializing a pharmaceutical product in a particular country or jurisdiction.
1.1.200. “Related Party” means a Party’s Affiliates and permitted Sublicensees.
1.1.201. “Research” or “Researching” means activities, other than Development, related to the design, discovery,
generation, identification, profiling, characterization, production, process development, cell line development, pre-
clinical development or non-clinical or pre-clinical studies of drug candidates and products.
1.1.202. “Research Plans” means, collectively, the T1 Research Plan and each of the Option Target Research Plans.
1.1.203. “Research Programs” means, collectively, the T1 Research Program and each of the Option Target Research
Programs.
1.1.204. “Research Term” means, [***]
1.1.205. “Research Target” means the T1 Target and the Option Targets.
1.1.206. “Restricted Technology” means Surface Technology, Novartis Technology, and any Confidential Information
of either Party or its Related Parties provided under or developed in connection with the Collaboration.
1.1.207. [***]
1.1.208. [***]
1.1.209. [***]
1.1.210. “RLP Branding Strategy has the meaning set forth in Section 6.2.5.1.
1.1.211. “RLP Commercial Strategy” has the meaning set forth in Section 6.2.2.
1.1.212. “RLP Development Activities” means collectively, [***]
1.1.213. “RLP Development Budget” has the meaning set forth in Section 5.2.2.2.
1.1.214. “RLP Development Plan” has the meaning set forth in Section 5.2.2.1.
1.1.215. “RLP Trademarks” means the Trademarks used, or intended for use, in connection with the distribution,
marketing, promotion and sale of the Regional Licensed Products. RLP Trademarks specifically exclude the corporate
names and logos of the Parties and their Affiliates and Sublicensees. RLP Trademarks include both the Surface RLP
Trademarks and the Novartis RLP Trademarks.
1.1.216. “Royalty Patents” means [***]
1.1.217. “Royalty Rates” means the Regional Royalty Rates, the T1 Royalty Rates and the Global Royalty Rates.
1.1.218. “Royalty Term” has the meaning set forth in Section 10.10.1.
1.1.219. “Safety Concern” means (a) any safety concern required to be reported under 21 C.F.R. § 312.32(c)(1)(iii)
(“Findings from animal or in vitro testing”) if an IND with respect to such Antibody Candidate or Licensed Product
was open at the time of the observation or (b) a toxicity or drug safety issue or a Serious Adverse Event reasonably
related to or observed in connection with Research, Development or Commercialization activities with respect to an
Antibody Candidate or Licensed Product.
1.1.220. “Sales Milestone Event” has the meaning set forth in Section 10.8.
1.1.221. “Sales Milestone Payment” has the meaning set forth in Section 10.9.
1.1.222. “SDEA” has the meaning set forth in Section 7.4.
1.1.223. “Serious Adverse Event” means an adverse drug experience or circumstance that results in any of the
following outcomes (a) death, (b) life-threatening condition, (c) inpatient hospitalization or a significant prolongation
of existing hospitalization, (d) persistent or significant disability or incapacity or substantial disruption of the ability to
conduct normal life functions, (e) or a congenital anomaly/birth defect or (f) significant intervention required to
prevent permanent impairment or damage.
1.1.224. “Specifically Bind” means, [***]
1.1.225. “Sublicensee” means a Third Party to which a Party or its Affiliate has granted or grants rights, as permitted
under this Agreement, to Research, Develop, Manufacture or Commercialize any Antibody Candidates or Licensed
Product(s), or any further sublicensee of such rights (regardless of the number of tiers, layers or levels of sublicenses
of such rights).
1.1.226. “Supplemental Study” is any Clinical Study (other than any Post-Marketing Study) for an additional
indication or other label expansion for a Licensed Product beyond the initial Indication contemplated by the
Development Plan.
1.1.227. “Supply Agreement” means any supply agreement entered into by the Parties pursuant to Section 8.
1.1.228. “Surface Collaboration IP” means [***]
1.1.229. “Surface Competing Program” has the meaning set forth in Section 12.5.2.1(a).
1.1.230. “Surface Component” means a Party Component Controlled by Surface or its Related Parties.
1.1.231. “Surface Election” has the meaning set forth in Section 8.3.1.3.
1.1.232. “Surface Indemnitees” has the meaning set forth in Section 13.1.
1.1.233. “Surface In-Licenses” means any Existing Surface In-License or any Collaboration In-License to which
Surface is a party.
1.1.234. “Surface Know-How” means [***]
1.1.235. “Surface Regional Net Sales Royalty” has the meaning set forth in Section 10.9.3.2.
1.1.236. “Surface Regional Royalty Rate” has the meaning set forth in Section 10.9.3.2.
1.1.237. “Surface Patents” means [***]
1.1.238. “Surface RLP Trademarks” has the meaning set forth in Section 14.9.2.2.
1.1.239. “Surface Technology” means Surface Know-How, Surface Patents, Surface Collaboration IP and Surface’s
interest in Joint Collaboration IP.
1.1.240. “Surface Territory” means, with respect to any Regional Licensed Product, the United States.
1.1.241. “Surface Territory Commercialization Plan” has the meaning set forth in Section 6.2.4.
1.1.242. “T1 Antibody Candidate” means any Antibody that [***]
1.1.243. “T1 Commercialization Plan” has the meaning set forth in Section 6.1.2.
1.1.244. “T1 Development Information” has the meaning set forth in Section 5.1.2.
1.1.245. “T1 Development Plan” has the meaning set forth in Section 5.1.3.
1.1.246. “T1 Licensed Product” means a [***]
1.1.247. “T1 Net Sales Royalty” has the meaning set forth in Section 10.9.1.
1.1.248. “T1 Research Plan” has the meaning set forth in Section 3.1.1.
1.1.249. “T1 Research Program” has the meaning set forth in Section 3.1.1.
1.1.250. “T1 Royalty Rates” has the meaning set forth in Section 10.9.1.
1.1.251. “T1 Target” means CD73 [***]
1.1.252. “T1 Transition Activities” has the meaning set forth in Section 5.1.2.
1.1.253. “T1 Transition Plan” has the meaning set forth in Section 5.1.2.
1.1.254. “Target” means a Licensed Target or Option Target, as applicable.
1.1.255. “Tax” and “Taxation” means any form of tax or taxation, levy, duty, charge or withholding (including any
related fine, penalty, addition to tax, surcharge or interest) imposed by, or payable to, a governmental authority.
1.1.256. “Technical Failure” [***]
1.1.257. “Territory” means (a) with respect to Surface, the Surface Territory and (b) with respect to Novartis, the
Novartis Territory.
1.1.258. “Term” has the meaning set forth in Section 15.1.
1.1.259. “Third Party” means any Person other than Novartis, Surface or their respective Affiliates.
1.1.260. “Third Party Acquisition” has the meaning set forth in Section 12.5.2.1(a).
1.1.261. “Third Party Payment” has the meaning set forth in Section 9.5.1.
1.1.262. “Trademark” means any trademark, trade name, service mark, service name, brand, domain name, trade
dress, logo, slogan or other indicia of origin or ownership, including the goodwill and activities associated with each of
the foregoing.
1.1.263. “United States” or “U.S.” means the United States and its territories, possessions and commonwealths.
1.1.264. “Valid Claim” means a claim of a Patent that (a) has not been rejected, revoked or held to be invalid or
unenforceable by a court or other authority of competent jurisdiction, from which decision no appeal can be further
taken, or (b) has not been finally abandoned, disclaimed or admitted to be invalid or unenforceable through reissue or
disclaimer. In order to be a Valid Claim, any claim being prosecuted in a pending patent application must be
prosecuted in good faith and not have been pending for more than [***] years from the filing date of the first utility
patent application (or equivalent concept in any such country) in the patent application family in the country in
question, in which case it will cease to be considered a Valid Claim until the patent issues and recites said claim.
2. GOVERNANCE
2.1. Alliance Manager. Promptly following the Effective Date, each Party will designate an individual to facilitate
communication and coordination of the Parties’ activities under this Agreement relating to Antibody Candidates and
Licensed Products and to provide support and guidance to the JSC (each, an “Alliance Manager”). Each Alliance
Manager may also serve as a representative of its respective Party on one or more Committees.
2.2. Joint Steering Committee.
2.2.1. Purpose; Formation. Within [***] days after the Effective Date, the Parties will establish a joint steering
committee (the “JSC”) that will monitor and provide strategic oversight of the activities under this Agreement and
facilitate communications between the Parties with respect to the Research, Development, Manufacture and
Commercialization of Antibody Candidates and Licensed Products, all in accordance with this Section 2.2.
2.2.2. Composition. Each Party will initially appoint [***] representatives to the JSC, all of whom will have sufficient
seniority within the applicable Party to make decisions arising within the scope of the JSC’s responsibilities. The
Parties’ initial representatives to the JSC are set forth on Exhibit E. The JSC may change its size from time to time by
mutual consent of its members, provided that the JSC will consist at all times of an equal number of representatives of
each of Surface and Novartis. Each Party may replace its JSC representatives at any time upon written notice to the
other Party. The JSC may invite non-members to participate in the discussions and meetings of the JSC, provided that
such participants have no voting authority at the JSC and are bound under written obligation of confidentiality no less
protective of the Parties’ Confidential Information than those set forth in this Agreement. The JSC will be co-chaired,
with one chairperson designated by Surface and [***] designated by Novartis, whose responsibilities will include
conducting meetings, including, when feasible, ensuring that objectives for each meeting are set and achieved.
Responsibility for running each meeting of the JSC will alternate between the chairpersons from meeting-to-meeting,
with Surface’s chairperson running the first meeting. The Alliance Managers
will work with the chairpersons to prepare and circulate agendas and to ensure the preparation of minutes. The
chairpersons have no additional powers or rights beyond those held by the other JSC representatives.
2.2.3. Specific Responsibilities. In addition to its overall responsibility for monitoring and providing strategic oversight
with respect to the Parties’ activities under this Agreement, the JSC will in particular have the following
responsibilities:
2.2.3.1. review and discuss the Research by the Parties with respect to the T1 Antibody Candidates and Option Target
Antibody Candidates, including whether a Technical Failure has occurred with respect to Option Target Antibody
Candidates;
2.2.3.2. review and discuss the Development of Regional Antibody Candidates;
2.2.3.3. review and discuss the Commercialization of Regional Licensed Products and any other ongoing related
activities;
2.2.3.4. review, discuss and oversee Manufacturing for the T1 Antibody Candidates and Option Antibody Candidates,
including the supply chain for Antibody Candidates;
2.2.3.5. facilitate the flow of information between the Parties with respect to T1 Antibody Candidates, Regional
Antibody Candidates, Global Antibody Candidates and Licensed Products;
2.2.3.6. review and discuss reports from the JRC, JDC and JCC, and provide guidance thereto and direct the activities
of such Committees, and review and approve all Research Plans and each RLP Development Plan, and, in each case,
all amendments thereto;
2.2.3.7. review and discuss the entry of any Collaboration In-Licenses with respect to the Research, Development,
Manufacture or Commercialization of any Antibody Candidates or Licensed Products;
2.2.3.8. review, discuss and coordinate the Parties’ scientific presentation and publication strategy relating to the
Regional Licensed Products in the Territory;
2.2.3.9. review and facilitate discussion of proposed publications and resolve disputes with respect thereto taking into
consideration Section 11.2.1;
2.2.3.10. attempt to resolve issues presented to it by, and disputes within, the JRC, JDC or JCC, or any other
subcommittee;
2.2.3.11. establish such additional joint subcommittees as it deems necessary to achieve the objectives and intent of
this Agreement; and
2.2.3.12. perform such other functions as appropriate, and direct each other Committee to perform such other functions
as appropriate, to further the purposes of this Agreement, in each case as agreed in writing by the Parties or as
expressly provided in this Agreement.
2.2.4. Meetings. The JSC will meet at least once per [***] during the Term unless the Parties mutually agree in writing
to a different frequency. No later than [***] Business Days prior to any meeting of the JSC (or such shorter time period
as the Parties may agree), the Alliance Managers will prepare and circulate an agenda for such meeting; provided,
however, that either Party may propose additional topics to be included on such agenda, either prior to or in the course
of such meeting. Either Party may also call a special meeting of the JSC (by videoconference, teleconference or in
person) by providing at least [***] Business Days prior written notice to the other Party if such Party reasonably
believes that a significant matter must be addressed prior to the next scheduled meeting, in which event such Party will
work with the chairperson of the JSC and the Alliance Managers of both Parties to provide the members of the JSC no
later than [***] Business Days prior to the special meeting with an agenda for the meeting and materials reasonably
adequate to enable an informed decision on the matters to be considered. The JSC may meet in person, by
videoconference or by teleconference. Notwithstanding the foregoing, at least one (1) meeting per [***] will be in
person unless the Parties mutually agree in writing to waive such requirement. In-person JSC meetings will be held at
locations alternately selected by Surface and by Novartis. Each Party will bear the expense of its respective JSC
members’ participation in JSC meetings. Meetings of the JSC will be effective only if at least [***] representative of
each Party (which representative is not such Party’s Alliance Manager) is present or participating in such meeting. The
Alliance Managers will be responsible for preparing reasonably detailed written minutes of all JSC meetings that
reflect material decisions made and action items identified at such meetings. The
Alliance Managers will send draft meeting minutes to each member of the JSC for review and approval within [***]
Business Days after each JSC meeting. Such minutes will be deemed approved unless [***] of the JSC objects to the
accuracy of such minutes within [***] Business Days of receipt. Minutes will be officially endorsed by the JSC at the
next JSC meeting, and will be signed by the Alliance Managers.
2.3. Joint Research Committee.
2.3.1. Formation; Composition; Dissolution. Within [***] days after the Effective Date, the Parties will establish a
committee to oversee the Research of Antibody Candidates and Licensed Products in accordance with the Research
Plan(s) and to coordinate the Research activities of the Parties with respect thereto (the “JRC”). Each Party will
initially appoint [***] representatives to the JRC, with each representative having knowledge and expertise in the
Research of compounds and products similar to the Antibody Candidates and Licensed Products and having sufficient
seniority within the applicable Party to make decisions arising within the scope of the JRC’s responsibilities. The JRC
may change its size from time to time, provided that the JRC will consist at all times of an equal number of
representatives of each of Surface and Novartis. Each Party may replace its JRC representatives at any time upon
written notice to the other Party. The JRC may invite non-members to participate in the discussions and meetings of
the JRC, provided that such participants have no voting authority at the JRC and are bound under written obligation of
confidentiality no less protective of the Parties’ Confidential Information than those set forth in this Agreement. The
JRC will be co-chaired, with one chairperson designated by Surface and [***] designated by Novartis, whose
responsibilities will include conducting meetings, including, when feasible, ensuring that objectives for each meeting
are set and achieved. Responsibility for running each meeting of the JRC will alternate between the chairpersons from
meeting-to-meeting, with Surface’s chairperson running the first meeting. Subject to Section 2.8, after Completion of
the last Phase 1 Study for the last Antibody Candidate or Licensed Product, the Parties agree that the JRC will be
automatically dissolved with no further action required by either Party.
2.3.2. Specific Responsibilities of the JRC. The JRC has the following responsibilities:
2.3.2.1. oversee and review Research responsibilities for T1 Antibody Candidate and Option Antibody Candidates;
2.3.2.2. discuss, prepare and approve for submission to the JSC the Research Plans and all amendments thereto;
2.3.2.3. oversee the conduct of the T1 Research Plan and Option Target Research Plans;
2.3.2.4. create, implement, review the overall strategy and approve protocols and the selection and use of Third Parties
for Research of T1 Antibody Candidates and Option Antibody Candidates, including the design of all nonclinical
studies, preclinical studies and GLP Toxicology Studies, conducted under the Research Plans;
2.3.2.5. decide whether and when to initiate or discontinue any nonclinical studies, preclinical studies or GLP
Toxicology Studies for T1 Antibody Candidates and Option Antibody Candidates under the Research Plans, provided
that nothing is intended to limit a Party’s ability to comply with applicable Law or manage subject safety;
2.3.2.6. review, discuss and oversee Manufacturing for the Research of T1 Antibody Candidates and Option Antibody
Candidates, including the supply chain for Antibody Candidates;
2.3.2.7. allocate budgeted resources and determine priorities for each nonclinical study, preclinical study and GLP
Toxicology Study for T1 Antibody Candidates and Option Antibody Candidates included under the Research Plans;
2.3.2.8. facilitate the flow of information between the Parties with respect to the Research of T1 Antibody Candidates
and Option Antibody Candidates;
2.3.2.9. facilitate the flow of information between the Parties with respect to the Research activities for the T1
Research Program and Option Target Research Programs; and
2.3.2.10. perform such other functions as may be appropriate to further the purposes of this Agreement, as directed by
the JSC in accordance with Section 2.2.3.12 or as expressly provided in this Agreement.
2.3.3. Meetings. The JRC will meet at least once per [***] unless the Parties mutually agree in writing to a different
frequency. No later than [***] prior to any meeting of the JRC (or such shorter time period as the Parties may agree),
the Alliance Managers will prepare and circulate an agenda for such meeting; provided, however, that either Party will
be free to propose additional topics to be included on such agenda, either prior to or in the course of such meeting.
Either Party may also call a special meeting of the JRC (by videoconference, teleconference or in person) by providing
at least [***] prior written notice to the other Party if such Party reasonably believes that a significant
matter must be addressed prior to the next scheduled meeting, in which event such Party will work with the Alliance
Manager to provide the members of the JRC no later than [***] prior to the special meeting with an agenda for the
meeting and materials reasonably adequate to enable an informed decision. The JRC may meet in person, by
videoconference, or by teleconference. In-person JRC meetings will be held at locations in the United States
alternately selected by Surface and by Novartis or at any other location mutually agreed by the members of the JRC.
Each Party will report to the JRC on all material issues relating to the Research of Antibody Candidates promptly after
such issues arise. Each Party will bear the expense of its respective JRC members’ participation in JRC meetings. The
JRC chairperson will be responsible for preparing reasonably detailed written minutes of JRC meetings that reflect all
decisions made and action items identified at such meetings. The JRC chairperson will send meeting minutes to each
member of the JRC for review and approval within [***] after each JRC meeting. Minutes will be deemed approved
unless [***] members of the JRC objects to the accuracy of such minutes within [***] of receipt. Minutes will be
officially endorsed by the JRC at the next JRC meeting, and will be signed by the Alliance Managers.
2.3.4. Decision-Making. Subject to the remainder of this Section 2.3.4 and Section 2.6, the JRC will act by unanimous
agreement. The representatives from each Party have, collectively, [***] vote on behalf of that Party. If the JRC cannot
reach unanimous agreement on an issue that comes before the JRC within [***] of the meeting such issue was raised
and over which the JRC has oversight, then the Parties will refer such matter to the JSC for resolution in accordance
with Section 2.6.
2.4. Joint Development Committee.
2.4.1. Formation; Composition; Dissolution. No later than [***] after the Initiation of the first GLP Toxicology Study
for any Antibody Candidate or Licensed Product, the Parties will establish a committee to (a) oversee the Development
of Regional Licensed Antibody Candidates and Regional Licensed Products in accordance with the Development
Plan(s) for the same and to coordinate the Development activities of the Parties with respect thereto, and (b) facilitate
the flow of information between the Parties with respect to, and provide a forum to discuss, the Development of T1
Antibody Candidates, T1 Licensed Products, Global Antibody Candidates and Global Licensed Products (the “JDC”).
Each Party will initially appoint [***] representatives to the JDC, with each representative having knowledge and
expertise in the Development of compounds and products similar to the Antibody Candidates and Licensed Products
and having sufficient seniority within the applicable Party to make decisions arising within the scope of the JDC’s
responsibilities. The JDC may change its size from time to time, provided that the JDC will consist at all times of an
equal number of representatives of each of Surface and Novartis. Each Party may replace its JDC representatives at
any time upon written notice to the other Party. The JDC may invite non-members to participate in the discussions and
meetings of the JDC, provided that such participants have no voting authority at the JDC and are bound under written
obligation of confidentiality no less protective of the Parties’ Confidential Information than those set forth in this
Agreement. The JDC will be co-chaired, with one chairperson designated by Surface and [***] designated by
Novartis, whose responsibilities will include conducting meetings, including, when feasible, ensuring that objectives
for each meeting are set and achieved. Responsibility for running each meeting of the JDC will alternate between the
chairpersons from meeting-to-meeting, with Novartis’s chairperson running the first meeting. Subject to Section 2.8,
upon later of [***] the Parties agree that the JDC will be automatically dissolved with no further action required by
either Party.
2.4.2. Specific Responsibilities of the JDC. The JDC has the following responsibilities:
2.4.2.1. oversee and review Development responsibilities for each Regional Antibody Candidate and Regional
Licensed Product;
2.4.2.2. discuss, prepare and approve for submission to the JSC all RLP Development Plans, and all amendments to
RLP Development Plans for Regional Antibody Candidates and Regional Licensed Products;
2.4.2.3. oversee the conduct of all RLP Development Plans;
2.4.2.4. create, implement and review the overall strategy for Development, including the design of all Clinical Studies
for Regional Antibody Candidates and Regional Licensed Products, conducted under the RLP Development Plans, as
applicable;
2.4.2.5. decide whether and when to initiate or discontinue any Clinical Study for any Regional Antibody Candidate or
Regional Licensed Product under each RLP Development Plan, as applicable, provided that nothing is intended to
limit a Party’s ability to comply with applicable Law or manage subject safety;
2.4.2.6. allocate budgeted resources and determine priorities for each Clinical Study for Regional Antibody Candidates
and Regional Licensed Products included under each RLP Development Plan;
2.4.2.7. oversee the conduct of all Clinical Studies for Regional Antibody Candidates and Regional Licensed Products
included under each RLP Development Plan;
2.4.2.8. facilitate the flow of information between the Parties with respect to the Development of T1 Antibody
Candidates, T1 Licensed Products, Regional Antibody Candidates, Regional Licensed Products, Global Antibody
Candidates or Global Licensed Products;
2.4.2.9. allocate primary responsibility as between the Parties for tasks relating to the Development of Regional
Antibody Candidates where not already specified in the RLP Development Plans therefor;
2.4.2.10. review, discuss and oversee Manufacturing for the Development of Regional Antibody Candidates and
Regional Licensed Products, including the supply chain for Regional Antibody Candidates and Regional Licensed
Products;
2.4.2.11. create, implement and review the overall strategy regarding Regulatory Approval of Regional Licensed
Products in the Territory;
2.4.2.12. without limitation to Section 2.4.2.11, review the regulatory strategy with respect to discussions with and
commitments to or agreements with Regulatory Authorities (including post-approval commitments) with respect to
Regional Licensed Product labeling, risk management or Clinical Studies;
2.4.2.13. without limitation to Section 2.4.2.12, review and approve any material submission to, or any material
agreement with or material commitment made to, a Regulatory Authority with respect to a Regional Licensed Product,
such as any BLA or MAA, or any submission, agreement or commitment with respect to Licensed Product labeling,
any risk management plans or post-approval commitment for such Licensed Product;
2.4.2.14. facilitate the flow of information between the Parties with respect obtaining Regulatory Approval for
Regional Licensed Products; and
2.4.2.15. perform such other functions as may be appropriate to further the purposes of this Agreement, as directed by
the JSC in accordance with Section 2.2.3.12 or as expressly provided in this Agreement.
2.4.3. Meetings. The JDC will meet at least once per [***] unless the Parties mutually agree in writing to a different
frequency. No later than [***] prior to any meeting of the JDC (or such shorter time period as the Parties may agree),
the Alliance Managers will prepare and circulate an agenda for such meeting; provided, however, that either Party will
be free to propose additional topics to be included on such agenda, either prior to or in the course of such meeting.
Either Party may also call a special meeting of the JDC (by videoconference, teleconference or in person) by providing
at least [***] prior written notice to the other Party if such Party reasonably believes that a significant matter must be
addressed prior to the next scheduled meeting, in which event such Party will work with the Alliance Manager to
provide the members of the JDC no later than [***] prior to the special meeting with an agenda for the meeting and
materials reasonably adequate to enable an informed decision. The JDC may meet in person, by videoconference, or
by teleconference. In-person JDC meetings will be held at locations in the United States alternately selected by Surface
and by Novartis or at any other location mutually agreed by the members of the JDC. Each Party will report to the JDC
on all material issues relating to the Development of Antibody Candidates and Licensed Products for and in the
Territory promptly after such issues arise. Each Party will bear the expense of its respective JDC members’
participation in JDC meetings. The JDC chairperson will be responsible for preparing reasonably detailed written
minutes of JDC meetings that reflect all decisions made and action items identified at such meetings. The JDC
chairperson will send meeting minutes to each member of the JDC for review and approval within [***] after each
JDC meeting. Minutes will be deemed approved unless [***] members of the JDC objects to the accuracy of such
minutes within [***] of receipt. Minutes will be officially endorsed by the JDC at the next JDC meeting, and will be
signed by the Alliance Managers.
2.4.4. Decision-Making. Subject to the remainder of this Section 2.4.4 and Section 2.6, the JDC will act by unanimous
agreement. The representatives from each Party have, collectively, [***] on behalf of that Party. If the
JDC cannot reach unanimous agreement on an issue that comes before the JDC within [***] of the meeting such issue
was raised and over which the JDC has oversight, then the Parties will refer such matter to the JSC for resolution in
accordance with Section 2.6.
2.5. Joint Commercialization Committee.
2.5.1. General. The Parties will establish a committee, no later than completion of the first Phase 2 Clinical Study for
the first Regional Licensed Product, to (a) oversee Commercialization of Regional Licensed Products in the Territory,
and (b) facilitate the flow of information between the Parties with respect to, and provide a forum to discuss, the
Commercialization of T1 Antibody Candidates, T1 Licensed Products, Global Antibody Candidates and Global
Licensed Products (the “JCC”).
2.5.2. Formation; Composition. Each Party will initially appoint [***] representatives to the JCC, with each
representative having knowledge and expertise in the commercialization of products similar to the Regional Licensed
Products and having sufficient seniority within the applicable Party to make decisions arising within the scope of the
JCC’s responsibilities. The JCC may change its size from time to time by mutual consent of its members, provided that
the JCC will consist at all times of an equal number of representatives of each of Surface and Novartis. Each Party
may replace its JCC representatives at any time upon written notice to the other Party. The JCC may invite non-
members to participate in the discussions and meetings of the JCC, provided that such participants have no voting
authority at the JCC and are bound under written obligation of confidentiality no less protective of the Parties’
Confidential Information than those set forth in this Agreement. The JCC will be co-chaired, with one chairperson
designated by Surface and [***] designated by Novartis, whose responsibilities will include conducting meetings,
including, when feasible, ensuring that objectives for each meeting are set and achieved. Responsibility for running
each meeting of the JCC will alternate between the chairpersons from meeting-to-meeting, with Novartis’s chairperson
running the first meeting.
2.5.3. Specific Responsibilities of the JCC. Subject to any limitations under applicable Law, including Antitrust Laws,
the JCC has the following responsibilities:
2.5.3.1. discuss, prepare and approve for submission to the JSC the Commercialization Plan for each Regional
Licensed Product, including, in each case, any amendments thereto;
2.5.3.2. oversee implementation of each Commercialization Plan for a Regional Licensed Product;
2.5.3.3. review and discuss Commercialization activities with respect to Regional Licensed Products;
2.5.3.4. facilitate the flow of information between the Parties with respect to the Commercialization of T1 Antibody
Candidates, T1 Licensed Products, Regional Antibody Candidates, Regional Licensed Products, Global Antibody
Candidates or Global Licensed Products;
2.5.3.5. allocate between the Parties primary responsibility for tasks relating to Commercialization of Regional
Licensed Products in their respective Territory in a manner consistent with Section 6;
2.5.3.6. oversee forecasting and market planning with respect to Regional Licensed Products;
2.5.3.7. review and discuss strategies with respect to Pricing Matters for Regional Licensed Products in the Territory,
to the extent operationally feasible and not prohibited by applicable Law;
2.5.3.8. review, discuss and oversee Manufacturing for the Commercialization of Regional Licensed Products,
including the supply chain for Regional Licensed Products;
2.5.3.9. manage Trademarks as contemplated by Section 14.9; and
2.5.3.10. perform such other functions as appropriate to further the purposes of this Agreement, as directed by the JSC
in accordance with Section 2.2.3.12 or as expressly provided in this Agreement.
2.5.4. Meetings. The JCC will meet at least once per [***] unless the Parties mutually agree in writing to a different
frequency. No later than [***] prior to any meeting of the JCC (or such shorter time period as the Parties may agree),
the Alliance Managers will prepare and circulate an agenda for such meeting; provided, however, that either Party will
be free to propose additional topics to be included on such agenda, either prior to or in the course of such meeting.
Either Party may also call a special meeting of the JCC (by videoconference, teleconference or in person) by providing
at least [***] prior written notice to the other Party if such Party reasonably believes that a significant
matter must be addressed prior to the next scheduled meeting, in which event such Party will work with the
chairperson of the JCC to provide the members of the JCC no later than [***] prior to the special meeting with an
agenda for the meeting and materials reasonably adequate to enable an informed decision. The JCC may meet in
person, by videoconference, or by teleconference. In-person JCC meetings will be held at locations in the United
States alternately selected by Surface and by Novartis or at any other location mutually agreed by the members of the
JCC. Meetings of the JCC will be effective only if at least one (1) representative of each Party is present or
participating in such meeting. Each Party will report to the JCC on all material issues relating to the
Commercialization of Regional Licensed Products promptly after such issues arise. Each Party will bear the expense of
its respective JCC members’ participation in JCC meetings. The JCC chairperson will be responsible for preparing
reasonably detailed written minutes of JCC meetings that reflect all decisions made and action items identified at such
meetings. The JCC chairperson will send meeting minutes to each member of the JCC for review and approval within
[***] after each JCC meeting. Minutes will be deemed approved unless [***] members of the JCC object to the
accuracy of such minutes within [***] of receipt. Minutes will be officially endorsed by the JCC at the next JCC
meeting, and will be signed by the Alliance Managers.
2.5.5. Decision-Making. Subject to the remainder of this Section 2.5.5 and Section 2.6, the JCC will act by unanimous
agreement. The representatives from each Party have, collectively, [***] on behalf of that Party. If the JCC cannot
reach unanimous agreement on an issue that comes before the JCC within [***] of the meeting such issue was raised
and over which the JCC has oversight, then the Parties will refer such matter to the JSC for resolution in accordance
with Section 2.6.3 and Section 2.6; provided that any issues arising under Section 2.5.3.7 shall not be subject to such
escalation or decision-making authority, and instead shall be determined by each Party in its respective Territory. For
clarity, any and all such communications or strategy involving the Commercialization activities shall be limited to
those permitted under applicable Law, including Antitrust Laws.
2.6. Resolution of Committee Disputes.
2.6.1. Within Operating Committees. All decisions within the JRC, JDC and JCC will be made by unanimous
agreement and all decisions within the other Committees, other than the JSC, will be made by unanimous agreement. If
a dispute arises which cannot be resolved within the JRC, JDC, JCC or such other Committees, then if such dispute
relates to a matter within the jurisdiction of the applicable Committee, the representatives of either Party may cause
such matter to be referred to the JSC for resolution as provided in Section 2.6.2.
2.6.2. Decision Making Within the JSC. In addition to resolving issues specifically delegated to it, the JSC has the
authority to resolve disputes within the jurisdiction of the JRC, JDC, JCC and any other Committees that the Parties
may subsequently create to assist in governance of this Agreement, but otherwise has no authority except where
expressly specified elsewhere in this Agreement or mutually agreed by the Parties in writing. The representatives from
each Party have, collectively, [***] on behalf of that Party, and all decisions within the JSC (whether originating there,
or referred to it by an operating Committee) will be made by unanimous agreement. If a matter is referred by an
operating Committee to the JSC, the JSC will use good faith efforts, in compliance with this Section 2.6.2, to resolve
promptly such matter. If the JSC is unable to reach unanimous agreement, within [***] after a Party affirmatively
states that a decision needs to be made, on any issue for which it is responsible, either Party may elect to submit such
issue to the Parties’ Executive Officers in accordance with Section 2.6.3.
2.6.3. Referral to Executive Officers. If a Party makes an election under Section 2.6.2 to refer a matter to the Executive
Officers, the JSC will submit in writing the respective positions of the Parties to their respective Executive Officers.
Such Executive Officers will use good faith efforts, in compliance with this Section 2.6.3, to resolve promptly such
matter, which good faith efforts will include at least one meeting between such Executive Officers within [***] after
the JSC’s submission of such matter to them. If the Executive Officers are unable to reach unanimous agreement on
any such matter, (i) if the matter relates to [***] provided, however, that [***] (ii) if the matter relates to [***] (iii) if
the matter relates to [***] (iv) if the matter relates to [***] and (v) [***]
Notwithstanding anything herein to the contrary, no exercise of a Party’s decision-making authority on any such
matters may, without the other Party’s prior written consent (i) result in a material increase in the other Party’s or its
Related Parties’ obligations, costs or expenses under this Agreement or any Research Plan, Development Plan or
Commercialization Plan, or (ii) otherwise conflict with this Agreement.
2.6.4. Good Faith. In conducting themselves on committees, and in exercising their rights under this Section 2.6, all
representatives of both Parties will consider diligently, reasonably and in good faith all input received from the other
Party, and will use reasonable efforts to reach unanimous agreement on all matters before them. In exercising any
decision-making authority granted to it under this Section 2.6, each Party will act based on its good faith judgment
taking into consideration such Party’s obligations to use Commercially Reasonable Efforts with respect to Research,
Development or Commercialization activities as provided in this Agreement.
2.7. General Committee Authority. Each Committee has solely the powers expressly assigned to it in this Section 2.
No Committee will have any power to amend, modify, or waive compliance with this Agreement. It is expressly
understood and agreed that the control of decision-making authority by Surface or Novartis, as applicable, pursuant to
Section 2.6, so as to resolve a disagreement or deadlock on a Committee for any matter will not authorize either Party
to perform any function or exercise any decision-making right not delegated to a Committee or such Party, and that
neither Surface nor Novartis has any right to unilaterally modify, amend or waive its own compliance with, the terms
of this Agreement.
2.8. Discontinuation of Participation on a Committee. The activities to be performed by each Committee will solely
relate to governance under this Agreement, and are not intended to be or involve the delivery of services. Subject to
Sections 2.3.1 and 2.4.1, each Committee will continue to exist until the Parties mutually agree to disband the
Committee. If each Committee is not disbanded pursuant to the preceding sentence, Surface will have the right, but not
the obligation, to discontinue Surface’s participation on each Committee no earlier than [***] after the expiration of
the Research Term with respect to any Licensed Target, other than a Regional Targets. If Surface exercises such right
to discontinue its participation, Surface will provide prompt written notice to Novartis of such election including the
applicable Licensed Target, and Novartis will have the sole right and authority to take any action that had been within
each Committee’s purview previously with respect to the applicable Antibody Candidates or Licensed Products within
such Licensed Target identified in Surface’s written notice.
3. RESEARCH
3.1. T1 Target.
3.1.1. Overview. Surface will be responsible for performing Research of T1 Antibody Candidates in accordance with
this Agreement and the T1 Research Plan during the Research Term (the “T1 Research Program”). An initial draft of
the research plan for the T1 Research Program, to be finalized by the JRC, is attached as Exhibit F (the “T1 Research
Plan”). In the event of any inconsistency between the T1 Research Plan and this Agreement, the terms of this
Agreement will prevail. During and after the expiration of the T1 Research Term, each Party will have the right, but
not the obligation, to perform Research of T1 Antibody Candidates in accordance with this Agreement.
3.1.2. Diligence; Standards of Conduct. During the Research Term, Surface (itself or through its Affiliates or by
permitted subcontracting pursuant to Section 3.1.7) will use Commercially Reasonable Efforts to [***] Surface will
conduct its activities under the T1 Research Plan in a good scientific manner and in compliance with applicable Law.
3.1.3. Oversight. The T1 Research Program will be conducted under the oversight of the JRC, which will have the
responsibilities outlined in this Agreement.
3.1.4. Research Costs. During the Research Term, Surface will be responsible for [***] of all costs and expenses
incurred by or on behalf of Surface in connection with the T1 Research Program. During and after the expiration of the
Research Term for the T1 Research Program, each Party will be responsible for [***] of all costs and expenses
incurred by or on behalf of such Party or its Related Parties in connection with Research of T1 Antibody Candidates.
3.1.5. Research Reports. Surface will keep the JRC informed regarding the progress of Research activities for the T1
Research Program during the Research Term, including a review of results and progress against timelines in the T1
Research Plan on a [***] basis. Following any dissolution of the JRC, Surface will continue to provide Novartis with
written updates on its and its Related Parties’ ongoing Research activities with respect to any TI Antibody Candidate
on a [***] basis.
3.1.6. Research Records. Surface will maintain scientific records in sufficient detail and in good scientific manner
appropriate for patent and regulatory purposes, and in compliance with cGLP with respect to activities intended to be
submitted in regulatory filings (including INDs), which will fully and accurately reflect all work done and results
achieved in the performance of the Research activities by or on behalf of Surface with respect to potential T1 Antibody
Candidates.
3.1.7. Third Parties. Surface will be entitled to utilize the services of Third Parties to perform its Research activities
under this Section 3.1, provided that (a) Surface will require that such Third Party operates in a manner consistent with
the terms of this
Agreement and is reasonably acceptable to Novartis, and (b) Surface will remain at all times fully liable for its
responsibilities. Surface will require that any Third Party agreement entered into pursuant to this Section 3.1.7 (x)
include confidentiality and non-use provisions that are no less stringent than those set forth in Section 11.1 (but of
duration customary in confidentiality agreements entered into for a similar purpose), other than the agreements listed
on Schedule 12.2.1, each of which contains reasonable and customary confidentiality and non-use provisions; and (y)
except as identified on Exhibit G, obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain
such license) under and to, any Know-How and Patents that are developed by such Third Party in the performance of
its obligations under such agreement and are reasonably necessary or useful to Research, Develop, Manufacture or
Commercialize T1 Antibody Candidates or T1 Licensed Products in the Field. For clarity, the foregoing requirement to
obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain such license) shall not apply to
any improvements to the proprietary core or platform technology owned or in-licensed by any such Third Party or its
Affiliates unless such improvements are reasonably necessary to Research, Develop, Manufacture or Commercialize
those Antibody Candidates or Licensed Products with respect to which such Third Party or its Affiliate conducted its
activities under such Third Party agreement. Surface will be solely responsible for direction of and communications
with such Third Party.
3.2. Option Targets.
3.2.1. Overview. On an Option Target-by-Option Target basis, Surface will be responsible for performing Research of
Option Target Antibody Candidates in accordance with this Agreement and the Option Target Research Plan for the
applicable Option Target during the Research Term (each an “Option Target Research Program”). An initial draft of
each of the Option Target research plans for each of the Option Target Research Programs is attached as Exhibit H-1,
H-2, H-3 and H-4, respectively (each an “Option Target Research Plan”). In the event of any inconsistency between
an Option Target Research Plan and this Agreement, the terms of this Agreement will prevail.
3.2.2. Diligence; Standards of Conduct. On an Option Target-by-Option Target basis, during the Research Term,
Surface (itself or through its Affiliates or by permitted subcontracting pursuant to Section 3.2.6) will use
Commercially Reasonable Efforts to [***] Surface will conduct its activities under the Option Target Research Plans
in a good scientific manner and in compliance with applicable Law.
3.2.3. Research Costs. During the Research Term, Surface will be responsible for [***] of all costs and expenses
incurred by or on behalf of Surface in connection with the Option Target Research Programs.
3.2.4. Research Reports. Surface will keep the JRC informed regarding the progress of Research activities for the
Option Target Research Programs during the Research Term, including a review of results and progress against
timelines in the applicable Option Target Research Plan on a [***] basis.
3.2.5. Research Records. Surface will maintain scientific records in sufficient detail and in good scientific manner
appropriate for Patent and regulatory purposes, and in compliance with cGLP with respect to activities intended to be
submitted in regulatory filings (including INDs), which will fully and accurately reflect all work done and results
achieved in the performance of the Research activities by or on behalf of Surface with respect to potential Option
Target Antibody Candidates.
3.2.6. Third Parties. Surface will be entitled to utilize the services of Third Parties to perform its Research activities
under this Section 3.2, provided that (a) Surface will require that such Third Party operates in a manner consistent with
the terms of this Agreement and is reasonably acceptable to Novartis and (b) Surface will remain at all times fully
liable for its responsibilities. Surface will require that any Third Party agreement entered into pursuant to this Section
3.2.6 (x) include confidentiality and non-use provisions that are no less stringent than those set forth in Section 11.1
(but of duration customary in confidentiality agreements entered into for a similar purpose), other than the agreements
set forth on Schedule 12.2.1, each of which contains reasonable and customary confidentiality and non-use provisions;
and (y) except as identified on Exhibit I obtain ownership of, or a fully sublicensable license (or an exclusive option to
obtain such license) under and to, any Know-How and Patents that are developed by such Third Party in the
performance of its obligations under such agreement and are reasonably necessary or useful to Research, Develop,
Manufacture or Commercialize Option Target Antibody Candidates or Option Target Licensed Products in the Field.
For clarity, the foregoing requirement to obtain ownership of, or a fully sublicensable license
(or an exclusive option to obtain such license) shall not apply to any improvements to the proprietary core or platform
technology owned or in-licensed by any such Third Party or its Affiliates unless such improvements are reasonably
necessary to Research, Develop, Manufacture or Commercialize those Antibody Candidates or Licensed Products with
respect to which such Third Party or its Affiliate conducted its activities under such Third Party agreement. Surface
will be solely responsible for direction of and communications with such Third Party.
3.3. Technical Failure. On an Option Target-by-Option Target basis, if the JSC determines that a Technical Failure has
occurred with respect to such Option Target within the Research Term, then Surface’s obligation to use Commercially
Reasonable Efforts to [***] shall be suspended for the remainder of the Research Term; provided, however, that
Surface will resume Commercially Reasonable Efforts to Research Option Target Antibody Candidates for the
remainder of the Research Term for any Option Target for which Technical Failure previously occurred, but where
changes in circumstance would render continuing activities consistent with the use of Commercially Reasonable
Efforts. Notwithstanding any such Technical Failure, during the Exclusivity Period with respect to such Option Target
(a) Novartis may, in its sole discretion, purchase the Option for such Option Target by issuing an Option Purchase
Notice in accordance with Section 4.1 of this Agreement, or (b) if Novartis has already delivered an Option Purchase
Notice with respect to such Option Target, exercise its Option with respect to such Option Target by issuing an Option
Exercise Notice. If Novartis opts not to purchase or exercise its Option with respect to such Option Target, then the
Option for such Option Target will terminate with the consequences set forth in Section 4.2.7 and elsewhere in this
Agreement.
4. OPTION PURCHASE, GRANT AND EXERCISE OF OPTIONS
4.1. Option Purchase Rights.
4.1.1. Option Purchase. On an Option Target-by-Option Target basis, Surface hereby grants Novartis the right, but not
the obligation, to purchase up to a total of four (4) exclusive option rights with respect to the Option Targets (each an
“Option”). For each Option Target, promptly [***] Surface will (a) provide to Novartis the Option Tox Package with
respect to the applicable Option Target, and (b) afford reasonable access during normal business hours to Surface’s
personnel by Novartis and its representatives as Novartis may reasonably request to assist Novartis in deciding
whether to purchase the Option for such Option Target. In addition, during the Option Purchase Period, Novartis may,
in its sole discretion, reasonably request that Surface provide to Novartis other information and documentation relating
to such Option Target Antibody Candidate, and Surface will provide such information and documentation in the
possession or control of Surface to Novartis within [***] weeks after the date of Novartis’ request; provided that, for
clarity, any such information delivery that occurs after the expiration of the Option Purchase Period will not extend
such Option Purchase Period. For each Option, Novartis will be entitled to purchase the applicable Option by
providing a completed Option Purchase Notice with respect to the applicable Option to Surface at any time during the
applicable Option Purchase Period for such Option and paying the Option Purchase Fee in accordance with Section
10.3. If Novartis purchases the applicable Option for an Option Target during the Option Purchase Period, then
Novartis will be entitled to exercise the Option with respect to such Option Target as set forth in Section 4.2.
4.1.2. Option Purchase Not Exercised. For each Option, if Novartis does not deliver to Surface an Option Purchase
Notice with respect to an Option Target during the Option Purchase Period, or if Novartis elects and delivers written
notice to Surface to terminate an Option prior to expiration of the applicable Option Purchase Period, then (a)
Novartis’s Option with respect to such Option Target will expire, (b) the Research Term with respect to such Option
Target will terminate, (c) each Party’s rights and obligations under this Agreement with respect to such Option Target
and any Option Target Antibody Candidates relating thereto (including the right to exercise the Option under Section
4.2 and the exclusivity under Section 12.5) will terminate, and (d) each Party will thereafter be free to research,
develop, manufacture or commercialize, alone or with one or more Third Parties, any Antibodies or products relating
to such Option Target, in each case without any further obligation to the other Party.
4.2. Options.
4.2.1. Grant. Surface hereby grants Novartis the right, but not the obligation, to exercise up to a total of three (3)
Options with respect to any three (3) Option Targets for which (a) Novartis has purchased an Option in accordance
with Section 4.1, and (b) Surface has received IND Acceptance with respect to such Option Target. Each Option will
be designated as either a Regional Option or a Global Option in accordance with the selection mechanism set forth in
Section 4.2.3.
4.2.2. Information Sharing for Options. For each of the Options, promptly after the first IND Acceptance with respect
to an Option Target, Surface will (a) provide to Novartis the Option IND Package with respect to the applicable Option
Target, and (b) afford reasonable access during normal business hours to Surface’s personnel by Novartis and its
representatives as Novartis may reasonably request to assist Novartis in deciding whether to exercise the Option for
such Option Target. In addition, during the Option Exercise Period, Novartis may, in its sole discretion, reasonably
request that Surface provide to Novartis other information and documentation relating to the Option Target, and
Surface will provide such information and documentation in the possession or control of Surface to Novartis within
[***] weeks after the date of Novartis’ request; provided that, for clarity, any such information delivery that occurs
after the expiration of the Option Exercise Period will not extend such Option Exercise Period.
4.2.3. Selection Mechanism. For each Option, the Parties will determine if the Option for such Option Target will be a
“Regional Option” or a “Global Option” in accordance with the following procedure:
4.2.3.1. First Option. Contemporaneously with the delivery of the Option IND Package for the first Option Target,
Surface will provide written notice in the form set forth on Exhibit J (the “Option Selection Notice”) to Novartis
indicating whether the Option for the first Option Target will be a Regional Option or a Global Option.
4.2.3.2. Second Option. Contemporaneously with the delivery of the Option Exercise Notice for the second Option
Target, Novartis will provide an Option Selection Notice to Surface indicating whether the Option for the second
Option Target will be a Regional Option or a Global Option or whether Novartis will terminate its rights to such
Option Target in accordance with Section 4.2.7. Notwithstanding the foregoing, Novartis, in its sole discretion, may
indicate that Novartis elects to defer its right to select the Option structure until the third Option Target achieves an
IND Acceptance in accordance with Section 4.2.3.3 and instead permit Surface to issue an Option Selection Notice to
Novartis for the second Option Target (the “Novartis Deferral Notice”). In the event that Novartis issues the Novartis
Deferral Notice, Surface will provide an Option Selection Notice to Novartis within [***] after receipt of the Novartis
Deferral Notice indicating whether the Option for the second Option Target will be a Regional Option or a Global
Option.
4.2.3.3. Third Option. Contemporaneously with the delivery of the Option IND Package for the third Option Target,
Surface will provide an Option Selection Notice to Novartis indicating whether the Option for the third Option Target
will be a Regional Option or a Global Option. Notwithstanding the foregoing, if Novartis provided a Novartis Deferral
Notice in accordance with Section 4.2.3.2, then contemporaneously with the delivery of the Option Exercise Notice for
the third Option Target, Novartis will provide an Option Selection Notice to Surface indicating whether the Option for
the third Option Target will be a Regional Option or a Global Option or whether Novartis will terminate its rights to
such Option Target in accordance with Section 4.1.2.
4.2.4. Regional Option Grants. For each Option that is designated as a Regional Option in accordance with Section
4.2.3, Surface hereby grants to Novartis an exclusive option, but not the obligation, to obtain an exclusive license on
the terms set forth in Section 9.2 to such Option Target and all associated Option Target Antibody Candidates. Each
Regional Option may be exercised by Novartis at any time during the applicable Option Exercise Period for such
Regional Option in accordance with the terms and conditions set forth in Section 4.2.6.
4.2.5. Global Option Grants. For each Option that is designated as a Global Option in accordance with Section 4.2.3,
Surface hereby grants Novartis an exclusive option, but not the obligation, to obtain an exclusive license on the terms
set forth in Section 9.3 to such Option Target and all associated Option Target Antibody Candidates. Each Global
Option may be exercised by Novartis at any time during the applicable Option Exercise Period for such Global Option
in accordance with the terms and conditions set forth in Section 4.2.6.
4.2.6. Exercise of an Option.
4.2.6.1. Option Exercise Notice. Novartis will exercise an Option, if at all, by properly delivering a completed Option
Exercise Notice in respect of such Option to Surface at any time during the applicable Option Exercise Period for such
Option. For clarity, Novartis will be entitled to exercise a maximum of three (3) Options, and thereafter all rights and
obligations with respect to any remaining Option Target will terminate in accordance with Section 4.2.7.
4.2.6.2. Exercise of Regional Options. On the applicable Option Exercise Date for the exercise of any Regional Option,
all Option Target Antibody Candidates for such Option Target will automatically be deemed “Regional Antibody
Candidates”, the applicable Option Target will automatically be deemed a “Regional Target” for all purposes under this
Agreement, the license from Surface to Novartis for such Regional Antibody Candidates and associated Regional
Licensed Products set forth in Section 9.2 will automatically, with no further action by any Party, go into full force and
effect, and all of the obligations of Surface and Novartis with respect to such Regional Licensed Products, including
the payment obligations relating thereto, will become the binding obligations of the applicable Party in respect of such
Regional Antibody Candidates and Regional Licensed Products.
4.2.6.3. Exercise of Global Options. On the applicable Option Exercise Date for the exercise of any Global Option, all
Option Target Antibody Candidates for such Option Target will automatically be deemed a “Global Antibody
Candidates” and the applicable Option Target will automatically be deemed a “Global Target” for all purposes under
this Agreement, the license from Surface to Novartis to such Global Antibody Candidates and associated Global
Licensed Products set forth in Section 9.3 will automatically, with no further action by any Party, go into full force and
effect, and all of the obligations of Surface and Novartis with respect to such Global Licensed Products, including the
payment obligations relating thereto, will become the binding obligations of the applicable Party in respect of such
Global Antibody Candidates and Global Licensed Products.
4.2.6.4. Regional [***] Candidate. Notwithstanding anything herein to the contrary, in the event Novartis exercises an
Option with respect to [***] pursuant to Section 4.2.6 and [***] is a Regional Target under this Agreement, then either
Party may, pursuant to Section 5.2.2.4(a), present a proposal to the JDC requesting the right to Develop and
Commercialize (“Regional [***] Activities”) one (1) or more Antibodies that Specifically Binds to any of the [***]
other than that Antibody Candidate [***] exercised in connection with the Option for [***] (“Regional [***]
Candidate”). Subject to Section 2.4.4, if JDC decides that the Parties will conduct the Regional [***] Activities with
respect to the Regional [***] Candidate, then such Regional [***] Candidate will be treated as “Regional Antibody
Candidate” or “Regional Licensed Product” on the same basis as all other Antibody Candidates for [***] that were
exercised under the Option. However, if the JDC is unable to agree that the Parties will conduct the Regional [***]
Activities, then either Party will be entitled, if permitted under Section 5.2.2.4(c), to proceed with the Regional [***]
Activities of such Regional [***] Candidate by itself in its respective Territory; provided that (a) such Party’s rights
will be limited to those Regional [***] Activities with respect to the Regional [***] Candidate and associated Regional
Licensed Product solely in such Party’s Territory, (b) all associated Regional Licensed Products will be royalty-bearing
Regional Licensed Products under this Agreement; and (c) the Non-Proposing Party shall, pursuant to Section
5.2.2.4(d) have the right to opt-in with respect to the Regional [***] Candidate. For the avoidance of doubt, Surface
will have no rights to conduct Regional [***] Activities in the event [***] is a Global Target.
4.2.6.5. Research, Development and Commercialization Following Option Exercise. Following the Option Exercise
Date for a Regional Option, (a) each Party will have the right, but not the obligation, to perform Research of Regional
Antibody Candidates in accordance with this Agreement, (b) each Party will be responsible for [***] of all costs and
expenses incurred by or on behalf of such Party or its Related Parties in connection with Research of Regional
Antibody Candidates, and (c) the Development and Commercialization of Regional Antibody Candidates and Regional
Licensed Products for such Regional Target will thereafter be governed by Sections 5.2 and 6.2, respectively.
Following the Option Exercise Date for a Global Option, (x) each Party will have the right, but not the obligation, to
perform Research of Global Antibody Candidates in accordance with this Agreement, (y) each Party will be
responsible for [***] of all costs and expenses incurred by or on behalf of such Party or its Related Parties in
connection with Research of Global Antibody Candidates, and (z) the Development and Commercialization of Global
Antibody Candidates and Global Licensed Product for such Global Target will thereafter be governed by Sections 5.3
and 6.3, respectively. Following any dissolution of the JRC or JDC, Surface will continue to provide Novartis with
written updates on its and its Related Parties’ ongoing Research activities with respect to any Regional Antibody
Candidate and Global Antibody Candidate on a [***] basis.
4.2.6.6. Further Assurances and Transaction Approvals in Connection with Option. Novartis shall specify in each
Option Exercise Notice provided with respect to an Option Target pursuant to Section 4.2.6, whether, in Novartis’
reasonable opinion, the Parties would be required by applicable Laws to file with the FTC and the Antitrust Division
of the DOJ, any notification and report form under the HSR Act (an “HSR Filing”) with respect to Novartis’ exercise
of the Option for such Option Target. The Parties will reasonably cooperate with one another to the extent necessary in
the preparation of any such HSR Filing. Novartis shall be responsible for all filing fees associated with
any such HSR Filing. The Parties shall each use Commercially Reasonable Efforts to ensure that applicable waiting
period under the HSR Act or any applicable comparable foreign law in the Territory expires or is terminated as soon as
practicable. Notwithstanding the foregoing, nothing in this Section 4.2.6 shall require either Party or such Party’s
Affiliates to (a) disclose to the other Party any information that is subject to obligations of confidentiality owed to
Third Parties (nor shall either Party be required to conduct joint meetings with any Governmental Authority in which
such information might be shared with the other Party), or (b) to commit to any divestiture, license (in whole or in
part) or any arrangement to hold separate (or any similar arrangement) with respect to any of its products or assets.
4.2.7. Termination of Option. On an Option-by-Option basis, if (a) Novartis does not deliver to Surface an Option
Exercise Notice with respect to an Option during the Option Exercise Period, (b) Novartis makes an HSR Filing with
respect to the exercise of an Option for an Option Target, but the applicable waiting period under the HSR Act with
respect to such HSR Filing does not expire or is not terminated within [***] days after the filing date, or (c) Novartis
elects, in its sole discretion, to deliver written notice to Surface to terminate an Option prior to the expiration of the
applicable Option Exercise Period, then (i) Novartis’s Option with respect to such Option Target will expire, (ii) the
Research Term with respect to such Option Target will terminate, (iii) each Party’s rights and obligations under this
Agreement with respect to such Option Target and any Option Target Antibody Candidates relating thereto (including
exclusivity under Section 12.5), will terminate, and (iv) each Party will thereafter be free to Research, Develop,
Manufacture or Commercialize, alone or with one or more Third Parties, any Antibodies or products relating to such
Option Target, in each case without any further obligation to the other Party. For clarity, Novartis will be entitled to
exercise a maximum of three (3) Options, and thereafter all rights and obligations with respect to any remaining
Option Target will terminate in accordance with this Section 4.2.7.
5. DEVELOPMENT
5.1. T1 Antibody Candidates and T1 Licensed Products.
5.1.1. Overview. Novartis will have the sole right to Develop T1 Antibody Candidates and T1 Licensed Products in the
Novartis Territory.
5.1.2. Transition. By no later than [***] for a T1 Licensed Product, Surface will prepare and provide to Novartis a
draft plan for the transition of the Development of such T1 Licensed Products from Surface to Novartis or its designee
(a “T1 Transition Plan”). The T1 Transition Plan for each T1 Licensed Product will require Surface to, as soon as
reasonably practicable following the Research Term: (a) transfer to Novartis of a copy of all Know-How Controlled by
Surface that is reasonably necessary or useful for Development of such T1 Antibody Candidates or T1 Licensed
Products, or obtaining or maintaining Regulatory Approval for such T1 Licensed Products in the Novartis Territory,
including information and materials reasonably requested by Novartis, in a format reasonably acceptable to Novartis
(which will be specified in such T1 Transition Plan, along with the process of transferring such Know-How); (b)
assign to Novartis any INDs and other Regulatory Materials submitted to, or filed with, any Regulatory Authority with
respect to such T1 Antibody Candidates or T1 Licensed Products, including any drug master files maintained by or on
behalf of Surface solely related thereto (provided however that Surface will not be required to transfer any drug master
files maintained by or on behalf of any Third Party, including any contract manufacturers); (c) transfer to Novartis a
copy of all written correspondence with any Regulatory Authority with respect to such T1 Antibody Candidates or T1
Licensed Products and all written minutes of meetings and memoranda of oral communications with any Regulatory
Authority with respect to such T1 Antibody Candidates or T1 Licensed Products; and (d) transfer to Novartis a copy of
any other information or materials reasonably requested by Novartis that are reasonably necessary or useful for
Development of such T1 Antibody Candidates or T1 Licensed Products in the Novartis Territory, including if so
reasonably requested by Novartis, and Third Party agreements relating solely thereto (the items described in clauses (a)
through (d) collectively, “T1 Development Information”). The T1 Transition Plan for each T1 Licensed Product will
also describe any Development activities with respect to such T1 Licensed Product that Surface is required to perform
as requested by Novartis and mutually agreed upon by the Parties (collectively, “T1 Transition Activities”). Each
Party will use Commercially Reasonable Efforts to perform the obligations assigned to it under the T1 Transition Plan
in accordance with any timelines set forth therein, and [***]
5.1.3. T1 Development Plan. Within [***] days prior to the anticipated expiration date of the Research Term with
respect to the T1 Target, Novartis will provide the JDC with a work plan and time table for the Development activities,
including Clinical Studies, to be undertaken with respect to T1 Antibody Candidates and T1 Licensed
Products in the Novartis Territory (a “T1 Development Plan”). The terms of, and Development activities set forth in,
each T1 Development Plan will at all times be designed to be in compliance with all applicable Laws and in
accordance with professional and ethical standards customary in the pharmaceutical industry. Novartis will update the
T1 Development Plan for such T1 Antibody Candidates and T1 Licensed Products [***] and will provide such updated
T1 Development Plan to the JDC.
5.1.4. Diligence. Novartis will use Commercially Reasonable Efforts to (a) [***] and (b) perform all Development
activities for the T1 Antibody Candidates and T1 Licensed Products in accordance with the T1 Development Plan.
Without limiting the foregoing, at all times during the Term, [***]
5.1.5. Costs. Novartis will be responsible for [***] Development Costs for the Development of T1 Antibody
Candidates or T1 Licensed Products.
5.1.6. Records; Reports; Information Sharing.
5.1.6.1. Development Activities. Following the transition period with respect to a T1 Licensed Product, once per [***]
Novartis will provide to Surface, through the JDC, an update regarding Development activities conducted by or on
behalf of Novartis with respect to such T1 Licensed Product, as well as any Clinical Studies with respect to such T1
Licensed Products conducted by Novartis.
5.1.6.2. Scientific Records. Novartis will maintain scientific records, in sufficient detail and in sound scientific manner
appropriate for Patent and regulatory purposes and in compliance with cGLP with respect to activities intended to be
submitted in regulatory filings (including INDs and BLAs), which will reflect all material work done and results
achieved in the performance of the Development activities and Clinical Studies with respect to T1 Licensed Products.
5.1.6.3. Personnel. During the period commencing after the completion of the T1 Transition Activities and ending
upon Regulatory Approval of the first T1 Licensed Product, Novartis may request that Surface reasonably make
available for consultation regarding the Development of T1 Antibody Candidates and T1 Licensed Products certain of
its employees engaged in Research and Development activities with respect to such T1 Antibody Candidates and T1
Licensed Products. Surface will reasonably cooperate with Novartis to provide (a) up to [***] hours of consultation
without charge to Novartis, and (b) any additional hours of consultation as Novartis may reasonably request, for which
Novartis will pay Surface a rate of [***] per hour of such consultation services.
5.1.7. Third Parties. The Parties will be entitled to utilize the services of Third Parties to perform their respective
Development activities under this Section 5.1, provided that (a) each Party will require that such Third Party operates
in a manner consistent with the terms of this Agreement and in the case of Surface, reasonably acceptable to Novartis
and (b) each Party will remain at all times fully liable for its respective responsibilities. Each Party will require that
any Third Party agreement entered into pursuant to this Section 5.1.7 (x) include confidentiality and non-use
provisions that are no less stringent than those set forth in Section 11.1 (but of duration customary in confidentiality
agreements entered into for a similar purpose), other than Existing Novartis In-Licenses and the agreements listed on
Schedule 12.2.1, each of which contains reasonable and customary confidentiality and non-use provisions; and (y)
except as identified on Exhibit G, obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain
such license) under and to, any Know-How and Patents that are developed by such Third Party in the performance of
its obligations under such agreement and are reasonably necessary or useful to Research, Develop, Manufacture or
Commercialize T1 Antibody Candidates or T1 Licensed Products in the Field. For clarity, the foregoing requirement to
obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain such license) shall not apply to
any improvements to the proprietary core or platform technology owned or in-licensed by any such Third Party or its
Affiliates unless such improvements are reasonably necessary to Research, Develop, Manufacture or Commercialize
those Antibody Candidates or Licensed Products with respect to which such Third Party or its Affiliate conducted its
activities under such Third Party agreement. The Party utilizing the services of a Third Party service provider will be
solely responsible for direction of and communications with such Third Party.
5.2. Regional Antibody Candidates and Regional Licensed Products.
5.2.1. Overview. Subject to the oversight of the JSC and the JDC, on a Regional Target-by-Regional Target basis:
5.2.1.1. Surface will be primarily responsible for Development of all Regional Antibody Candidates and Regional
Licensed Products in accordance with this Agreement and the RLP Development Plan for such Regional Target during
the Early RLP Development Term.
5.2.1.2. Unless Surface exercises its Opt-Out Right in accordance with Section 5.2.9, the Parties will collaborate on
further global Development of Regional Antibody Candidates and Regional Licensed Products in accordance with this
Agreement and the RLP Development Plan during the Late RLP Development Term, with each Party’s responsibility
for Development activities specifically related to obtaining Regulatory Approval in its Territory.
5.2.2. Development Plans.
5.2.2.1. RLP Development Plans. On a Regional Target-by-Regional Target basis, the Development activities that are
necessary or useful to be undertaken for the applicable Regional Antibody Candidates and Regional Licensed Products
to achieve initial Regulatory Approval will be mutually agreed upon by the Parties and set forth in reasonable detail in
a written work plan and time table (each, as updated from time to time, a “RLP Development Plan”) . The initial RLP
Development Plan for each Regional Target will be included in the Option IND Package for such Regional Target
provided by Surface to Novartis under Section 4.2.2, and within [***] days after the Option Exercise Date for such
Regional Target, or as soon as reasonably practicable thereafter, the JDC will review, update and approve such RLP
Development Plan. Each RLP Development Plan will allocate responsibility for the performance of each RLP
Development Activity to one or both of the Parties in their respective Territories. The terms of, and Development
activities set forth in, each RLP Development Plan will at all times be designed to be in compliance with all applicable
Laws and in accordance with professional and ethical standards customary in the pharmaceutical industry. The Parties
will update the applicable RLP Development Plan for such Regional Antibody Candidates and Regional Licensed
Products [***] and will provide such updated RLP Development Plan to the JDC. The JDC will review and approve
each RLP Development Plan submitted to it in accordance with Section 2.4.4.
5.2.2.2. RLP Development Budgets. Each RLP Development Plan will contain a [***] rolling budget covering the
anticipated RLP Development Activities to be performed during the then-current Calendar Year (broken down by
Calendar Quarter) and the next Calendar Year (broken down by Calendar Quarter), and a forecast of the budgets for
each subsequent Calendar Year thereafter through completion of all RLP Development Activities set forth in any such
RLP Development Plan, provided that each initial RLP Development Plan will also include such a budget for the
partial Calendar Year commencing as of the date of such RLP Development Plan and ending December 31 of such
Calendar Year (each such two-year budget plus any such partial Calendar Year is a “RLP Development Budget”).
Each RLP Development Budget will be updated [***] by the JDC in accordance with Section 5.2.2.3. The initial RLP
Development Budget for a Regional Target, and each update thereto, will be prepared by the JDC, based on (a) the
Parties’ good faith estimation of the anticipated RLP Development Activities to be conducted during the relevant [***]
year period and (b) information prepared by the Parties in good faith for their own internal planning processes relating
to anticipated RLP Development Activities for such Regional Target, a summary of which will be provided to the JDC
for review and incorporation into the RLP Development Budget. Each RLP Development Budget will include an
itemized list of the applicable RLP Development Activities to be performed during the [***] year period covered by
such RLP Development Budget, with detailed line item entries for each RLP Development Activity setting forth the
costs directly related to such RLP Development Activity (broken out to show Out-of-Pocket Costs and FTE Costs for
FTEs directly engaged to perform such RLP Development Activity) and specifying what Party or Third Party is
responsible for performing the applicable RLP Development Activity, which itemized list may include:
(i) Any material preclinical, non-clinical studies or GLP Toxicology Studies, itemized by study;
(ii) Clinical Studies, including (A) the following costs itemized by Clinical Study: [***] and (B) the following
information itemized by Clinical Study: [***] and
(iii) allocation of responsibility for Manufacturing the applicable Regional Antibody Candidates and Regional
Licensed Products.
Confidential
- 56 -
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
5.2.2.3. Managing and Amending RLP Development Plans and RLP Development Budgets. The JDC will update and
amend the applicable RLP Development Plan from time-to-time as it deems necessary and, until such time as no
further RLP Development Activities are occurring or expected to occur with respect to such Regional Target.
5.2.2.4. Supplemental Studies; Regional [***] Candidates.
(a) Additional Development Proposals. If a Party desires to conduct (i) a Supplemental Study of a Regional Licensed
Product for a Regional Target for the purpose of seeking Regulatory Approval to market such Regional Licensed
Product, or (ii) Regional [***] Activities, such Party (the “Proposing Party,” and such other Party, the “Non-
Proposing Party”) will submit to the JDC a proposal to add such Supplemental Study or Regional [***] Activities, as
applicable, to the applicable RLP Development Plan (an “Additional Development Proposal”). Each Additional
Development Proposal will describe in reasonable detail the applicable Regional Target or Regional [***] Candidate,
the Supplemental Study(ies) or Regional [***] Activities that the Proposing Party desires to conduct, including a
synopsis of the trial or activities, the proposed enrollment criteria, number of patients to be included, endpoints to be
measured, and statistical design and powering (the “Additional Development Activities”), as well as a proposed
timeline and budget and an analysis of the business opportunity and revenue potential for such Additional
Development Activities.
(b) JDC Decision Regarding Additional Development Activities. The JDC will approve or reject an Additional
Development Proposal within [***] days after receipt thereof from the Proposing Party as set forth in this Section
5.2.2.4.
(i) If the JDC approves an Additional Development Proposal, upon such an approval, the applicable RLP Development
Plan will be amended to include the Additional Development Activities, including the proposed timeline and budget
for such Additional Development Activities, set forth in such Additional Development Proposal (as may be amended
by the JDC) upon such approval. Any Additional Development Activities included in a RLP Development Plan
pursuant to this Section 5.2.2.4 will be deemed to be RLP Development Activities for all purposes under Section
5.2.3.2.
(ii) If the JDC fails to approve an Additional Development Proposal, upon such a failure, the Supplemental Study or
Regional [***] Activities proposed in the Additional Development Proposal will not be deemed an RLP Development
Activity for any purpose under this Agreement, and Sections 5.2.2.4(c) and 5.2.2.4(d) will apply.
(c) Independent Performance of Additional Development Activities.
(i) If, the JDC fails to approve for inclusion in the RLP Development Plan an Additional Development Proposal
proposed by Surface for a Supplemental Study(ies) for such Regional Licensed Product or Regional [***] Activities
for such Regional [***] Candidate, Surface may, upon notice to Novartis, conduct the proposed Supplemental
Study(ies) or Regional [***] Activities at its own expense; provided, however, that if Novartis determines reasonably
and in good faith that the performance of such proposed Supplemental Study(ies) or Regional [***] Activities would
pose Safety Concerns or other ethical concerns, then Surface will not undertake such Supplemental Study(ies) or
Regional [***] Activities, unless and until Novartis determines that such Additional Development Activities should be
permitted.
(ii) If the JDC fails to approve for inclusion in the RLP Development Plan an Additional Development Proposal
proposed by Novartis for a Supplemental Study(ies) for such Regional Licensed Product or Regional [***] Activities
for such Regional [***] Candidate, Novartis may, upon notice to Surface, conduct the proposed Supplemental
Study(ies) or Regional [***] Activities at its own expense; provided, however, that if Surface determines reasonably
and in good faith that the performance of such proposed Supplemental Study(ies) or Regional [***] Activities would
pose Safety Concern or other ethical concerns, then Novartis will not undertake such Supplemental Study(ies) or
Regional [***] Activities, unless and until Surface determines that such Additional Development Activities should be
permitted.
(iii) Notwithstanding anything in Section 7.1.3 to the contrary, if the JDC does not approve an Additional
Development Proposal, unless and until the Non-Proposing Party delivers an Additional Development Opt-In Notice
with respect to such Additional Development Activity, as described in Section 5.2.2.4(d), the Non-Proposing Party will
not have any rights under Section 7.1.3 with respect to any information or data generated from any Supplemental
Study or Regional [***] Activity that was the subject of the unapproved Additional Development Proposal or from any
future information or data generated from any future Clinical Studies with respect to the same Indication or the
applicable Regional [***] Candidate, other than to use such information or data to determine whether to deliver an
Additional Development Opt-In Notice in accordance with Section 5.2.2.4(d) or as permitted pursuant to the SDEA.
(d) Opt-In for Additional Development Activities. In the event that the Proposing Party conducts a Supplemental Study
or Regional [***] Activity pursuant to Section 5.2.2.4(c), the Proposing Party will provide to the Non-Proposing Party
(i) [***] (the “Additional Development Data Package”). The Non-Proposing Party shall have the one-time right to
elect, in its sole discretion and upon written notice to the Proposing Party no later than [***] days after the date the
Additional Development Data Package is made available to the Non-Proposing Party (an “Additional Development
Opt-In Notice”), to opt in with respect to any Supplemental Study or Regional [***] Activity that was the subject of
such Additional Development Proposal that the Proposing Party elected to conduct in accordance with Section
5.2.2.4(c), and then (A) such Supplemental Study or Regional [***] Activity, as applicable, will be deemed to be an
RLP Development Activity under the RLP Development Plan for the applicable Regional Target from and after the
date on which such Additional Development Opt-In Notice is received by the Proposing Party (the “Additional
Development Opt-In Date”); (B) the then-current plan and budget of the Proposing Party with respect to such
Supplemental Study or Regional [***] Activity, as applicable, will be deemed to be included within, and part of, the
RLP Development Plan for such Regional Licensed Product as of the Additional Development Opt-In Date, and will
control with respect to such Supplemental Study or Regional [***] Activity unless and until an amendment to the RLP
Development Plan providing for a different or modified plan and budget is approved by the JDC; and (C) the Non-
Proposing Party will have all rights granted to it under Section 7.1.3 with respect to the information and data generated
from such Supplemental Study or Regional [***] Activity as if such Supplemental Study or Regional [***] Activity
was conducted under the RLP Development Plan for such Regional Licensed Product, provided that, (1) the Non-
Proposing Party’s right to so opt-in with respect to such Additional Development Activities, triggering the results
described in the foregoing clauses (A) through (C), is conditioned on the payment by the Non-Proposing Party to the
Proposing Party of a payment of [***] of those costs and expenses incurred by the Proposing Party prior to the
Additional Development Opt-in Date that the Non-Proposing Party should have paid in connection with such
Additional Development Activities had such Additional Development Activities been included in the RLP
Development Plan pursuant to Section 5.2.2.4(b)(i); and (2) any future Development Costs with respect to such
Regional Licensed Product, including any future Clinical Studies, will be allocated in accordance with Section 5.2.4.
5.2.3. Diligence; Standards of Conduct.
5.2.3.1. Novartis Diligence. On a Regional Target-by-Regional Target basis, Novartis will use Commercially
Reasonable Efforts to (a) [***] and (b) perform the RLP Development Activities allocated to it under the RLP
Development Plan for such Regional Antibody Candidates and Regional Licensed Products for such Regional Target
in accordance with the RLP Development Plan.
5.2.3.2. Surface Diligence. On a Regional Target-by-Regional Target basis, Surface will use Commercially Reasonable
Efforts to (a) [***] and (b) perform the RLP Development Activities allocated to it under the RLP Development Plan
for such Regional Antibody Candidates and Regional Licensed Products for such Regional Target in accordance with
the RLP Development Plan.
5.2.4. Development Costs.
5.2.4.1. With respect to each Regional Target, Surface will be responsible for [***] of all Development Costs for the
Development of Regional Antibody Candidates or Regional Licensed Products for such Regional Target during the
Early RLP Development Term.
5.2.4.2. With respect to each Regional Target, Surface will be responsible for [***] of all Development Costs and
Novartis will be responsible for [***] of all Development Costs, in each case for the Development of all Regional
Antibody Candidates or Regional Licensed Products during the Late RLP Development Term.
5.2.5. Novartis Development. Novartis will use Commercially Reasonable Efforts to conduct its Development of each
Regional Licensed Product in accordance with the applicable RLP Development Plan, as such RLP
Development Plan may be amended in accordance with this Agreement, in sound scientific manner and in compliance
with applicable Law.
5.2.6. Surface Development. Surface will use Commercially Reasonable Efforts to conduct its Development of each
Regional Licensed Product for the Surface Territory in accordance with the applicable terms of the RLP Development
Plan, as such RLP Development Plan may be amended in accordance with this Agreement, in sound scientific manner
and in compliance with applicable Law.
5.2.7. Records; Reports; Information Sharing.
5.2.7.1. Development Activities Reports. On a Regional Target-by-Regional Target basis, each Party will periodically
provide to the JDC, on a [***] basis, or more frequently as reasonably requested by the JDC, an update regarding
Development activities conducted by or on behalf of such Party with respect to Regional Antibody Candidates and
Regional Licensed Products for such Regional Target, as well as any Supplemental Studies, Regional [***] Activities
and Post-Marketing Studies conducted by or on behalf of such Party with respect to Regional Antibody Candidates and
Regional Licensed Products for such Regional Target. The Parties will periodically report to the JDC, but in no event
less than on a [***] basis, regarding their respective activities conducted under the RLP Development Plan for
Regional Antibody Candidates and Regional Licensed Products for such Regional Target. In addition, each Party will
promptly share with the other Party all material developments and information that it comes to possess relating to the
Development of any Regional Antibody Candidates and Regional Licensed Products for such Regional Target,
including (a) Safety Concerns for Regional Antibody Candidates or Regional Licensed Products, and (b) study reports
and data generated from Clinical Studies of such Regional Antibody Candidates and Regional Licensed Products for
such Regional Target; provided however, that excluding Safety Concerns or as required under the SDEA, a Party as
Proposing Party will not be obligated to share any study reports and data generated from Clinical Studies for any
Additional Development Activities (including Regional [***] Activities) conducted by or on behalf of the Proposing
Party where the Non-Proposing Party has not exercised an Additional Development Opt-in Notice other than to permit
the Non-Proposing Party data to determine whether to deliver an Additional Development Opt-In Notice in accordance
with Section 5.2.2.4(d).
5.2.7.2. Scientific Records. Each Party will maintain scientific records, in sufficient detail and in sound scientific
manner appropriate for Patent and regulatory purposes and in compliance with cGLP with respect to activities intended
to be submitted in regulatory filings (including INDs and BLAs), which will fully and accurately reflect all work done
and results achieved in the performance of the Development activities, Clinical Studies, Regional [***] Activities and
Supplemental Studies with respect to Regional Antibody Candidates and Regional Licensed Products by such Party.
5.2.7.3. Information Exchange and Development Assistance. Until the expiration or termination of the final RLP
Development Plan, upon the reasonable request of the other Party, each Party will provide to the other Party, without
additional compensation and in a commercially reasonable format, Know-How Controlled by such Party or its Related
Parties that is licensed to the other Party under this Agreement (i.e., Know-How included in Novartis Technology for
Novartis and Know-How included in Surface Technology for Surface) to the extent that it is reasonably necessary or
useful for Development of Regional Antibody Candidates or Regional Licensed Products in the requesting Party’s
Territory or for obtaining or maintaining Regulatory Approval for Regional Licensed Products in the requesting Party’s
Territory, including copies of (a) all scientific information and data related to such Regional Antibody Candidates or
Regional Licensed Products (including all data made, collected or otherwise generated in the conduct of any pre-
clinical studies, Clinical Studies, Supplemental Studies or Regional [***] Activities for which a Party as Non-
Proposing Party has exercised its Additional Development Opt-In Notice, or early access/named patient programs for
the Regional Licensed Products, as well as CMC information), and (b) protocols and investigator brochures, in each
case, that are reasonably necessary for the other Party (or its Related Parties) to perform its obligations or exploit its
rights under this Agreement with respect to such Regional Antibody Candidates or Regional Licensed Products.
5.2.7.4. Personnel. Each Party may request, through the JDC or the other Party’s Alliance Manager, that the other
Party reasonably make available for consultation regarding the Development of such Regional Antibody Candidates or
Regional Licensed Products certain of its employees engaged in Development activities and Supplemental Studies or
Regional [***] Activities for which a Party as Non-Proposing Party has exercised its Additional Development Opt-In
Notice, with respect to such Regional Antibody Candidates or Regional Licensed Products. The JDC or the Alliance
Managers will reasonably coordinate, upon reasonable notice during normal business hours
and at their respective places of employment, consultation between the Parties on the progress of the Development for
such Regional Antibody Candidates or Regional Licensed Products, including any Supplemental Studies or Regional
[***] Activities for which a Party as Non-Proposing Party has exercised its Additional Development Opt-In Notice.
5.2.8. Third Parties. The Parties will be entitled to utilize the services of Third Parties to perform their respective
Development under this Section 5.2, provided that (a) each Party will require that such Third Party operates in a
manner consistent with this Agreement and reasonably acceptable to the other Party, (b) each Party will remain at all
times fully liable for its respective responsibilities and (c) the Parties will make reasonable efforts to share, through the
JDC, information regarding any prior experience with specific CROs that are anticipated to be engaged to perform
work under the RLP Development Plan. Each Party will require that any Third Party agreement entered into pursuant
to this Section 5.2.8 (x) include confidentiality and non-use provisions that are no less stringent than those set forth in
Section 11.1 (but of duration customary in confidentiality agreements entered into for a similar purpose), other than
Existing Novartis In-Licenses and the agreements listed on Schedule 12.2.1, each of which contains reasonable and
customary confidentiality and non-use provisions; and (y) except as identified on Exhibit I, obtain ownership of, or a
fully sublicensable license (or an exclusive option to obtain such license) under and to, any Know-How and Patents
that are developed by such Third Party in the performance of such agreement and are reasonably necessary or useful to
Research, Develop, Manufacture or Commercialize Regional Antibody Candidates or Regional Licensed Products in
the Field. For clarity, the foregoing requirement to obtain ownership of, or a fully sublicensable license (or an
exclusive option to obtain such license) shall not apply to any improvements to the proprietary core or platform
technology owned or in-licensed by any such Third Party or its Affiliates unless such improvements are reasonably
necessary to Research, Develop, Manufacture or Commercialize those Antibody Candidates or Licensed Products with
repect to which such Third Party or its Affiliate conducted its activities under such Third Party agreement. The Party
utilizing the services of a Third Party service provider will be solely responsible for direction of and communications
with such Third Party, but such Party will provide the other Party with reasonably detailed updates regarding any such
activities from time to time.
5.2.9. Opt-Out Right. On a Regional Target-by-Regional Target basis, at any time during the Early RLP Development
Term or the Late RLP Development Term, Surface has the right, at its sole discretion, to opt-out of further
Development and Commercialization of all Regional Antibody Candidates or Regional Licensed Products for such
Regional Target upon [***] prior written notice to Novartis (the “Opt-Out Notice”). The Opt-Out Notice will clearly
identify the applicable Regional Target and associated Regional Antibody Candidates and Regional Licensed Products.
Upon the delivery of an Opt-Out Notice, Surface’s then on-going funding commitments and Development Activities,
will continue until [***] from the date of the Opt-Out Notice. In the event that Surface delivers an Opt-Out Notice
with respect to a Regional Target, the following will automatically occur (without any further action by the Parties)
upon such date, (a) the Regional Target will convert to a Global Target, (b) all Regional Antibody Candidates and
Regional Licensed Products will convert to Global Antibody Candidates and Global Licensed Products, respectively,
(c) the licenses set forth in Section 9.2 will terminate, and (d) the licenses set forth in Section 9.3 will apply to such
new Global Target, Global Antibody Candidates and Global Licensed Products. For the sake of clarity, Surface will not
be reimbursed, in whole or in part, for any Development Costs incurred prior to the end of such [***] period with
respect to the Regional Antibody Candidates or Regional Licensed Products for which an Opt-Out Right was
exercised.
5.3. Global Antibody Candidates and Global Licensed Products.
5.3.1. Overview. On a Global Target-by-Global Target basis:
5.3.1.1. Surface will be responsible for Development of all Global Antibody Candidates and Global Licensed Products
in accordance with this Agreement and the Global Development Plan for such Global Target during the Early Global
Development Term.
5.3.1.2. Novartis will be responsible for further Development of Global Antibody Candidates and Global Licensed
Products in accordance with this Agreement and the Global Development Plan during the Late Global Development
Term.
5.3.2. Global Development Plan. On a Global Target-by-Global Target basis, the Development activities that are
necessary or useful to be undertaken for the applicable Global Antibody Candidates or Global Licensed Products to
achieve initial Regulatory Approval for each of the Indications selected by Novartis using Commercially Reasonable
Efforts in the Major Market Countries (including the design of the initial Phase 1 Study) will be set forth in
reasonable detail in a written work plan and time table (each, a “Global Development Plan”). The initial Global
Development Plan for each Global Target will be included in the Option IND Package for such Global Target provided
by Surface to Novartis under Section 4.2.2. The terms of, and Development activities set forth in, each Global
Development Plan will at all times be designed to be in compliance with all applicable Laws and in accordance with
professional and ethical standards customary in the pharmaceutical industry. Novartis will update the Global
Development Plan for such Global Antibody Candidates and Global Licensed Products [***] and will provide such
updated Global Development Plan to the JDC.
5.3.3. Transition. On a Global Target-by-Global Target basis, by no later than [***] Surface will prepare and provide to
Novartis a draft plan for the transition of the Development of the Global Antibody Candidates and Global Licensed
Products for such Global Target from Surface to Novartis (a “Global Transition Plan”). The Global Transition Plan
for each Global Target will require Surface to, as soon as reasonably practicable following the Research Term: (a)
transfer to Novartis a copy of all Know-How Controlled by Surface that is reasonably necessary or useful for
Development of Global Antibody Candidates or Global Licensed Products for such Global Target, or obtaining or
maintaining Regulatory Approval for such Global Licensed Products in the Novartis Territory, including information
and materials reasonably requested by Novartis, in a format reasonably acceptable to Novartis (which will be specified
in such Global Transition Plan, along with the process of transferring such Know-How); (b) assign to Novartis all
INDs and other Regulatory Materials submitted to, or filed with, any Regulatory Authority with respect to such Global
Antibody Candidates or Global Licensed Products, including any drug master files maintained by or on behalf of
Surface solely related thereto (provided however that Surface will not be required to transfer any drug master files
maintained by or on behalf of any Third Party, including any contract manufacturer); (c) transfer to Novartis a copy of
all written correspondence with any Regulatory Authority with respect to such Global Antibody Candidates or Global
Licensed Products and all written minutes of meetings and memoranda of oral communications with any Regulatory
Authority with respect to such Global Antibody Candidates or Global Licensed Products; and (d) transfer to Novartis
any other a copy of information or materials reasonably requested by Novartis that are reasonably necessary or useful
for Development of such Global Antibody Candidates or Global Licensed Products in the Novartis Territory, including
if so reasonably requested by Novartis, and Third Party agreements relating solely thereto. The Global Transition Plan
for each Global Target will also describe any Development activities with respect to Global Antibody Candidates or
Global Licensed Products for such Global Target that Surface is required to perform as requested by Novartis and
mutually agreed upon by the Parties (collectively, “Global Transition Activities”). Each Party will use Commercially
Reasonable Efforts to perform the obligations assigned to it under the Global Transition Plan in accordance with any
timelines set forth therein and, subject to Section 5.2.3.2, [***]
5.3.4. Diligence; Standards of Conduct. On a Global Target-by-Global Target basis, Novartis will use Commercially
Reasonable Efforts to (a) [***] and (b) perform all Development activities for the Global Antibody Candidates and
Global Licensed Products for such Global Target in accordance with the Global Development Plan. On a Global
Target-by-Global Target basis, Surface will use Commercially Reasonable Efforts to (x) [***] and (y) perform all
Development activities for the Global Antibody Candidates and Global Licensed Products for such Global Target in
accordance with the Global Development Plan that Surface agrees to perform at Novartis’ request.
5.3.5. Development Costs.
5.3.5.1. With respect to each Global Target, Surface will be responsible for [***] of all Development Costs for the
Development of Global Antibody Candidates or Global Licensed Products for such Global Target during the Early
Global Development Term.
5.3.5.2. With respect to each Global Target, Novartis will be responsible for [***] of all Development Costs for the
Development of Global Antibody Candidates or Global Licensed Products for such Global Target during the Late
Global Development Term.
5.3.6. Records; Reports; Information Sharing.
5.3.6.1. Development Activities; Reports. On a Global Target-by-Global Target basis and until the transition of
Development to Novartis, each Party will periodically (a) provide to the JDC, on a [***] basis, an update regarding
Development activities conducted by or on behalf of such Party with respect to Global Antibody Candidates or Global
Licensed Products for such Global Target, and (b) report to the JDC, but in no event less than on a [***] basis,
regarding their respective activities conducted under the Global Transition Plan for Global Antibody Candidates and
Global Licensed Products for such Global Target. Following the transition period with respect to a
Global Target, once per [***] Novartis will provide to Surface, through the JDC, an update regarding Development
activities conducted by or on behalf of Novartis with respect to such Global Target Antibody Candidates and Global
Licensed Product, as well as any Clinical Studies with respect to such Global Target Antibody Candidates and Global
Licensed Product conducted by Novartis. The Parties will share any Safety Concerns with respect to such Global
Antibody Candidates and Global Licensed Products in accordance with the SDEA.
5.3.6.2. Scientific Records. Each Party will maintain scientific records, in sufficient detail and in sound scientific
manner appropriate for Patent and regulatory purposes and in compliance with cGLP with respect to activities intended
to be submitted in regulatory filings (including INDs and BLAs), which will reflect all material work done and results
achieved in the performance of the Development activities and Clinical Studies with respect to Global Antibody
Candidates and Global Licensed Products by such Party.
5.3.6.3. Information Exchange and Development Assistance. Until the expiration or termination of the final Global
Development Plan, upon the reasonable request of Novartis, Surface will provide to Novartis, without additional
compensation and in a commercially reasonable format, a copy of Know-How Controlled by Surface or its Related
Parties that is licensed to Novartis under this Agreement (i.e. Know-How included in Surface Technology for Surface)
to the extent that it is reasonably necessary or useful for Development of Global Antibody Candidates or Global
Licensed Products or for obtaining or maintaining Regulatory Approval for Global Licensed Products, including
copies of (a) all scientific information and data related to such Global Antibody Candidates or Global Licensed
Products (including all data made, collected or otherwise generated in the conduct of any pre-clinical studies, Clinical
Studies, Supplemental Studies or early access/named patient programs for the Global Licensed Products, as well as
CMC information), and (b) protocols and investigator brochures, in each case, that are reasonably necessary for
Novartis (or its Related Parties) to perform its obligations or exploit its rights under this Agreement with respect to
such Global Antibody Candidates or Global Licensed Products.
5.3.6.4. Personnel. During the period commencing after the completion of the Global Transition Activities and ending
upon Regulatory Approval of the first Global Licensed Product, Novartis may request that Surface reasonably make
available for consultation regarding the Development of Global Antibody Candidates and Global Licensed Products
certain of its employees engaged in Research and Development activities with respect to such Global Antibody
Candidates and Global Licensed Products. Surface will reasonably cooperate with Novartis to provide (a) up to [***]
hours of consultation without charge to Novartis, and (b) any additional hours of consultation as Novartis may
reasonably request, for which Novartis will pay Surface a rate of [***] per hour of such consultation services.
5.3.7. Third Parties. The Parties will be entitled to utilize the services of Third Parties to perform their respective
Development under this Section 5.3.7, provided that (a) each Party will require that such Third Party operates in a
manner consistent with the terms of this Agreement and, in the case of Surface, reasonably acceptable to Novartis and
(b) each Party will remain at all times fully liable for its respective responsibilities. Each Party will require that any
such Third Party agreement entered into pursuant to this Section 5.3.7 (x) include confidentiality and non-use
provisions that are no less stringent than those set forth in Section 11.1 (but of duration customary in confidentiality
agreements entered into for a similar purpose), other than Existing Novartis In-Licenses and the agreements listed on
Schedule 12.2.1, each of which contains reasonable and customary confidentiality and non-use provisions; and (y)
except as identified on Exhibit I, obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain
such license) under and to, any Know-How and Patents that are developed by such Third Party in the performance of
such agreement and are reasonably necessary or useful to Research, Develop, Manufacture or Commercialize Global
Antibody Candidates or Global Licensed Products in the Field. For clarity, the foregoing requirement to obtain
ownership of, or a fully sublicensable license (or an exclusive option to obtain such license) shall not apply to any
improvements to the proprietary core or platform technology owned or in-licensed by any such Third Party or its
Affiliates unless such improvements are reasonably necessary to Research, Develop, Manufacture or Commercialize
those Antibody Candidates or Licensed Products with respect to which such Third Party or its Affiliate conducted its
activities under such Third Party agreement. The Party utilizing the services of a Third Party service provider will be
solely responsible for direction of and communications with such Third Party.
6. COMMERCIALIZATION
6.1. T1 Licensed Products.
6.1.1. Responsibility, Cost and Diligence. Novartis will be solely responsible, at its expense, for all Commercialization
activities relating to T1 Licensed Products in the Field in the Novartis Territory. Novartis will
use Commercially Reasonable Efforts to (a) Commercialize each T1 Licensed Product for which Novartis has obtained
Regulatory Approval within the Novartis Territory, and (b) perform all Commercialization activities for T1 Licensed
Products in accordance with the T1 Commercialization Plan.
6.1.2. T1 Commercialization Plan. No less than [***], and [***] thereafter, Novartis will prepare and deliver to
Surface, through the JSC, (a) a high level summary of the Commercialization and Development Activities performed
with respect to such T1 Licensed Product in the Novartis Territory during the just-completed Calendar Year and (b) a
high level summary of the Commercialization and Development activities to be undertaken with respect to such T1
Licensed Product in the then-current Calendar Year, including any plans to obtain further Regulatory Approvals and
launch such T1 Licensed Products in countries in the Novartis Territory in which Novartis is not then Commercializing
such T1 Licensed Products, and the dates by which any such activities are targeted to be accomplished (the “T1
Commercialization Plan”).
6.1.3. First Commercial Sale Reporting Obligations. With respect to each T1 Licensed Product, Novartis will provide
Surface with written notice of the First Commercial Sale of such T1 Licensed Product in the Novartis Territory.
6.1.4. Advertising and Promotional Materials.
6.1.4.1. T1 Branding. Novartis will have the sole right, from time to time during the Term, to develop (and thereafter
modify and update) a global branding strategy (including global positioning, messages, logo, colors and other visual
branding elements) for each T1 Licensed Product for use in the Field throughout the Novartis Territory.
6.1.4.2. Promotional Materials. Novartis will be responsible for the creation, preparation, production, reproduction and
filing with the applicable Regulatory Authorities, of relevant written sales, promotion and advertising materials
relating to each T1 Licensed Product for use in the Novartis Territory. All such Promotional Materials will be
compliant with applicable Law. If permitted under applicable Law, Novartis will include a reference in such TI
Promotional Materials to such T1 Licensed Product as being sold under license from Surface.
6.1.5. Sales and Distribution. Novartis and its Related Parties will be solely responsible for booking sales and will
warehouse and distribute T1 Licensed Products in the Novartis Territory.
6.1.6. Recalls, Market Withdrawals or Corrective Actions. In the event that any Regulatory Authority issues or
requests a recall or takes a similar action in connection with a T1 Licensed Product, Novartis will have the sole right to
decide whether to conduct a recall and the manner in which any such recall will be conducted. [***]
6.2. Regional Licensed Products.
6.2.1. Responsibility, Cost and Diligence.
6.2.1.1. Novartis. On a Regional Target-by-Regional Target basis, Novartis will be solely responsible, at its expense,
for all Commercialization activities relating to Regional Licensed Products in the Field in the Novartis Territory. On a
Regional Target-by-Regional Target basis, Novartis will use Commercially Reasonable Efforts to (a) Commercialize
each Regional Licensed Product for which Novartis has obtained Regulatory Approval within the Novartis Territory,
and (b) perform all Commercialization activities for such Regional Licensed Product in accordance with the RLP
Commercialization Strategy.
6.2.1.2. Surface. On a Regional Target-by-Regional Target basis, Surface will be solely responsible, at its expense, for
all Commercialization activities relating to Regional Licensed Products in the Field in the Surface Territory. On a
Regional Target-by-Regional Target basis, Surface will use Commercially Reasonable Efforts to (a) Commercialize
each Regional Licensed Product for which Surface has obtained Regulatory Approval within the Surface Territory, and
(b) perform all Commercialization activities for each Regional Licensed Product in accordance with the RLP
Commercialization Strategy.
6.2.2. RLP Commercial Strategy. Within [***] Novartis will provide and within [***] days after such provision the
JCC will, subject to applicable Law including Antitrust Laws, review, update and approve a written summary of the
global Commercial strategy for such Regional Licensed Product (the “RLP Commercial Strategy”). For clarity, any
and all such communications and strategy involving the Commercialization of Regional Licensed Products shall be
limited to those permitted under applicable Law, including Antitrust Laws.
6.2.3. Novartis Territory Commercialization Plan. No less than [***] Novartis will prepare and deliver to the JCC for
review a reasonable written plan that summarizes the Commercialization activities to be undertaken with respect to
such Regional Licensed Product in the Novartis Territory in the next Calendar Year (the “Novartis Territory
Commercialization Plan”). The Novartis Territory Commercialization Plan for a Regional Licensed Product will
subsequently be updated and modified by Novartis, from time to time at its discretion and no less frequently than [***]
based upon, among other things, Novartis’s Commercialization activities with respect to such Regional Licensed
Product in the Novartis Territory, a copy of which updated plan Novartis will provide to the JCC. Notwithstanding the
foregoing, in the event of any disagreement between the Parties regarding the Novartis Territory Commercialization
Plan for a Regional Licensed Product pursuant to Section 2.5.5, the Novartis representatives on the JCC will have final
decision-making authority over the preparation and updating of such Novartis Territory Commercialization Plan,
provided that such decisions do not materially adversely affect the Commercialization of such Regional Licensed
Product in the Surface Territory.
6.2.4. Surface Territory Commercialization Plan. No less than [***] Surface will prepare and deliver to the JCC for
review a reasonable written plan that summarizes the Commercialization activities to be undertaken with respect to
such Regional Licensed Product in the Surface Territory in the next Calendar Year (the “Surface Territory
Commercialization Plan”). The Surface Territory Commercialization Plan for a Regional Licensed Product will
subsequently be updated and modified by Surface, from time to time at its discretion and no less frequently than [***]
based upon, among other things, Surface’s Commercialization activities with respect to such Regional Licensed
Product in the Surface Territory, a copy of which updated plan Surface will provide to the JCC. Notwithstanding the
foregoing, in the event of any disagreement between the Parties regarding the Surface Territory Commercialization
Plan for a Regional Licensed Product pursuant to Section 2.5.5, the Surface representatives on the JCC will have final
decision-making authority over the preparation and updating of such Surface Territory Commercialization Plan,
provided that such decisions do not materially adversely affect the Commercialization of such Regional Licensed
Product in the Novartis Territory.
6.2.5. Advertising and Promotional Materials.
6.2.5.1. RLP Branding. Each Party will use Commercially Reasonable Efforts to develop (and thereafter modify and
update) a branding strategy (including positioning, colors, other visual branding elements and Novartis RLP
Trademarks and Surface RLP Trademarks in accordance with Section 14.9.2) for each Regional Licensed Product for
use in the Field for its Territory (each a “RLP Branding Strategy”), which the JCC will, in accordance with Sections
2.5.3.3 and 2.5.5, review, coordinate and approve, and which the Parties will, following such review and approval,
implement. Each Party will submit its RLP Branding Strategy for a Regional Licensed Product to the JCC at least
[***] (or more frequently if reasonably requested by the other Party). Each Party will consider in good faith any timely
comments by the other Party with respect to its RLP Branding Strategy, but will have final decision-making authority
with respect to such its RLP Branding Strategy in its Territory. Notwithstanding the foregoing, each Party will use
Commercially Reasonable Efforts to ensure that (a) its RLP Branding Strategy complies with applicable Laws in its
Territory, and (b) that any branding elements selected for inclusion in its RLP Branding Strategy do not infringe any
Third Party trademarks or other intellectual property rights. If any such RLP Branding Strategy infringes Third Party
trademarks or other intellectual property rights or otherwise does not comply with applicable Law in the Territory in
which such RLP Branding Strategy is used, the affected Party will take action to end such infringement or other
noncompliance (including by modifying its RLP Branding Strategy) in its Territory and the other Party will not be
obligated to implement its RLP Branding Strategy in its Territory pursuant to this Section unless and until such
infringement or noncompliance is ended.
6.2.5.2. Surface A&P. Surface will be responsible for the creation, preparation, production, reproduction and filing
with the applicable Regulatory Authorities, of relevant written sales, promotion and advertising materials relating to
each Regional Licensed Product (“Promotional Materials”) for use in the Surface Territory. All such Promotional
Materials will be compliant with applicable Law and, if applicable, consistent in all material respects with the Surface
Territory Commercialization Plan and, if applicable, consistent in all material respects with the RLP Branding Strategy
for such Regional Licensed Product in the Surface Territory. Surface will submit representative samples of its
Promotional Materials developed by it for use in the Surface Territory to the JCC at least [***] (or more frequently if
reasonably requested by Novartis). Surface will consider in good faith any timely comments Novartis may have with
respect to any such Promotional Materials, but will have final decision-making authority in the Surface Territory with
respect to such Promotional Materials. Notwithstanding the foregoing, Surface will incorporate any changes to
Promotional Materials requested by Novartis in a timely fashion in cases where Novartis
indicates that it believes in good faith that such change is necessary to enable Novartis to comply with any applicable
Law.
6.2.5.3. Novartis A&P. Novartis will be responsible for the creation, preparation, production, reproduction and filing
with the applicable Regulatory Authorities, of relevant Promotional Materials relating to each Regional Licensed
Product for use in the Novartis Territory. All such Promotional Materials will be compliant with applicable Law,
consistent in all material respects with the Novartis Territory Commercialization Plan and, if applicable, consistent in
all material respects with the RLP Branding Strategy for such Regional Licensed Product in the Novartis Territory.
Novartis will submit representative samples of its Promotional Materials developed by it for use in the Novartis
Territory to the JCC at least [***] thereafter (or more frequently if reasonably requested by Surface). Novartis will
consider in good faith any timely comments Surface may have with respect to any such Promotional Materials, but will
have final decision-making authority in the Novartis Territory with respect to such Promotional Materials.
Notwithstanding the foregoing, Novartis will incorporate any changes to Promotional Materials requested by Surface
in a timely fashion in cases where Surface indicates that it believes in good faith that such change is necessary to
enable Surface to comply with any applicable Law.
6.2.5.4. Reporting Obligations. Each Party will report to the JCC in writing, on an [***] basis in the first [***]
following the first Regulatory Approval of such Regional Licensed Product in the Field in such Party’s Territory (for
the period ending December 31 of the prior Calendar Year), summarizing in reasonable detail such Party’s
Commercialization activities for such Regional Licensed Product performed to date (or updating such report for
activities performed since the last such report was given hereunder, as applicable). In addition, each Party will provide
the other Party with written notice of the First Commercial Sale of each Regional Licensed Product in such Party’s
Territory as soon as reasonably practicable after such event; provided, however, that such Party will inform the other
Party of such event prior to public disclosure of such event by such Party. Each Party will provide such other
information to the JCC as the other Party may reasonably request with respect to Commercialization of such Regional
Licensed Product and will keep such JCC reasonably informed of such Party’s Commercialization activities with
respect to such Regional Licensed Product.
6.2.6. Commercialization Reporting Obligations. Each Party and its Related Parties will be responsible for booking
sales of the Regional Licensed Products sold in its Territory. Each Party and its Related Parties may warehouse
Regional Licensed Products both inside and outside of such Party’s Territory, provided that any sales with respect to
such Regional Licensed Products are booked in such Party’s Territory. If a Party receives any orders for any Regional
Licensed Product in the other Party’s Territory, it will refer such orders to the other Party, to the extent it is not
prohibited from doing so under applicable Law. Moreover, each Party and its Related Parties will, using Commercially
Reasonable Efforts, be solely responsible for handling all returns of any Regional Licensed Product sold in its
Territory, as well as all aspects of Regional Licensed Product order processing, invoicing and collection, distribution,
inventory and receivables of Regional Licensed Products sold in its Territory.
6.2.7. Recalls, Market Withdrawals or Corrective Actions. In the event that any Regulatory Authority issues or
requests a recall or takes a similar action in connection with a Regional Licensed Product in a Territory, or in the event
either Party determines that an event, incident or circumstance has occurred that may result in the need for a recall or
market withdrawal of a Regional Licensed Product in its Territory, the Party notified of such recall or similar action, or
the Party that desires such recall or similar action, will as promptly as possible, notify the other Party’s Alliance
Manager and JCC representatives thereof by telephone or e-mail. Each Party, in consultation with the other Party, will
decide whether to conduct a recall of a Regional Licensed Product in its own Territory and the manner in which any
such recall will be conducted (except in the case of a government mandated recall, when such Party may act without
such advance notice but will notify the other Party as soon as possible thereafter). Except as may otherwise be agreed
to by the Parties, [***] Each Party will make available all of its pertinent records that may be reasonably requested by
the other Party in order for a Party to effect a recall of a Regional Licensed Product in its Territory. The Parties’ rights
and obligations under this Section 6.2.7 will be subject to the terms of any supply agreement(s), including any SDEA
or quality related agreements entered into between the Parties. In the event of a conflict between the provisions of any
such supply agreement, SDEA or quality related agreements and this Section 6.2.7, the provisions of such supply
agreement, SDEA or quality related agreements will govern.
6.2.8. Ex-Territory Sales; Export Monitoring.
6.2.8.1. Ex-Territory Sales. Subject to applicable Law, neither Party will engage in any advertising or promotional
activities relating to any Regional Licensed Product directed primarily to customers or other buyers or users of such
Regional Licensed Product located outside its Territory or accept orders for Regional Licensed Products from or sell
Regional Licensed Products into such other Party’s Territory for its own account, and if a Party receives any order for
any Regional Licensed Product in the other Party’s Territory, it will refer such orders to the other Party. The Parties
expressly acknowledge and agree that applicable Law may prevent or limit a Party from taking action to prevent
exports from one EU country to another.
6.2.8.2. Export Monitoring. Each Party and its Related Parties will use Commercially Reasonable Efforts to monitor
and prevent exports of Regional Licensed Products from its own Territory for Commercialization in the other Party’s
Territory using methods permitted under applicable Law that are commonly used in the industry for such purpose (if
any), and will promptly inform the other Party of any such exports of Regional Licensed Products from its Territory,
and any actions taken to prevent such exports. Each Party agrees to take reasonable actions requested in writing by the
other Party that are consistent with applicable Law to prevent exports of Regional Licensed Products from its Territory
for Commercialization in the other Party’s Territory. The Parties expressly acknowledge and agree that applicable Law
may prevent or limit a Party from taking action to prevent exports from one EU country to another.
6.2.9. Combinations. Net Sales received by the Parties or their respective Related Parties in respect of certain
Combinations in the Surface Territory shall be allocated between the Parties in accordance with the provisions of
Exhibit A.
6.3. Global Licensed Products.
6.3.1. Responsibility, Cost and Diligence. Novartis will be solely responsible, at its expense, for all Commercialization
activities relating to Global Licensed Products in the Field in the Novartis Territory. Novartis will use Commercially
Reasonable Efforts to (a) Commercialize each Global Licensed Product for which Novartis has obtained Regulatory
Approval in the Novartis Territory, and (b) perform all Commercialization activities for each Global Licensed Product
in accordance with the Global Licensed Product Commercialization Plan.
6.3.2. Commercialization Plan. No less than [***] and [***] thereafter, Novartis will prepare and deliver to Surface,
through the JSC, (a) a high level summary of the Commercialization activities performed with respect to such Global
Licensed Product in the Novartis Territory during the just-completed Calendar Year, and (b) a high level summary of
the Commercialization activities to be undertaken with respect to such Global Licensed Product in the then-current
Calendar Year (the “Global Licensed Product Commercialization Plan”).
6.3.3. First Commercial Sale Reporting Obligations. With respect to a Global Licensed Product, Novartis will provide
Surface with written notice of the First Commercial Sale of such Global Licensed Product in the Novartis Territory.
6.3.4. Advertising and Promotional Materials.
6.3.4.1. Global Licensed Product Branding. Novartis will have the sole right, from time to time during the Term, to
develop (and thereafter modify and update) a global branding strategy (including global positioning, messages, logo,
colors and other visual branding elements) for each Global Licensed Product for use in the Field throughout the
Novartis Territory.
6.3.4.2. Promotional Materials. Novartis will be responsible for the creation, preparation, production, reproduction and
filing with the applicable Regulatory Authorities, of relevant written sales, promotion and advertising materials
relating to each Global Licensed Product for use in the Novartis Territory. All such Promotional Materials will be
compliant with applicable Law. If permitted under applicable Law, Novartis will include a reference in such Global
Licensed Promotional Materials to such Global Licensed Product as being sold under license from Surface.
6.3.5. Sales and Distribution. Novartis and its Related Parties will be solely responsible for booking sales and will
warehouse and distribute Global Licensed Products in the Novartis Territory.
6.3.6. Recalls, Market Withdrawals or Corrective Actions. In the event that any Regulatory Authority issues or
requests a recall or takes a similar action in connection with a Global Licensed Product, Novartis will have the sole
right to decide whether to conduct a recall and the manner in which any such recall will be conducted. [***]
7. REGULATORY
7.1. T1 Licensed Products.
7.1.1. Regulatory Filings and Interactions.
7.1.1.1. Ownership of Regulatory Filings. Novartis will own all INDs, NDAs, Regulatory Materials and related
regulatory documentation with respect to any T1 Licensed Product, including any drug master files maintained by or
on behalf of Surface solely with respect thereto (provided however that Surface will not be obligated to transfer any
drug master files maintained by or on behalf of any Third Party, including any contract manufacturer). At Novartis’s
request following [***] for the T1 Research Program, Surface will promptly assign and transfer to Novartis all INDs,
Regulatory Materials and other regulatory documentation in the Novartis Territory with respect to such T1 Licensed
Product that is in the possession or control of Surface, including any drug master files maintained by or on behalf of
Surface solely with respect thereto, and each Party will submit all filings, letters and other documentation necessary to
effect such assignment and transfer to the applicable Regulatory Authority as soon as reasonably practicable, but no
later than [***] after such request for such T1 Licensed Product. For clarity, Surface will not be required to transfer
any drug master files maintained by or on behalf of any Third Party, including any contract manufacturer; provided
that Novartis has access to or rights to cross-reference those drug master files pursuant to Section 7.1.3 to permit
Novartis to comply with its regulatory obligation in connection with the Research, Development, Manufacture, and
Commercialization of T1 Licensed Products. Surface hereby appoints Novartis as Surface’s agent for all matters
related to each T1 Licensed Product involving Regulatory Authorities in the Novartis Territory during the period
beginning on the Effective Date for the T1 Licensed Product and ending on the date that the transfer of all INDs,
Regulatory Materials and related regulatory documents in the Novartis Territory that relate to such T1 Licensed
Product, including any drug master files maintained by or on behalf of Surface solely with respect thereto, becomes
effective, and Novartis hereby accepts such appointment.
7.1.1.2. Responsibilities for Regulatory Matters. Novartis will, using Commercially Reasonable Efforts, be solely
responsible for all regulatory matters relating to T1 Licensed Products in the Novartis Territory, including (a)
overseeing, monitoring and coordinating all regulatory actions, communications and filings with, and submissions to,
each Regulatory Authority in the Novartis Territory with respect to T1 Licensed Products; (b) interfacing,
corresponding and meeting with each Regulatory Authority in the Novartis Territory with respect to T1 Licensed
Products; and (c) seeking and maintaining all Regulatory Materials in the Novartis Territory with respect to T1
Licensed Products.
7.1.1.3. Communications with Regulatory Authorities. Novartis will provide Surface, through the JDC, as part of the
[***] updates regarding Development activities described in Section 5.1.6.1, with a brief description in English, of the
principal issues raised in any material communication with any Regulatory Authority in the Novartis Territory with
respect to any T1 Licensed Product during the preceding Calendar Quarter. For purposes of this Section 7.1.1.3,
“material communication” with Regulatory Authorities include meetings with Regulatory Authorities and Regulatory
Authority questions or concerns regarding significant issues, including any of the following: key product quality
attributes (e.g., purity), safety findings affecting the platform (e.g., Serious Adverse Events, emerging safety signals),
clinical or nonclinical findings affecting patient safety, or lack of efficacy.
7.1.1.4. Regulatory Meetings. Novartis will use Commercially Reasonable Efforts, to the extent reasonably practicable,
to permit Surface to have, at Surface’s expense, mutually acceptable representatives of Surface attend, solely as a non-
participating observer, material, substantive meetings including pre-IND meetings, with the Governmental Authorities
pertaining to Research of such T1 Licensed Product; provided, however, that (a) if required by the Governmental
Authority, attendance by Surface will be permitted; (b) attendance by Surface representatives will not prevent
participation of a Novartis representative due to restrictions imposed by Regulatory Agencies on the number of
attendees; and (c) Novartis will not be obligated to change the schedule of such meeting in order to accommodate the
schedule of Surface’s representatives. Novartis will provide Surface, through the JDC, with [***] updates of
substantive meetings with the Governmental Authorities in the Novartis Territory pertaining to the Development of
each T1 Licensed Product. For clarity, Novartis has the right to attend, at Novartis’ expense, any material, substantive
meetings held by or on behalf of Surface, including pre-IND meetings, with the Governmental Authorities pertaining
to such T1 Licensed Product.
7.1.1.5. Submissions. With respect to each T1 Licensed Product, Novartis will provide Surface with written notice of
each of the following events (a) within a reasonable period of time after the occurrence of such event in the Novartis
Territory: (i); the submission of any filings or applications for Regulatory Approval (other than INDs) of such T1
Licensed Product to any Regulatory Authority; and (ii) receipt or denial of Regulatory Approval for such T1 Licensed
Product; and (b) on a [***] basis, a summary of any INDs (including orphan drug applications and designations) that
were filed for such T1 Licensed Product during such preceding [***] and those anticipated to be filed within the
upcoming [***] provided, however, that Novartis will inform Surface of any such events under (a) or (b) prior to
public disclosure of such event by Novartis.
7.1.2. Costs of Regulatory Affairs. [***] costs and expenses incurred in connection with applying for Regulatory
Approval with respect to T1 Licensed Products in the Novartis Territory, and related regulatory affairs activities.
7.1.3. Right of Reference. Surface hereby grants to Novartis, and at the request of Novartis will grant to Novartis’s
Related Parties, a “Right of Reference,” as that term is defined in 21 C.F.R. § 314.3(b) (or any successor rule or
analogous Law recognized outside of the United States), to, and a right to copy, access, and otherwise use, all
information and data (including all CMC information as well as data made, collected or otherwise generated in the
conduct of any Clinical Studies or early access/named patient programs for the T1 Licensed Products) included in or
used in support of any drug master file maintained by or on behalf of Surface (including its Related Parties) that relates
to any T1 Licensed Product to the extent necessary or useful to Research, Develop, Manufacture or Commercialize T1
Licensed Products in the Novartis Territory. Notwithstanding anything to the contrary in this Agreement, Surface will
not withdraw or inactivate any regulatory filing that Novartis or its Related Parties reference or otherwise use pursuant
to this Section 7.1.3.
7.2. Regional Licensed Products.
7.2.1. Regulatory Filings and Interactions.
7.2.1.1. Responsibilities.
(a) Pursuant to the RLP Development Plan for a Regional Licensed Product and, except as otherwise provided in such
RLP Development Plan, or set forth in Section 7.2.1.1(b) below, each Party will be solely responsible for all regulatory
matters relating to such Regional Licensed Product in its Territory and will own all INDs, NDAs, Regulatory Materials
and related regulatory documents in its Territory with respect to such Regional Licensed Product, including any drug
master files maintained by or on behalf of such Party solely with respect thereto in such Territory, which will be and
remain such Party’s sole responsibility. At Novartis’s request, [***] for a Regional Licensed Product, Surface will
promptly assign and transfer to Novartis all INDs, Regulatory Materials and other regulatory documentation in the
Novartis Territory with respect to such Regional Licensed Product that is in the possession and control of Surface, and
each Party will submit to the applicable Regulatory Authority all filings, letters and other documentation necessary to
effect such assignment and transfer as soon as practicable and no later than [***] after such request for such Regional
Licensed Product, in each case, including any drug master files maintained by or on behalf of Surface solely with
respect thereto. For clarity, Surface will not be required to transfer any drug master files maintained by or on behalf of
any Third Party, including any contract manufacturer; provided that Novartis has access to or rights to cross-reference
those drug master files pursuant to Section 7.2.3 to permit Novartis to comply with its regulatory obligation in
connection with the Research, Development, Manufacture, and Commercialization of Regional Licensed Products.
Each Party will have the sole right to (i) oversee, monitor and coordinate all regulatory actions, communications and
filings with, and submissions to, each Regulatory Authority in its Territory with respect to such Regional Licensed
Product; (ii) interface, correspond and meet with each Regulatory Authority in its Territory with respect to such
Regional Licensed Product, and (iii) seek and maintain all regulatory filings in its Territory with respect to such
Regional Licensed Product.
(b) Notwithstanding the foregoing, and solely with respect to the first Phase 1 Safety Study conducted under a RLP
Development Plan, Surface will have the right, but not the obligation, to draft the protocol, develop the IND strategy,
and file INDs globally, including in the Novartis Territory, after input and review by Novartis, and, if Surface exercises
such right, Surface will use reasonable efforts to address any concerns raised by Novartis in connection with such
activities. If Surface files INDs in the Novartis Territory as set forth above, then, unless otherwise agreed by the
Parties, promptly following [***] Surface will assign the INDs in the Novartis Territory to Novartis and from that
point forward, Novartis will be primarily responsible for the related regulatory activities with respect thereto in the
Novartis Territory. Novartis will reimburse Surface for its portion of Development Costs incurred by Surface in
accordance with Section 5.2.3.2 with respect to the performance of activities described in this Section 7.2.1.1,
including drafting protocols, developing IND strategies and preparing and submitting INDs. If Surface does not
exercise such right to file INDs in the Novartis Territory, then Novartis will draft the protocol, develop the IND
strategy, and file the INDs in the Novartis Territory.
(c) Communications with Regulatory Authorities. Each Party will notify the JDC, including a brief description in
English, of the principal issues raised in each material communication with Regulatory Authorities with respect to such
Regional Licensed Product within [***] after receipt thereof. Upon request, each Party will provide to the other Party:
(a) at the requesting Party’s expense, a summary translation of such material communications in English, (b) at the
requesting Party’s expense, complete copies of the original correspondence in their native language, or (c) at the
requesting Party’s expense, a full translation of such material communications in English, in each case of (a) through
(c) within a reasonable period of time following such request. For the purposes of this Section 7.2, “material
communications” with Regulatory Authorities include meetings with Regulatory Authorities and Regulatory
Authority questions or concerns with respect to significant issues, including any of the following: key product quality
attributes (e.g., purity), safety findings affecting the platform (e.g., Serious Adverse Events, emerging safety signals),
clinical or nonclinical findings affecting patient safety, lack of efficacy or receipt or denial of Regulatory Approval.
7.2.1.2. Regulatory Meetings. Each Party will provide the other Party with reasonable advance notice of all substantive
meetings with the Governmental Authorities in its Territory pertaining to each Regional Licensed Product, or with as
much advance notice as practicable under the circumstances. Each Party will use Commercially Reasonable Efforts, to
the extent reasonably practicable, to permit the other Party to have, at the other Party’s expense, mutually acceptable
representatives of the other Party attend, solely as a non-participating observer, material, substantive meetings,
including pre-IND and end of Phase 2 Study meetings, with the Governmental Authorities within either its or the other
Party’s Territory pertaining to such Regional Licensed Product; provided, however, that (a) if required by the
Governmental Authority, attendance by the other Party will be permitted; (b) attendance by the representatives of the
other Party will not prevent participation of a representative of the Party in charge of its Territory due to restrictions
imposed by Regulatory Agencies on the number of attendees; and (c) neither Party will be obligated to change the
schedule of such meeting in order to accommodate the schedule of the other Party’s representatives. In the event that
Surface exercises its rights pursuant to Section 7.2.1.1 to files INDs in the Novartis Territory, then prior to the
acceptance or approval of the IND, Surface will provide Novartis with reasonable advance notice of all substantive
meetings with Regulatory Authorities in the Novartis Territory pertaining to such Regional Licensed Product, or with
as much advance notice as practicable under the circumstances. Surface will use reasonable efforts, to the extent
reasonably practicable, to permit Novartis to have, at Novartis’s expense, mutually acceptable representatives of
Novartis to attend, as full and equal participants, material, substantive meetings, including pre-IND meetings, with
Regulatory Authorities in the Novartis Territory pertaining to such Regional Licensed Product.
7.2.1.3. Submissions. Each Party will provide the other Party with written notice of each of the following events with
regard to each Regional Licensed Product (a) within a reasonable period of time following the occurrence thereof, to
the extent notice was not provided prior to the Option Exercise Date for such Regional Licensed Product: (i) the
submission of any filings or applications for Regulatory Approval (other than INDs) of such Regional Licensed
Product in such Party’s Territory to any Regulatory Authority; and (ii) receipt or denial of Regulatory Approval for
such Regional Licensed Product; and (b) on a [***] basis, a summary of any INDs (including orphan drug applications
and designations) that were filed for such Regional Licensed Product during such preceding [***] and those
anticipated to be filed within the upcoming [***] provided, however, that each Party will inform the other Party of
such event under (a) or (b) prior to public disclosure of such event by such Party.
7.2.2. Costs of Regulatory Affairs. Except as provided in Section 5.3.5, [***] costs and expenses incurred in
connection with applying for, obtaining and maintaining Regulatory Approval with respect to Regional Licensed
Products in its Territory, and related regulatory affairs activities.
7.2.3. Right of Reference. Each Party hereby grants to the other Party, and at the request of the other Party will grant to
the other Party’s Related Parties, a “Right of Reference,” as that term is defined in 21 C.F.R. § 314.3(b) (or any
successor rule or analogous Law recognized outside of the United States), to, and a right to copy, access, and otherwise
use, all information and data (including all CMC information as well as data made, collected or otherwise generated in
the conduct of any Clinical Studies or upon exercise of the Additional Development Opt-In Right, Supplemental
Studies or Regional [***] Activities, or early access/named patient programs for the Regional Licensed Products)
included in or used in support of any regulatory filing, Regulatory Approval, drug master file or other regulatory
documentation (including orphan drug applications and designations) maintained on behalf of such Party (or its
Related Parties) that relates to any Regional Licensed Product, to the extent necessary or useful to obtain Regulatory
Approval of a Regional Licensed Product in the Novartis Territory or the Surface Territory, as
applicable, and such Party will provide a signed statement to this effect, if requested by the other Party, in accordance
with 21 C.F.R. § 314.50(g)(3) (or any successor or analogous Law outside of the United States). In addition, upon
reasonable request of either Party (on behalf of itself or a Sublicensee), the other Party will obtain and provide to the
requesting Party certificates or other formal or official attestations concerning the regulatory status of the Regional
Licensed Products in the Novartis Territory or the Surface Territory, as applicable (e.g., Certificates of Free Sale,
Certificates for Export, Certificates to Foreign Governments), at the requesting Party’s request, and provided further
that such attestations are reasonably necessary for the requesting Party to exercise its rights under this Agreement.
Notwithstanding anything to the contrary in this Agreement other than for Safety Concerns, neither Party will
withdraw or inactivate any regulatory filing that the other Party references or otherwise uses pursuant to this Section
7.2.3. For clarity, the benefit of any regulatory vouchers [***]
7.3. Global Licensed Products.
7.3.1. Regulatory Filings and Interactions.
7.3.1.1. Ownership of Regulatory Filings. Novartis will own all INDs, NDAs, Regulatory Materials and related
regulatory documentation submitted to any Regulatory Authority with respect to any Global Licensed Product,
including any drug master files maintained by or on behalf of Surface solely with respect thereto. At Novartis’s request
following [***] for a Global Licensed Product, Surface will promptly assign and transfer to Novartis all INDs,
Regulatory Materials and other regulatory documentation in the Novartis Territory with respect to such Global
Licensed Product that is in the possession or control of Surface, including any drug master files maintained by or on
behalf of Surface solely with respect thereto, and each Party will submit all filings, letters and other documentation
necessary to effect such assignment and transfer to the applicable Regulatory Authority as soon as reasonably
practicable, but no later than [***] after such request for such Global Licensed Product. For clarity, Surface will not be
required to transfer any drug master files maintained by or on behalf of any Third Party, including any contract
manufacturer; provided that Novartis has access to or rights to cross-reference those drug master files pursuant to
Section 7.3.3 to permit Novartis to comply with its regulatory obligation in connection with the Research,
Development, Manufacture, and Commercialization of Global Licensed Products. Surface hereby appoints Novartis as
Surface’s agent for all matters related to each Global Licensed Product involving Regulatory Authorities in the
Novartis Territory during the period beginning on the Option Exercise Date for such Global Licensed Product and
ending on the date that the transfer of all INDs, Regulatory Materials and related regulatory documents in the Novartis
Territory that relate to such Global Licensed Product, including any drug master files maintained by or on behalf of
Surface solely with respect thereto, becomes effective, and Novartis hereby accepts such appointment.
7.3.1.2. Responsibilities for Regulatory Matters. Novartis will, using Commercially Reasonable Efforts, be solely
responsible for all regulatory matters relating to Global Licensed Products in the Novartis Territory, including (i)
overseeing, monitoring and coordinating all regulatory actions, communications and filings with, and submissions to,
each Regulatory Authority in the Novartis Territory with respect to Global Licensed Products; (ii) interfacing,
corresponding and meeting with each Regulatory Authority in the Novartis Territory with respect to Global Licensed
Products; and (iii) seeking and maintaining all Regulatory Materials in the Novartis Territory with respect to Global
Licensed Products.
7.3.1.3. Communications with Regulatory Authorities. Novartis will provide Surface, through the JDC, as part of the
[***] updates regarding Development activities described in Section 5.3.6.1, with a brief description in English, of the
principal issues raised in any material communication with any Regulatory Authority in the Novartis Territory with
respect to any Global Licensed Product during the preceding Calendar Quarter. For purposes of this Section 7.3.1.3,
“material communication” with Regulatory Authorities include meetings with Regulatory Authorities and Regulatory
Authority questions or concerns regarding significant issues, including any of the following: key product quality
attributes (e.g., purity), safety findings affecting the platform (e.g., Serious Adverse Events, emerging safety signals),
clinical or nonclinical findings affecting patient safety, or lack of efficacy.
7.3.1.4. Regulatory Meetings. Novartis will use Commercially Reasonable Efforts, to the extent reasonably practicable,
to permit Surface to have, at Surface’s expense, mutually acceptable representatives of Surface attend, solely as a non-
participating observer, material, substantive meetings, including pre-IND meetings, with the Governmental Authorities
pertaining to Research of such Global Licensed Product should such meetings be deemed necessary by Novartis;
provided, however, that (a) if required by the Governmental Authority, attendance by Surface will be permitted; (b)
attendance by Surface representatives will not prevent participation of a Novartis representative due to restrictions
imposed by Regulatory Agencies on the number of attendees; and (c) Novartis will
not be obligated to change the schedule of such meeting in order to accommodate the schedule of Surface’s
representatives. Novartis will provide Surface, through the JDC, with [***] updates of substantive meetings with the
Governmental Authorities in the Novartis Territory pertaining to the Development of each Global Licensed Product.
7.3.1.5. Submissions. With respect to each Global Licensed Product, Novartis will provide Surface with prompt written
notice of each of the following events (a) within a reasonable period of time after the occurrence of such event in the
Novartis Territory: (i) the submission of any filings or applications for Regulatory Approval (other than INDs) of such
Global Licensed Product to any Regulatory Authority; and ii) receipt or denial of Regulatory Approval for such Global
Licensed Product; and (b) on a [***] basis, a summary of any INDs (including orphan drug applications and
designations) that were filed for such Global Licensed Product during such preceding [***] and those anticipated to be
filed within the upcoming [***] provided, however, that Novartis will inform Surface of any such events under (a) or
(b) prior to public disclosure of such event by Novartis.
7.3.2. Costs of Regulatory Affairs. Except as set forth in Section 5.3.5, [***] incurred in connection with applying for
Regulatory Approval with respect to Global Licensed Products in the Novartis Territory, and related regulatory affairs
activities.
7.3.3. Right of Reference. Surface hereby grants to Novartis, and at the request of Novartis will grant to Novartis’s
Related Parties, a “Right of Reference,” as that term is defined in 21 C.F.R. § 314.3(b) (or any successor rule or
analogous Law recognized outside of the United States), to, and a right to copy, access, and otherwise use, all
information and data (including all CMC information as well as data made, collected or otherwise generated in the
conduct of any Clinical Studies or early access/named patient programs for the Global Licensed Products) included in
or used in support of any drug master file maintained on behalf of Surface or its Related Parties that relates to any
Global Licensed Product to the extent necessary or useful to Research, Develop, Manufacture or Commercialize
Global Licensed Products in the Novartis Territory. Notwithstanding anything to the contrary in this Agreement,
Surface will not withdraw or inactivate any regulatory filing that Novartis or its Related Parties reference or otherwise
use pursuant to this Section 7.3.3.
7.4. Pharmacovigilance. The Parties will cooperate with regard to the reporting and handling of safety information
involving the Regional Antibody Candidates or Regional Licensed Products in accordance with the applicable
regulatory Laws and regulations on pharmacovigilance and clinical safety. Within such time to ensure that all
regulatory requirements are met, the Parties shall negotiate in good faith and enter into a Safety Data Exchange
Agreement (“SDEA”), which will define the pharmacovigilance responsibilities of the Parties and include safety data
exchange procedures to enable each Party (and their respective related Third Parties, if any) to comply with all of its
legal and regulatory obligations related to such Regional Antibody Candidates or Regional Licensed Products.
8. MANUFACTURE
8.1. T1 Antibody Candidates and T1 Licensed Products.
8.1.1. Manufacturing Responsibilities.
8.1.1.1. Subject to the oversight of the JRC, Surface has the sole responsibility to Manufacture (or have Manufactured)
T1 Antibody Candidates for use in the T1 Research Program in accordance with the T1 Research Plan. Surface will
Manufacture (or have Manufactured) such T1 Antibody Candidates in accordance with Novartis quality standards.
8.1.1.2. Subject to the oversight of the JDC, Surface has the sole responsibility to Manufacture (or have Manufactured)
T1 Antibody Candidates and T1 Licensed Products for use in the first Phase 1 Safety Study for the T1 Antibody
Candidates and T1 Licensed Products in accordance with the T1 Development Plan. Surface will Manufacture (or have
Manufactured) such T1 Antibody Candidates in accordance with Novartis quality standards.
8.1.1.3. Other than the first Phase 1 Safety Study for the T1 Antibody Candidates and T1 Licensed Products, Novartis
has the sole responsibility to Manufacture (or have Manufactured) T1 Antibody Candidates and T1 Licensed Products
for use in Development and Commercialization of such T1 Antibody Candidates and T1 Licensed Products in the
Novartis Territory.
8.1.2. Manufacturing Costs.
8.1.2.1. Surface will be responsible for [***] of all Manufacturing Costs relating to T1 Antibody Candidates incurred
by or on behalf of Surface to support the T1 Research Program.
8.1.2.2. Novartis will pay to Surface [***] of reasonable Manufacturing Costs relating to the first Phase 1 Safety Study
for T1 Antibody Candidates and T1 Licensed Products set forth in the Novartis approved budget for such Phase 1
Safety Study.
8.1.2.3. Other than the first Phase 1 Safety Study for the T1 Antibody Candidates and T1 Licensed Products, Novartis
will be responsible for [***] of all Manufacturing Costs relating to T1 Antibody Candidates and T1 Licensed Products
for use in the Research, Development and Commercialization of such T1 Antibody Candidates and T1 Licensed
Products in the Novartis Territory incurred by or on behalf of Novartis.
8.1.3. Manufacturing Contracts. Surface will, at such time as determined by the JSC, use Commercially Reasonable
Efforts to assign to Novartis or its designee all then-existing Manufacturing contracts with Third Party contract
manufacturers that are solely related to the Manufacture of any T1 Antibody Candidates or T1 Licensed Products and
that Novartis agrees to assume.
8.2. Option Antibody Candidates.
8.2.1. Manufacturing Responsibilities. Subject to the oversight of the JRC, Surface has the sole responsibility to
Manufacture (or have Manufactured) Option Target Antibody Candidates, including CD47 Option Target Antibody
Candidates, for use in the Option Target Research Programs in accordance with the Option Target Research Plans.
8.2.2. Manufacturing Costs. Surface will be responsible for [***] of all Manufacturing Costs incurred by or on behalf
of Surface relating to Option Target Antibody Candidates, including CD47 Option Target Antibody Candidates, for use
in the Option Target Research Programs. For clarity, responsibility for Manufacturing Clinical Study material will be
allocated as set forth in under Sections 8.3 or 8.4, as applicable.
8.2.3. Novartis Manufacturing Election. Notwithstanding Sections 8.2.1 and 8.2.2, with respect to Option Target
Antibody Candidates other than CD47 Option Target Antibody Candidates, Novartis shall have the right, on an Option
Target-by-Option Target basis, exercisable at or about the time of selection by the JRC of the lead Option Target
Antibody Candidate for the applicable Option Target, to Manufacture (or have Manufactured) Option Target Antibody
Candidates for use in the applicable Option Target Research Program in accordance with the Option Target Research
Plan (a “Novartis Option Target Manufacturing Election”).
8.2.3.1. If Novartis makes a Novartis Option Target Manufacturing Election with respect to an Option Target (a)
Novartis shall have sole responsibility to Manufacture (or have Manufactured) (i) effective upon such election, Option
Target Antibody Candidates for such Option Target for use in the applicable Option Target Research Program; and (ii)
effective upon Novartis’ exercise of an Option with respect to such Option Target, Antibody Candidates and Licensed
Products associated with such Licensed Target for use in the first Phase 1 Safety Study in accordance with the
applicable Development Plan, and (b) Novartis will be responsible for [***] of all Manufacturing Costs incurred by or
on behalf of Novartis (i) effective upon such election, Option Target Antibody Candidates for use in the applicable
Option Target Research Program and (ii) effective upon Novartis’ exercise of an Option with respect to such Option
Target, Antibody Candidates and Licensed Products to support the first Phase 1 Safety Study for the applicable
Antibody Candidates and Regional Licensed Products, including reasonable costs (calculated in the same manner as
Development Costs) incurred by or on behalf of Surface to effect a technology transfer (to the extent necessary) to
Novartis for purposes of Manufacturing pursuant to the Novartis Option Target Manufacturing Election.
8.2.3.2. If Novartis makes a Novartis Option Target Manufacturing Election with respect to an Option Target and
thereafter does not purchase an Option with respect to such Option Target in accordance with Section 4.1.1 or exercise
a purchased Option with respect to such Option Target in accordance with Section 4.2.6, then Novartis shall, (a) within
[***] of expiration of the Option Purchase Period or Option Exercise Period, as applicable, provide to Surface or
Surface’s designated contract manufacturer(s), copies of all material data, reports, records and information in
Novartis’s possession and Control to the extent that such data, reports, records and information are used in the
Manufacture of the applicable Antibody Candidates; (b) as soon as reasonably practicable, transfer to a Third Party
approved by Novartis (such approval not to be unreasonably withheld, conditioned or delayed), those cell lines and
master cell banks to the extent used solely in the Manufacture of the applicable Antibody Candidates; (c) within such
[***] period if Surface so requests, and to the extent permitted under Novartis’s obligations to Third Parties, use
Commercially Reasonable Efforts to transfer to Surface any Third Party agreements relating solely to the Manufacture
of the applicable Antibody Candidates to which Novartis is a party, subject to any required consents of such Third
Party, which Novartis will use Commercially Reasonable Efforts to obtain promptly; and (d)
use Commercially Reasonable Efforts to continue to supply Surface with Antibody Candidates then being
Manufactured (at the time of expiration of the Option Purchase Period or Option Exercise Period, as applicable) until
the earlier of (i) Surface having established a source of supply for the applicable Antibody Candidates or (ii) [***]
after expiration of the Option Purchase Period or Option Exercise Period, as applicable.
8.2.3.3. In addition, to (a) through (d) set forth in Section 8.2.3.2 above, Novartis will grant to Surface a worldwide,
royalty-bearing non-exclusive license (with the right to sublicense subject to Section 9.2.2.4, mutatis mutandis) under
such Know-How and Patents both (a) Controlled by Novartis as of the date of expiration of the Option Purchase Period
or Option Exercise Period, as applicable and (b) necessary to Manufacture the applicable Antibody Candidate and
corresponding Licensed Product (it being understood and agreed that with respect to any such Patents or Know-How
that are in-licensed by Novartis or any of its Related Parties, Surface will be responsible for any payments due to a
Third Party with respect thereto and Surface’s rights will be subject to the terms of the applicable Third Party
agreement), solely to the extent necessary to Manufacture such Antibody Candidate and corresponding Licensed
Products in the Field (the “Option License”); provided that the Parties agree to negotiate in good faith commercially
reasonable financial terms for such Option License, subject to Expedited Arbitration if the Parties are unable to agree
on such financial terms within [***] following the date of expiration of the Option Purchase Period or Option Exercise
Period, as applicable; provided further that after completion of such Expedited Arbitration, Surface will have the right
to reject such Option License upon written notice to Novartis within [***] after the completion of the Expedited
Arbitration, in which case, the Option License will not take effect and Surface will have no obligation to pay the
amounts specified in such Expedited Arbitration.
8.3. Regional Antibody Candidates and Regional Licensed Products.
8.3.1. Manufacturing Responsibilities.
8.3.1.1. Phase 1 Safety Study. Subject to Section 8.2.3, and subject to the oversight of the JDC, Surface has the sole
responsibility to Manufacture (or have Manufactured) Regional Antibody Candidates and Regional Licensed Products
for use in the first Phase 1 Safety Study for the Regional Antibody Candidates and Regional Licensed Products in
accordance with the RLP Development Plan.
8.3.1.2. Development. Other than the first Phase 1 Safety Study for the Regional Antibody Candidates and Regional
Licensed Products (subject to Section 8.2.3), Novartis has the sole responsibility to Manufacture (or have
Manufactured) Regional Antibody Candidates and Regional Licensed Products for use in Development of such
Regional Antibody Candidates and Regional Licensed Products in the Novartis Territory and the Surface Territory.
Novartis will use Commercially Reasonable Efforts to Manufacture sufficient Regional Licensed Products for use in
all Clinical Studies provided for in the then-applicable RLP Development Plan and the Parties shall discuss in good
faith engaging a Third Party contract manufacturer as a second source in order to ensure adequate supply. In the event
of a shortage of Regional Licensed Products for Development, (a) the available Regional Licensed Products shall be
allocated first to those Clinical Studies contemplated in the then-applicable RLP Development Plan and thereafter to
Supplemental Studies in the order that such Supplemental Studies were initiated and (b) the Parties will in good faith
discuss and agree upon a plan to increase supply volume as necessary, which plan may include utilization of a second
source supplier.
8.3.1.3. Commercialization. Novartis shall have the right to determine whether it is willing to Manufacture Regional
Antibody Candidates and Regional Licensed Products for use in Commercialization of such Regional Antibody
Candidates and Regional Licensed Products in the Surface Territory and shall communicate such determination by
written notice to Surface no later than Initiation of the first Phase 3 Study. If Novartis notifies Surface that it is willing
to Manufacture Regional Antibody Candidates and Regional Licensed Products for use in Commercialization in the
Surface Territory in accordance with the foregoing, then, Surface may elect, by written notice to Novartis no later than
[***] after its receipt of such notice from Novartis whether to utilize Novartis for such Commercial Manufacturing in
the Surface Territory or to retain a Third Party contract manufacturer(s) for such purpose. If either Novartis is not
willing to provide such Commercial supply (a “Novartis Election”) or Surface elects not to utilize Novartis for such
Commercial supply (a “Surface Election”), then Novartis shall effect a technology transfer to a Third Party contract
manufacturer(s) to enable such Third Party to provide Commercial supply of Regional Antibody Candidates and
Regional Licensed Products for use in the Surface Territory, provided that such Third Party contract manufacturer(s) is
approved by Novartis, such approval not to be unreasonably withheld, conditioned or delayed. The cost of such
technology transfer shall be borne by (a) Novartis in the case of a Novartis Election; and (b) Surface in the case of
either (i) a Surface Election or (ii) any request for a second
technology transfer, whether in the case of a Novartis Election or Surface Election; provided, however that Surface
may not require of Novartis more than [***] such transfers for any Regional Licensed Product. Further, in the case of a
Novartis Election, Novartis shall remain responsible for Manufacturing Commercial supply for use in the Surface
Territory until the earlier of (x) such time as the technology transfer is completed or (y) [***] If Novartis is willing to
Manufacture Regional Antibody Candidates and Regional Licensed Products for use in Commercialization in the
Surface Territory and Surface elects to utilize Novartis for such Commercial Manufacturing in the Surface Territory,
the terms of supply of such Regional Antibody Candidates and Regional Licensed Products for use in
Commercialization of such Regional Antibody Candidates and Regional Licensed Products in the Surface Territory
will be set forth in the RLP Supply Agreement.
8.3.2. Manufacturing Costs.
8.3.2.1. Phase 1 Safety Study. Subject to Section 8.2.3, Surface will be responsible for [***] of all Manufacturing
Costs relating to Regional Antibody Candidates and Global Licensed Products incurred by or on behalf of Surface to
support the first Phase 1 Safety Study for Regional Antibody Candidates and Regional Licensed Products.
8.3.2.2. Development. Novartis will be responsible for [***] of all Manufacturing Costs relating to Regional Antibody
Candidates and Regional Licensed Products incurred by or on behalf of Novartis for use in the Development of such
Regional Antibody Candidates and Regional Licensed Products in the Novartis Territory. Other than the first Phase 1
Safety Study for the Regional Antibody Candidates and Regional Licensed Products (subject to Section 8.2.3), Surface
shall reimburse Novartis for [***] of all Manufacturing Costs relating to Regional Antibody Candidates and Regional
Licensed Products incurred by or on behalf of Novartis for use in the Development of such Regional Antibody
Candidates and Regional Licensed Products in the Surface Territory. For clarity, costs incurred by the Parties in
connection with the Manufacture of Regional Antibody Candidates and Regional Licensed Products for use in the
Development of such Regional Antibody Candidates and Regional Licensed Products in the Novartis Territory or the
Surface Territory in accordance with the applicable RLP Development Plan shall constitute Development Costs to be
allocated between the Parties in accordance with Section 5.2.4.2.
8.3.2.3. Commercialization. Each Party shall be responsible for [***] of all Manufacturing Costs relating to Regional
Licensed Products for use by such Party or its Related Parties in the Commercialization of Regional Licensed Products
in such Party’s Territory. With respect to Regional Licensed Products (including any Component of a Regional
Licensed Product that is a Combination) purchased by Surface from Novartis for use in the Surface Territory, Surface
shall pay Novartis an amount equal to Commercial Manufacturing Cost for such Regional Licensed Products. For
purposes hereof, “Commercial Manufacturing Cost” shall be calculated as follows:
(i) With respect to any Regional Licensed Product which is not a Combination, an amount equal to Manufacturing
Cost plus a Mark-Up. The Mark-Up shall be set forth in the RLP Supply Agreement to be entered into between the
Parties; in the event the Parties are unable to agree upon such Mark-Up, the dispute shall be submitted to Expedited
Arbitration for resolution.
(ii) With respect to any Regional Licensed Product which is a Combination, an amount specified on Exhibit A-2. Any
Mark-Up set forth in such Exhibit shall be set forth in the RLP Supply Agreement to be entered into between the
Parties; in the event the Parties are unable to agree upon such Mark-Up, the dispute shall be submitted to Expedited
Arbitration for resolution.
8.3.3. Manufacturing and Supply Agreements.
8.3.3.1. The terms under which Novartis will Manufacture and supply Regional Antibody Candidates and Regional
Licensed Products to Novartis pursuant to Section 8.3 will be set forth in a supply agreement to be entered into
between the Parties (the “RLP Supply Agreement”) within [***] of either Party’s written request. The RLP Supply
Agreement will contain customary terms and conditions, including quality, and otherwise be consistent with this
Agreement and Novartis quality standards.
8.3.3.2. Subject to Section 8.2.3, Surface will, at such time as determined by the JSC, use Commercially Reasonable
Efforts to assign to Novartis or its designee all then-existing Manufacturing contracts with Third Party contract
manufacturers that are solely related to the Manufacture of any Regional Antibody Candidates or Regional Licensed
Products and that Novartis agrees to assume.
8.4. Global Antibody Candidates and Global Licensed Products.
8.4.1. Manufacturing Responsibilities.
8.4.1.1. Subject to Section 8.2.3 and subject to the oversight of the JDC, Surface has the sole responsibility to
Manufacture (or have Manufactured) Global Antibody Candidates and Global Licensed Products for use in the first
Phase 1 Safety Study for the Global Antibody Candidates and Global Licensed Products in accordance with the Global
Development Plan.
8.4.1.2. Other than the first Phase 1 Safety Study for the Global Antibody Candidates and Global Licensed Products
(subject to Section 8.2.3), Novartis has the sole responsibility to Manufacture (or have Manufactured) Global Antibody
Candidates and Global Licensed Products for use in Development and Commercialization of such Global Antibody
Candidates and Global Licensed Products in the Novartis Territory.
8.4.2. Manufacturing Costs.
8.4.2.1. Subject to Section 8.2.3, Surface will be responsible for [***] of all Manufacturing Costs relating to Global
Antibody Candidates and Global Licensed Products incurred by or on behalf of Surface to support the first Phase 1
Safety Study for Global Antibody Candidates and Global Licensed Products.
8.4.2.2. Other than the first Phase 1 Safety Study for the Global Antibody Candidates and Global Licensed Products
(subject to Section 8.2.3), Novartis will be responsible for [***] of all Manufacturing Costs relating to Global
Antibody Candidates and Global Licensed Products for use in the Research, Development and Commercialization of
such Global Antibody Candidates and Global Licensed Products by or on behalf of Novartis in the Novartis Territory.
8.4.3. Manufacturing Agreements. Surface will, at such time as determined by the JSC, use Commercially Reasonable
Efforts to assign to Novartis or its designee all then-existing Manufacturing contracts with Third Party contract
manufacturers that are solely related to the Manufacture of any Global Antibody Candidates or Global Licensed
Products and that Novartis agrees to assume .
8.5. Third Parties. The Parties will be entitled to utilize the services of Third Parties to perform their respective
Manufacturing activities under this Section 8, provided that (a) [***] (b) each Party will require that such Third Party
operates in a manner consistent with the terms of this Agreement, and (c) each Party will remain at all times fully
liable for its respective responsibilities contracted to such Third Party. Each Party will require that any such Third
Party agreement entered into pursuant to this Section 8.5 (x) include confidentiality and non-use provisions that are no
less stringent than those set forth in Section 11.1 (but of duration customary in confidentiality agreements entered into
for a similar purpose), other than Existing Novartis In-Licenses and the agreements listed on Schedule 12.2.1, each of
which contains reasonable and customary confidentiality and non-use provisions; and (y) except as identified on
Exhibit K, obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain such license) under
and to, any Know-How and Patents that are developed by such Third Party in the performance of such agreement and
are reasonably necessary or useful to Research, Develop, Manufacture or Commercialize Antibody Candidates or
Licensed Products in the Field. For clarity, the foregoing requirement to obtain ownership of, or a fully sublicensable
license (or an exclusive option to obtain such license) shall not apply to any background or foundational Know-How or
Patents owned or in-licensed by a Third Party contract manufacturer or its Affiliates (including any improvements
thereto) unless such background or foundational Know-How or Patents (or improvements thereto) are reasonably
necessary to Research, Develop, Manufacture or Commercialize those Antibody Candidates or Licensed Products in
the Field with respect to which such Third Party or its Affiliate conducted its activities under such Third Party
agreement. The Party utilizing the services of a Third Party service provider will be solely responsible for direction of
and communications with such Third Party. [***]
9. LICENSES
9.1. T1 Target.
9.1.1. Research and Development License. Subject to the terms and conditions of this Agreement, effective upon the
Effective Date, Surface hereby grants Novartis a non-transferable (except as provided in Section 16.1), sublicensable
(subject to Section 9.1.4) exclusive (even as to Surface) license under Surface Technology to Research and Develop T1
Antibody Candidates and T1 Licensed Products in the Field anywhere in the world. Notwithstanding the foregoing,
Surface retains the right under the Surface Technology, without the right to grant licenses or sublicenses without
Novartis’ prior written consent, to Research T1 Antibody Candidates and T1 Licensed Products in the Field
anywhere in the world as and to the extent provided in any approved T1 Research Plan or as otherwise permitted under
Section 3.1.1 or elsewhere under this Agreement.
9.1.2. Commercialization License. Subject to the terms and conditions of this Agreement, effective upon the Effective
Date, Surface hereby grants Novartis a non-transferable (except as provided in Section 16.1), sublicensable (subject to
Section 9.1.4), royalty-bearing, exclusive (even as to Surface) license under Surface Technology to Commercialize T1
Licensed Products in the Field anywhere in the world.
9.1.3. Manufacturing Licenses. Subject to the terms and conditions of this Agreement, effective upon the Effective
Date, Surface hereby grants Novartis a non-transferable (except as provided in Section 16.1), sublicensable (subject to
Section 9.1.4), exclusive (even as to Surface) license under Surface Technology to Manufacture T1 Antibody
Candidates and T1 Licensed Products anywhere in the world for Research, Development and Commercialization in the
Novartis Territory. Notwithstanding the foregoing, Surface retains the right under the Surface Technology, without the
right to grant licenses or sublicenses without Novartis’ prior written consent, to Manufacture T1 Antibody Candidates
and T1 Licensed Products in the Field anywhere in the world for Research as and to the extent provided in any
approved T1 Research Plan or permitted under Section 8.1.1 of this Agreement or as permitted elsewhere under this
Agreement.
9.1.4. Sublicensing Terms.
9.1.4.1. Novartis will have the right to sublicense any of its rights under Sections 9.1.1, 9.1.2 and 9.1.3 to any of its
Affiliates or to any Third Party (which sublicensed rights may be further sublicensable through multiple tiers) without
the prior consent of Surface, subject to the requirements of this Section 9.1.4.
9.1.4.2. Each sublicense granted by Novartis pursuant to this Section 9.1.4 will be subject and subordinate to this
Agreement and will contain provisions consistent with the terms and conditions of this Agreement. Novartis will as
soon as reasonably practicable thereafter, provide Surface with a copy of any executed sublicense agreement covering
a material sublicense granted hereunder (which copy may be redacted to remove provisions which are not necessary to
monitor compliance with this Section 9.1.4), and each such sublicense agreement will contain the following
provisions: (i) a requirement that the Sublicensee comply with the confidentiality and non-use provisions of Section
11.1 with respect to Surface’s Confidential Information, (ii) if such sublicense agreement contains a sublicense of
Section 9.1.2, such sublicense agreement will also contain the following provisions: (x) a requirement that the
Sublicensee submit applicable sales or other reports to Novartis to the extent necessary or relevant to the reports
required to be made or records required to be maintained under this Agreement; and (y) the audit requirement set forth
in Section 10.12.3; and (iii) a requirement that the Sublicensee comply with the applicable provisions under any
Surface In-License.
9.1.4.3. Notwithstanding any sublicense, Novartis will remain primarily liable to Surface for the performance of all of
Novartis’s obligations under, and Novartis’s compliance with all provisions of, this Agreement.
9.2. Regional Targets.
9.2.1. License Grants to Novartis.
9.2.1.1. Research and Development License. Subject to the terms and conditions of this Agreement, on a Regional
Target-by-Regional Target basis, effective upon the Option Exercise Date for each Regional Target, Surface hereby
grants Novartis a non-transferable (except as provided in Section 16.1), sublicensable (subject to Section 9.2.1.4)
exclusive (even as to Surface) license under Surface Technology to Research and Develop such Regional Antibody
Candidates and Regional Licensed Products in the Field anywhere in the world; provided, that, such license grant for
Research and Development will be limited in each case solely as and to the extent provided in any approved RLP
Development Plan or as otherwise permitted under Section 4.2.6.5 or elsewhere under this Agreement, and in each
case, solely for Regulatory Approval and Commercialization in the Novartis Territory. Notwithstanding the foregoing,
Surface retains the right under the Surface Technology, with the right to grant licenses through multiple tiers in
accordance with Section 9.2.2.4, which shall apply mutatis mutandis, to (a) conduct the Phase 1 Safety Study for each
Regional Antibody Candidate or Regional Licensed Product, and (b) to Research and Develop each Regional Antibody
Candidate or Regional Licensed Product in the Field anywhere in the world, in each case solely as and to the extent
provided in any approved RLP Development Plan or as otherwise permitted under Section 4.2.6.5 or elsewhere under
this Agreement, and in each case, solely for Regulatory Approval and Commercialization in the Surface Territory.
9.2.1.2. Commercialization License in the Novartis Territory. Subject to the terms and conditions of this Agreement,
on a Regional Target-by-Regional Target basis, effective upon the Option Exercise Date for each Regional Target,
Surface hereby grants Novartis a non-transferable (except as provided in Section 16.1), sublicensable (subject to
Section 9.2.1.4), royalty-bearing, exclusive (even as to Surface) license under Surface Technology to Commercialize
such Regional Licensed Products in the Field in the Novartis Territory.
9.2.1.3. Manufacturing Licenses. Subject to the terms and conditions of this Agreement and the applicable RLP Supply
Agreement (if any), on a Regional Target-by-Regional Target basis, effective upon the Option Exercise Date for each
Regional Target, Surface hereby grants Novartis a non-transferable (except as provided in Section 16.1), sublicensable
(subject to Section 9.2.1.4), exclusive (even as to Surface) license under Surface Technology to Manufacture such
Regional Antibody Candidates and Regional Licensed Products anywhere in the world solely for (a) Research,
Development and Commercialization in the Field in the Novartis Territory and, to the extent permitted under this
Agreement or any RLP Supply Agreement, for Research and Development in the Field in the Surface Territory; and
(b) to the extent provided for under Section 8.2.3 or 8.3 or elsewhere under this Agreement or any RLP Supply
Agreement, to supply (or have supplied) to Surface or use in the Field. Notwithstanding the foregoing, Surface retains
the right under the Surface Technology, with the right to grant licenses through multiple tiers in accordance with
Section 9.2.2.4, which shall apply mutatis mutandis, to Manufacture Regional Antibody Candidates and Regional
Licensed Products anywhere in the world (a) for Research and Development in the Field as and to the extent provided
in any approved RLP Development Plan, or permitted under Section 8.3 or elsewhere under this Agreement or under
any RLP Supply Agreement and (b) to the extent provided for under Section 8.2.3 or any RLP Supply Agreement for
Commercialization in the Field in the Surface Territory.
9.2.1.4. Sublicensing Terms.
(a) Novartis will have the right to sublicense any of its rights under Sections 9.2.1.1, 9.2.1.2 and 9.2.1.3 to any of its
Affiliates or to any Third Party (which sublicensed rights may be further sublicensable through multiple tiers) without
the prior consent of Surface, subject to the requirements of this Section 9.2.1.4.
(b) Each sublicense granted by Novartis pursuant to this Section 9.2.1.4 will be subject and subordinate to this
Agreement and will contain provisions consistent with the terms and conditions of this Agreement. Novartis will as
soon as reasonably practicable thereafter, provide Surface with a copy of any executed sublicense agreement covering
a material sublicense granted hereunder (which copy may be redacted to remove provisions which are not necessary to
monitor compliance with this Section 9.2.1.4), and each such sublicense agreement will contain the following
provisions: (i) a requirement that the Sublicensee comply with the confidentiality and non-use provisions of Section
11.1 with respect to Surface’s Confidential Information, (ii) if such sublicense agreement contains a sublicense of
Section 9.2.1.2, such sublicense agreement will also contain the following provisions: (x) a requirement that the
Sublicensee submit applicable sales or other reports to Novartis to the extent necessary or relevant to the reports
required to be made or records required to be maintained under this Agreement; and (y) the audit requirement set forth
in Section 10.12.3; and (iii) a requirement that the Sublicensee comply with the applicable provisions under any
Surface In-License.
(c) Notwithstanding any sublicense, Novartis will remain primarily liable to Surface for the performance of all of
Novartis’s obligations under, and Novartis’s compliance with all provisions of, this Agreement.
9.2.2. License Grants to Surface.
9.2.2.1. Research and Development License. Subject to the terms and conditions of this Agreement, on a Regional
Target-by-Regional Target basis, effective upon the Option Exercise Date for each Regional Target, Novartis hereby
grants Surface a non-transferable (except as provided in Section 16.1), sublicensable (subject to Section 9.2.2.4)
exclusive (even as to Novartis) license under Novartis Technology to Research and Develop such Regional Antibody
Candidates and Regional Licensed Products in the Field anywhere in the world; provided, that such license grant for
Research and Development will be limited in each case solely as and to the extent provided in any approved RLP
Development Plan or as otherwise permitted under this Agreement, and in each case, solely for Regulatory Approval
and Commercialization in the Surface Territory. Notwithstanding the foregoing, Novartis retains the right under the
Novartis Technology, with the right to grant licenses through multiple tiers in accordance with Section 9.2.2.4, which
shall apply mutatis mutandis, to Research and Develop each Regional Antibody Candidate or Regional Licensed
Product in the Field anywhere in the world, in each case solely as and to the extent provided in any approved RLP
Development Plan or as otherwise permitted under Section 4.2.6.5 or elsewhere
under this Agreement, and in each case, solely for Regulatory Approval and Commercialization by Novartis in the
Novartis Territory.
9.2.2.2. Commercialization License in the Surface Territory. Subject to the terms and conditions of this Agreement, on
a Regional Target-by-Regional Target basis, effective upon the Option Exercise Date for each Regional Target,
Novartis hereby grants Surface a non-transferable (except as provided in Section 16.1), sublicensable (subject to
Section 9.2.2.4), royalty-bearing, exclusive (even as to Novartis) license under Novartis Technology to Commercialize
such Regional Licensed Products in the Field in the Surface Territory.
9.2.2.3. Manufacturing Licenses. Subject to the terms and conditions of this Agreement and the applicable RLP Supply
Agreement (if any), on a Regional Target-by-Regional Target basis, effective upon the Option Exercise Date for each
Regional Target, Novartis hereby grants Surface a non-transferable (except as provided in Section 16.1), sublicensable
(subject to Section 9.2.2.4), exclusive (even as to Novartis) license under Novartis Technology to Manufacture such
Regional Antibody Candidates and Regional Licensed Products anywhere in the world solely for (a) Research and
Development as and to the extent provided in any approved RLP Development Plan, or permitted elsewhere under this
Agreement or any RLP Supply Agreement and (b) to the extent provided for under Section 8.2.3 or 8.3 or elsewhere
under this Agreement or any RLP Supply Agreement, for Commercialization in the Surface Territory. Notwithstanding
the foregoing, Novartis retains the right under the Novartis Technology, with the right to grant licenses through
multiple tiers in accordance with Section 9.2.2.4, which shall apply mutatis mutandis, to Manufacture Regional
Antibody Candidates and Regional Licensed Products anywhere in the world (a) for Research, Development and
Commercialization in the Novartis Territory and, to the extent permitted pursuant to Section 5.2.2 or elsewhere under
this Agreement or any RLP Supply Agreement for Research and Development in the Surface Territory, and (b) to the
extent permitted pursuant to Section 8.2.3 or Section 8.3.3 or elsewhere under this Agreement or any RLP Supply
Agreement, to supply (or have supplied to) Surface.
9.2.2.4. Sublicensing Terms.
(a) Surface will have the right to sublicense any of its rights under Sections 9.2.1.1, 9.2.1.2,9.2.1.3, 9.2.2.1, 9.2.2.2,
and 9.2.1.3 to any of its Affiliates or to any Third Party (which sublicensed rights may be further sublicensable through
multiple tiers) without the prior consent of Novartis, subject to the requirements of this Section 9.2.2.4.
(b) Each sublicense granted by Surface pursuant to this Section 9.2.2.4 will be subject and subordinate to this
Agreement and will contain provisions consistent with the terms and conditions of this Agreement. Surface will as
soon as reasonably practicable thereafter, provide Novartis with a copy of any executed sublicense agreement covering
a material sublicense granted hereunder (which copy may be redacted to remove provisions which are not necessary to
monitor compliance with this Section 9.2.2.4), and each such sublicense agreement will contain the following
provisions: (i) a requirement that the Sublicensee comply with the confidentiality and non-use provisions of Section
11.1 with respect to Novartis’s Confidential Information, (ii) if such sublicense agreement contains a sublicense of
Section 9.2.2.2, such sublicense agreement will also contain the following provisions: (x) a requirement that the
Sublicensee submit applicable sales or other reports to Surface to the extent necessary or relevant to the reports
required to be made or records required to be maintained under this Agreement; and (y) the audit requirement set forth
in Section 10.12.3; and (iii) a requirement that the Sublicensee comply with the applicable provisions under any
Novartis In-License.
(c) Notwithstanding any sublicense, Surface will remain primarily liable to Novartis for the performance of all of
Surface’s obligations under, and Surface’s compliance with all provisions of, this Agreement.
(d) Notwithstanding the other provisions of this Section 9.2.2.4, if Surface proposes to enter into an agreement with a
Third Party with respect to the Research, Development, Manufacture or Commercialization of any Regional Antibody
Candidate or Regional Licensed Product, which agreement includes the grant of a sublicense under Section 9.2.2.2 or
other rights to Commercialize any Regional Licensed Product in the Surface Territory (any such agreement, a
“Proposed Surface Sublicense”), Surface will so notify Novartis in writing. Novartis will have [***] exercisable by
written notice to Surface at any time within [***] following receipt of Surface’s notice, to obtain (via termination and
reversion to Novartis of the applicable licenses granted by Novartis to Surface hereunder, grant of a sublicense back to
Novartis or to otherwise) the licenses or other rights proposed to be granted to the Third Party pursuant to such
Proposed Surface Sublicense on terms to be negotiated in good faith by the Parties for up to [***] following exercise
of such right of first negotiation. If Novartis does not exercise [***] within such initial [***] period, or if the Parties
cannot agree on mutually acceptable terms during such subsequent [***] period, then, subject to the other terms of this
Section 9.2.2.4, for a period of [***] following expiration of such subsequent [***]
period, Surface may enter into the Proposed Surface Sublicense with a Third Party, provided, however, that Surface
may not enter into any such Proposed Surface Sublicense during such [***] In all events, this Section 9.2.2.4(d) will
not apply to (a) any permitted assignment of this Agreement under Section 16.1, or (b) any bona fide agreement with a
Third Party contract sales organization, contract research organization or contract manufacturer, under which such
Third Party performs contract services on behalf of Surface or any of its Affiliates for the Research, Development, or
Manufacture of any Regional Antibody Candidate or Regional Licensed Product as permitted under this Agreement on
a fee-for-services basis, it being understood that under an agreement for such fee-for-services, fees paid to the Third
Party for such services may include milestones or royalties.
9.3. Global Targets.
9.3.1. Research and Development License. Subject to the terms and conditions of this Agreement, on a Global Target-
by-Global Target basis, effective upon the Option Exercise Date for each Global Target, Surface hereby grants
Novartis a non-transferable (except as provided in Section 16.1), sublicensable (subject to Section 9.3.4) exclusive
(even as to Surface), license under Surface Technology to Develop such Global Antibody Candidates and Global
Licensed Products in the Field anywhere in the world. Notwithstanding the foregoing, Surface retains the right under
the Surface Technology, with the right to grant licenses through multiple tiers in accordance with Section 9.2.2.4,
which shall apply mutatis mutandis solely to (a) Research Global Antibody Candidates and Global Licensed Products
in the Field anywhere in the world as permitted under Section 4.2.6.5 or elsewhere under this Agreement, and (b)
conduct the Phase 1 Safety Study for each Global Antibody Candidate and Global Licensed Product in accordance
with the Global Development Plan.
9.3.2. Commercialization License. Subject to the terms and conditions of this Agreement, on a Global Target-by-
Global Target basis, effective upon the Option Exercise Date for each Global Target, Surface hereby grants Novartis a
non-transferable (except as provided in Section 16.1), sublicensable (subject to Section 9.3.4), royalty-bearing,
exclusive (even as to Surface), license under Surface Technology to Commercialize such Global Licensed Products in
the Field anywhere in the world.
9.3.3. Manufacturing Licenses. Subject to the terms and conditions of this Agreement, on a Global Target-by-Global
Target basis, effective upon the Option Exercise Date for each Global Target, Surface hereby grants Novartis a non-
transferable (except as provided in Section 16.1), sublicensable (subject to Section 9.3.4), exclusive (even as to
Surface) license under Surface Technology to Manufacture such Global Antibody Candidates or Global Licensed
Products anywhere in the world for Research, Development and Commercialization in the Novartis Territory.
Notwithstanding the foregoing, Surface retains the right under the Surface Technology, with the right to grant licenses
through multiple tiers in accordance with Section 9.2.2.4, which shall apply mutatis mutandis solely to Manufacture
Global Antibody Candidates and Global Licensed Products in the Field anywhere in the world for Research as and to
the extent permitted under the approved Global Development Plan or permitted under Section 8.4.1 of this Agreement
or as permitted elsewhere under this Agreement.
9.3.4. Sublicensing Terms.
9.3.4.1. Novartis will have the right to sublicense any of its rights under Sections 9.3.1, 9.3.2 and 9.3.3 to any of its
Affiliates or to any Third Party (which sublicensed rights may be further sublicensable through multiple tiers) without
the prior consent of Surface, subject to the requirements of this Section 9.3.4.
9.3.4.2. Each sublicense granted by Novartis pursuant to this Section 9.3.4 will be subject and subordinate to this
Agreement and will contain provisions consistent with the terms and conditions of this Agreement. Novartis will as
soon as reasonably practicable thereafter, provide Surface with a copy of any executed sublicense agreement covering
a material sublicense granted hereunder (which copy may be redacted to remove provisions which are not necessary to
monitor compliance with this Section 9.3.4), and each such sublicense agreement will contain the following
provisions: (i) a requirement that the Sublicensee comply with the confidentiality and non-use provisions of Section
11.1 with respect to Surface’s Confidential Information, (ii) if such sublicense agreement contains a sublicense of
Section 9.3.2, such sublicense agreement will also contain the following provisions: (x) a requirement that the
Sublicensee submit applicable sales or other reports to Novartis to the extent necessary or relevant to the reports
required to be made or records required to be maintained under this Agreement; and (y) the audit requirement set forth
in Section 10.12.3; and (iii) a requirement that the Sublicensee comply with the applicable provisions under any
Surface In-License.
9.3.4.3. Notwithstanding any sublicense, Novartis will remain primarily liable to Surface for the performance of all of
Novartis’s obligations under, and Novartis’s compliance with all provisions of, this Agreement.
9.4. Joint Collaboration IP. Subject to the rights and licenses granted to, and the obligations (including royalty
obligations) of, each Party under this Agreement, including any exclusivity obligations, either Party is entitled to
practice Joint Collaboration IP for all purposes on a worldwide basis without consent of and without a duty of
accounting to the other Party. Each Party will grant and hereby does grant all permissions, consents and waivers with
respect to, and all licenses under, the Joint Collaboration IP, throughout the world, necessary to provide the other Party
with such rights of use and exploitation of the Joint Collaboration IP, and will execute documents as necessary to
accomplish the foregoing.
9.5. In-Licenses.
9.5.1. In-Licenses. The Parties agree that all [***] payments to any Third Party in respect of any Collaboration In-
License, Surface Existing In-Licenses or Novartis Existing In-License will be deemed a “Third Party Payment” and
subject to this Section 9.5. Responsibility for Collaboration In-Licenses, Surface Existing In-Licenses, Novartis
Existing In-License and Third Party Payments will be as follows:
9.5.1.1. Subject to Section 10.10.6 Surface will be responsible for all Third Party Payments under the Surface Existing
In-Licenses.
9.5.1.2. Novartis will be responsible for all Third Party Payments under the Novartis Existing In-Licenses.
9.5.1.3. The Parties acknowledge that during the Term, the JSC may determine that Research, Development,
Manufacture or Commercialization of any Antibody Candidates or Licensed Products may require or benefit from a
license acquired or entered into after the Effective Date with respect to additional Patents or Know-How of Third
Parties (a “Potential In-License”). If a Party acquires or otherwise enters into any Potential In-License after the
Effective Date with respect to the Research, Development, Manufacture, or Commercialization of any Antibody
Candidates or Licensed Products, such Party will endeavor to bring such Potential In-License to the attention of the
JSC. If a Potential In-License is brought to the attention of the JSC pursuant to this Section 9.5.1.3, the Parties will,
through the JSC, discuss in good faith whether such Potential In-License should be made available for use by the
Parties pursuant to this Agreement with respect to such Party’s rights under this Agreement to conduct Research,
Development, Manufacture, or Commercialization of any Antibody Candidates or Licensed Products. The Party to the
Potential In-License will propose, through the JSC, an equitable allocation of any non-product specific upfront
payments, milestone payments or similar payments payable under the Potential In-License [***] Any upfront
payments, milestone payments or similar payments that are specific to the Antibody Candidates or Licensed Products
will be allocated [***] to the corresponding Antibody Candidates or Licensed Products. The JSC will discuss the
rationale of including the Potential In-License and the proposed economics associated with doing so (including related
royalty obligations). For any Potential In-License that the JSC approves for use by the Parties pursuant to this
Agreement, (i) such Potential In-License will be deemed to be a “Collaboration In-License” hereunder, (ii) the
Patents and Know-How in-licensed under such Collaboration In-License will be deemed “Controlled” under this
Agreement as Surface Patents or Surface Know-How (as applicable) or Novartis Patents or Novartis Know-How (as
applicable) for purposes of Research, Development, Manufacture, or Commercialization of any Antibody Candidates
or Licensed Products, (iii) any allocated payments for Regional Antibody Candidates or Regional Licensed products
that are non-territory specific or for the Surface Territory will be allocated as Development Costs under Section
5.2.3.2, and (iv) any allocated payments for a Party’s Territory will be borne by the applicable Party. If the JSC does
not approve such Potential In-License, then the applicable Party may proceed to enter into the Potential In-License,
provided that (A) such Potential In-License will not be deemed to be a Collaboration In-License hereunder, (B) the
Patents and Know-How in-licensed under such Potential In-License will not be deemed Surface Patents or Surface
Know-How (as applicable) or Novartis Patents or Novartis Know-How (as applicable) and will not be deemed
“Controlled” for purposes of this Agreement, (C) each Party will have the right to enter into such Potential In-License
solely with respect to in its own Territory and, subject to Section 10.10.3, bear [***] of any Third Party Payment
thereunder, and the other Party will not be entitled to use any Patents or Know-How in-licensed under such Potential
In-License in connection with the performance of this Agreement in its Territory; [***]
9.5.2. Compliance with In-Licenses. All licenses and other rights granted to Novartis under this Section 9 are subject to
the rights and obligations of Surface under the Surface In-Licenses. All licenses and other rights granted to Surface
under this Section 9 are subject to the rights and obligations of Novartis under the Novartis In-Licenses.
Each Party will comply with all applicable provisions of the In-Licenses, and will perform and take such actions as
may be required to allow the Party that is party to such In-License to comply with its obligations thereunder, including
obligations relating to sublicensing, patent matters, confidentiality, reporting, audit rights, indemnification and
diligence. Without limiting the foregoing, each Party will prepare and deliver to the other Party any additional reports
required under the applicable In-Licenses and reasonably requested by such other Party, in each case sufficiently in
advance to enable the Party that is party to such In-License to comply with its obligations under the applicable In-
Licenses. Each Party agrees, upon the other Party’s reasonable request, to provide the other Party with copies of any
In-Licenses to which it is a party. Confidential Information of the providing Party or its counterparty may be redacted
from such copies, except to the extent that such information is required in order to enable the other Party to comply
with its obligations to the providing Party under this Agreement with respect to such In-License or in order to enable
the providing Party to ascertain compliance with the terms and conditions of this Agreement.
9.6. Combinations. Notwithstanding any other provision of this Agreement, for purposes of the license grants under
Sections 9.1 through Section 9.3 with respect to any Licensed Product that is a Combination, such license will only
include a license with respect to any Party Component of such Combination if such Licensed Product (a) is a
Combination Product or (b) a Combination Therapy [***] For clarity, except in the case of the foregoing clause (b), in
no event is a license granted hereunder to either Party or its Related Parties with respect to a the other Party’s
Component of a Combination Therapy.
9.7. Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by a Party to the other are and
will otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of right to
“intellectual property” as defined under Section 101 of the Bankruptcy Code. The Parties agree that the Parties and
their respective Sublicensees, as Sublicensees of such rights under this Agreement, will retain and may fully exercise
all of their rights and elections under the Bankruptcy Code and any foreign counterpart thereto. The Parties further
agree that upon commencement of a bankruptcy proceeding by or against a Party (the “Bankrupt Party”) under the
Bankruptcy Code, the other Party (the “Non-Bankrupt Party”) will be entitled to a complete duplicate of, or complete
access to (as the Non-Bankrupt Party deems appropriate), all such intellectual property and all embodiments of such
intellectual property. Such intellectual property and all embodiments of such intellectual property will be promptly
delivered to the Non-Bankrupt Party (a) upon any such commencement of a bankruptcy proceeding and upon written
request by the Non-Bankrupt Party, unless the Bankrupt Party elects to continue to perform all of its obligations under
this Agreement, or (b) if not delivered under (a) above, upon the rejection of this Agreement by or on behalf of the
Bankrupt Party and upon written request by the Non-Bankrupt Party. The Bankrupt Party (in any capacity, including
debtor-in-possession) and its successors and assigns (including any trustee) agree not to interfere with the exercise by
the Non-Bankrupt Party or its Related Parties of its rights and licenses to such intellectual property and such
embodiments of intellectual property in accordance with this Agreement, and agrees to assist the Non-Bankrupt Party
and its Related Parties in obtaining such intellectual property and such embodiments of intellectual property in the
possession or control of Third Parties as are reasonably necessary or desirable for the Non-Bankrupt Party to exercise
such rights and licenses in accordance with this Agreement. The foregoing provisions are without prejudice to any
rights the Non-Bankrupt Party may have arising under the Bankruptcy Code or other Laws.
9.8. No Other Rights. Except as otherwise expressly provided in this Agreement, under no circumstances will a Party
or any of its Affiliates, as a result of this Agreement, obtain any ownership interest, license or other right in or to any
Know-How, Patents or other intellectual property rights of the other Party, including tangible or intangible items
owned, controlled or developed by the other Party, or provided by the other Party to the receiving Party at any time,
pursuant to this Agreement. Neither Party nor any of its Affiliates will use or practice any Know-How or Patents
licensed or provided to such Party or any of its Affiliates outside the scope of or otherwise not in compliance with the
rights and licenses granted to such Party and its Affiliates under this Agreement.
10. PAYMENTS
10.1. Initial License Fee. Novartis will pay to Surface within [***] after receipt of an invoice from Surface, which
invoice shall be substantially in the form of Exhibit L and issued promptly following the Effective Date, a one-time
payment of Seventy Million Dollars ($70,000,000). Such payment will be non-refundable, non-creditable and not
subject to set-off.
10.2. Equity Investment. Novartis and Surface will enter into the Equity Agreements as of the Effective Date.
10.3. Option Purchase Fee. On a Regional Option Target-by-Regional Option Target basis, no later than [***] after
receipt of an invoice from Surface, which invoice shall be substantially in the form of Exhibit L and issued by Surface
promptly following the date of the Option Purchase Notice for each Option Target, Novartis will pay to Surface an
option exercise right purchase fee of (a) Five Million Dollars ($5,000,000) for each of the following Option Targets:
CD47, [***] and (b) [***] (for [***] (each, an “Option Purchase Fee”). Such payments will be non-refundable and
non-creditable and not subject to set-off.
10.4. Regional Option Exercise Fee. On a Regional Option-by-Regional Option basis, no later than [***] after receipt
of an invoice from Surface, which invoice shall be substantially in the form of Exhibit L and issued by Surface
promptly following the date of the Option Exercise Notice for each Regional Option, as applicable, Novartis will pay
to Surface an exercise fee of (a) [***] where the Regional Option Target is [***] CD47, [***] and (b) [***] where the
Regional Option Target is [***] Such payments will be non-refundable and non-creditable and not subject to set-off.
10.5. Global Option Exercise Fee. On a Global Option Target-by-Global Option Target basis, no later than [***] after
receipt of an invoice from Surface, which invoice shall be substantially in the form of Exhibit L and issued by Surface
promptly following date of the Option Exercise Notice for each Global Option, as applicable, Novartis will pay to
Surface to an exercise fee of (a) [***] where the Global Option Target is [***] CD47, [***] and (b) [***] where the
Global Option Target is [***] Such payments will be non-refundable and non-creditable and not subject to set-off.
10.6. Development Costs for Regional Targets.
10.6.1. For each Regional Target, commencing upon the first Calendar Quarter immediately following the approval of
the first RLP Development Plan and continuing thereafter so long as a Party incurs Development Costs under this
Agreement for which reconciliation will be provided, Surface and Novartis will, within [***] of such Calendar Quarter
submit to a finance officer designated by Surface and a finance officer designated by Novartis (the “Finance
Officers”) a report setting forth the Development Costs it incurred in such Calendar Quarter with respect to Regional
Antibody Candidates and Regional Licensed Products for each Regional Target as approved by the JDC. Each such
report will specify in reasonable detail all such costs, and, if requested by Surface or Novartis, any such invoices or
other supporting documentation for any payments to a Third Party or with respect to which documentation is otherwise
reasonably requested will be promptly provided. Within [***] after receipt of such reports, the Finance Officers will
confer and agree in writing on whether a reconciliation payment is due from Surface to Novartis or Novartis to
Surface, and if so, the amount of such reconciliation payment, so that Surface and Novartis share Development Costs
in accordance with Section 5.2.4. Surface or Novartis, as applicable, if required to pay such reconciliation payment,
will submit such payment to Novartis or Surface, respectively, as applicable, within [***] of receipt of the other
Party’s invoice for such amount; [***] In addition, each Party will consider in good faith other reasonable procedures
proposed by the other Party for sharing financial information in order to permit each Party to close its books
periodically in a timely manner.
10.6.2. Any expenses incurred by a Party for Development activities related to a Regional Antibody Candidate or
Regional Licensed Product that do not fall within the definitions of Development Costs (as the case may be) will be
borne solely by such Party unless the JDC determines otherwise. In addition, any expenditure or cost that exceeds the
amount set forth in the RLP Development Plan (as applicable) by more than [***] for a Calendar Year or any
unbudgeted cost that is incurred by either Party will be borne by such Party; provided that the JDC will have the
discretion to review such expenditures or costs and propose that they be designated as Development Costs in
accordance with Section 5.2.3.2 (as the case may be).
10.7. Development and Regulatory Milestone Payments. Subject to Section 10.7.4, on a Licensed Target-by-
Licensed Target basis, Novartis will make one-time milestone payments to Surface (each, a “Developmental
Milestone Payment”) upon the first achievement of the development and regulatory milestone events set forth in this
Section 10.7 (each, a “Developmental Milestone Event”) with respect to a Licensed Target as set forth in the
applicable table below for T1 Licensed Products, Global Licensed Products or Regional Licensed Products, as
applicable. For clarity, and without limitation, references to Licensed Product include a Combination. Notwithstanding
any other provision of this Agreement, each series of Development Milestone Payments will be payable only once
with respect to the specified Licensed Target, notwithstanding the number of Licensed Products (or the number of
times a Licensed Product) may achieve the applicable Development Milestone Event.
10.7.1. T1 Licensed Products. Novartis will make the following Developmental Milestone Payments to Surface upon
the first achievement of the corresponding Developmental Milestone Event for the T1 Target:
Developmental Milestone Event
Developmental Milestone Payment
Initiation of the first GLP Toxicology Study for a T1
Licensed Product
$30,000,000
(Thirty Million Dollars)
[***]
[***]
10.7.2. Global Licensed Products. Novartis will, on a Global Target-by-Global Target basis, make the following
Developmental Milestone Payments to Surface upon the first achievement of the corresponding Developmental
Milestone Event for a Global Target:
Developmental Milestone Event
Developmental Milestone Payment
[***]
[***]
10.7.3. Regional Licensed Products. Novartis will, on a Regional Target-by-Regional Target basis, make the following
Developmental Milestone Payments to Surface upon the first achievement of the corresponding Developmental
Milestone Event for a Regional Target:
Developmental Milestone Event
Developmental Milestone Payment
[***]
[***]
10.7.3.1. Additional Development Milestone Terms. Notwithstanding the foregoing, for the purpose of construing the
Development Milestone Payments specified in the above tables:
10.7.3.1. For clarity, each Development Milestone Payment shall be payable only on the first occurrence of the
applicable Development Milestone Event for the Licensed Target, and none of the Development Milestone Payments
shall be payable more than once with respect to a Licensed Target; [***]
10.7.3.2. If Development of a Licensed Product is terminated after it achieves a Development Milestone Event, then
the corresponding Development Milestone Payment will not be due on any subsequent achievement of the same
Development Milestone Event by a subsequent Licensed Product for such Licensed Target.
10.7.3.3. [***]
10.7.3.4. Milestone Payments for Regulatory Approval in the EU [***]
10.7.4. Payment Terms for Development Milestone Payments. Novartis shall provide Surface with written notice of its
achievement of each Development Milestone Event within [***] after such Development Milestone Event is achieved
by Novartis. After receipt of such notice, Surface shall submit an invoice to Novartis substantially in the form of
Exhibit L for the corresponding Development Milestone Payment. Novartis shall make the corresponding
Development Milestone Payment within [***] after receipt of such invoice.
10.8. Sales Milestone Payments. Subject to Section 10.8.4, on a Licensed Target-by-Licensed Target basis, Novartis
will make one-time payments of each of the sales milestone payments indicated below (each, a “Sales Milestone
Payment” and together with the Developmental Milestone Payments, the “Milestone Payments”) to Surface when
aggregate Annual Net Sales of all Licensed Products for such Licensed Target in the Territory in a given Calendar Year
first reach the dollar values indicated on each table below for the applicable T1 Licensed Products, Global Licensed
Products or Regional Licensed Products (each, a “Sales Milestone Event”). Notwithstanding any other provision of
this Agreement, each series of Sales Milestone Payments will be payable only once with respect to the specified
Licensed Target, notwithstanding the number of Licensed Products (or the number of times a Licensed Product) may
achieve the applicable Sales Milestone Event.
10.8.1. T1 Licensed Products. Novartis will make the following Sales Milestone Payments to Surface upon
achievement of the corresponding Sales Milestone Event for the T1 Licensed Products:
Annual Net Sales in a Given Calendar
Year for all T1 Licensed Products
[***]
Sales Milestone Payment
[***]
10.8.2. Global Licensed Products. On a Global Target-by-Global Target basis, Novartis will make the following Sales
Milestone Payments to Surface upon achievement of the corresponding Sales Milestone Event for all Global Licensed
Products for such Global Target:
Annual Net Sales in a Given Calendar
Year for all Global Licensed Products
[***]
Sales Milestone Payment
[***]
10.8.3. Regional Licensed Products. On a Regional Target-by-Regional Target basis, Novartis will make the following
Sales Milestone Payments to Surface upon achievement of the corresponding Sales Milestone Event for all Regional
Licensed Products for such Regional Target:
Annual Net Sales in the Novartis
Territory in a Given Calendar Year for
all Regional Licensed Products
[***]
Sales Milestone Payment
[***]
10.8.4. Additional Sales Milestone Payment Terms.
10.8.4.1. Each Sales Milestone shall be payable only once per Licensed Target, the first time worldwide Annual Net
Sales for all Licensed Products in a Calendar Year for such Licensed Target exceeds the relevant threshold set forth
above.
10.8.4.2. The Sales Milestone Payments in this Section 10.8 are [***]
10.8.5. Each Sales Milestone Payment shall be deemed earned upon achievement of the corresponding Sales
Milestone, and shall be notified by Novartis to Surface within [***] after [***] After receipt of such notice, Surface
shall submit an invoice to Novartis substantially in the form of Exhibit L for the corresponding Sales Milestone
Payment. Novartis shall make the corresponding Sales Milestone Payment within [***] after receipt of such invoice.
10.9. Royalties. During the applicable Royalty Term and subject to Section 10.10, Novartis will make royalty
payments to Surface, on a Licensed Product-by-Licensed Product basis, based on Annual Net Sales of the applicable
Licensed Product within the Field in the Novartis Territory by Novartis and its Related Parties at the applicable rates
set forth below.
10.9.1. T1 Licensed Products. Novartis will pay to Surface royalties on a T1 Licensed Product-by-T1 Licensed Product
basis on Annual Net Sales for each T1 Licensed Product at the royalty rates (“T1 Royalty Rates”) set forth below (the
“T1 Net Sales Royalty”).
Royalty
Rate
Paid on
the
Portion
of
Annual
Net
Sales in
the
United
States
[***]
Royalty
Rate
Paid on
the
Portion
of
Annual
Net
Sales
outside
the
United
States
[***]
Annual Net Sales
[***]
The applicable T1 Net Sales Royalty will be calculated by reference to the worldwide Annual Net Sales of each T1
Licensed Product. See Exhibit M for an example of such calculation.
10.9.2. Global Licensed Products. Novartis will pay to Surface royalties on a Global Licensed Product-by-Global
Licensed Product basis on Annual Net Sales for each Global Licensed Product at the royalty rates (“Global Royalty
Rates”) set forth below (the “Global Net Sales Royalty”).
Royalty
Rate
Paid on
the
Portion
of
Annual
Net
Sales in
the
United
States
[***]
Royalty
Rate
Paid on
the
Portion
of
Annual
Net
Sales
outside
the
United
States
[***]
Annual Net Sales
[***]
The applicable Global Net Sales Royalty will be calculated by reference to the worldwide Annual Net Sales of each
Global Licensed Product. See Exhibit M for an example of such calculation.
10.9.3. Regional Licensed Products.
10.9.3.1. Novartis will pay to Surface royalties on a Regional Licensed Product-by-Regional Licensed Product basis on
Annual Net Sales for each Regional Licensed Product in the Novartis Territory at the royalty rates (the “Novartis
Regional Royalty Rates”) set forth below (the “Novartis Regional Net Sales Royalty”).
Annual Net Sales
[***]
Royalty
Rate
[***]
The applicable Novartis Regional Net Sales Royalty will be calculated by reference to the Annual Net Sales of each
Regional Licensed Product in the Novartis Territory. See Exhibit M for an example of such calculation.
10.9.3.2. Surface will pay to Novartis royalties on a Regional Licensed Product-by-Regional Licensed Product basis on
Annual Net Sales for each Regional Licensed Product in the Surface Territory at the royalty rates (the “Surface
Regional Royalty Rates,” and together with the Novartis Regional Royalty Rates, the “Regional Royalty Rates”) set
forth below (the “Surface Regional Net Sales Royalty,” and together with the Novartis Regional Net Sales Royalty,
the “Regional Net Sales Royalty”).
Annual Net Sales
[***]
Royalty
Rate
[***]
The applicable Surface Regional Net Sales Royalty will be calculated by reference to the Annual Net Sales of each
Regional Licensed Product in the Surface Territory. See Exhibit M for an example of such calculation.
10.9.4. Combinations. Notwithstanding the foregoing, royalties on any Combinations will be calculated in accordance
with Exhibit A-1.
10.10. Additional Royalty Terms.
10.10.1. Royalty Term. Subject to this Section 10.10, on a Licensed Product-by-Licensed Product and country-by-
country basis, the royalties due under Section 10.9 will be payable on Annual Net Sales from the First Commercial
Sale of a particular Licensed Product in a country until the later of (a) expiration of the last Valid Claim of Royalty
Patents Covering such Licensed Product in such country, or (b) fifteen (15) years after First Commercial Sale of such
Licensed Product in such country (the “Royalty Term”).
10.10.2. Royalty Reduction upon Patent Expiration. If royalties are payable in a particular country under Section 10.9
on Annual Net Sales of a particular Licensed Product during the Royalty Term but after the expiration of the last Valid
Claim of Royalty Patents Covering such Licensed Product in such country, then the royalties payable on Annual Net
Sales of such Licensed Product in such country will be calculated as set forth in Section 10.9, provided that the
royalties payable on Annual Net Sales of such Licensed Product in such country will be reduced by [***] as of the date
that such Licensed Product is no longer Covered by a Valid Claim of Royalty Patents in such country. The royalty rate
tier applicable to the Annual Net Sales of such Licensed Product in such country will be applied pro rata on a
Calendar Quarter-by-Calendar Quarter basis, with reference to the aggregate worldwide Annual Net Sales
of all Licensed Products with respect to the applicable Licensed Target. See Exhibit M for an example of such
calculation.
10.10.3. Reduction for Third Party Obligations.
10.10.3.1. In the event that Novartis determines that intellectual property owned or controlled by a Third Party would
be infringed or misappropriated by the [***] of any Licensed Product in the Field in the Novartis Territory under this
Agreement, Novartis shall have the right to negotiate and acquire rights to such intellectual property through a license
or otherwise (including pursuant to any settlement agreement) and to deduct from [***] on such Licensed Product due
to Surface with respect to a given Calendar Quarter [***] by Novartis to such Third Party with respect to such
Licensed Product, subject to the limitation set forth in Section 10.10.6. [***]
10.10.3.2. In the event that Surface determines that intellectual property owned or controlled by a Third Party would
be infringed or misappropriated by the [***] any Regional Licensed Product in the Field in the Surface Territory under
this Agreement, Surface shall have the right to negotiate and acquire rights to such intellectual property through a
license or otherwise (including pursuant to any settlement agreement) and to deduct from [***] on such Regional
Licensed Product due to Novartis with respect to a given Calendar Quarter [***] by Surface to such Third Party with
respect to such Regional Licensed Product, subject to the limitation set forth in Section 10.10.6. [***]
10.10.4. Only One Royalty. Only one royalty will be due with respect to the sale of the same unit of Licensed Product.
Only one royalty will be due hereunder on the sale of a Licensed Product even if the manufacture, use, sale, offer for
sale or importation of such Licensed Product infringes more than one claim of the Royalty Patents.
10.10.5. Reduction for Biosimilar Competition. Notwithstanding the foregoing, on a country-by-country basis, in the
event of Loss of Market Exclusivity with respect to a Licensed Product in a country, the applicable Royalty Rates for
Annual Net Sales of such Licensed Product set forth in Section 10.9 will be reduced by [***]
10.10.6. Royalty Minimum. Notwithstanding the foregoing in this Section 10.10, in no event will the [***] otherwise
due to a Party in a Calendar Quarter be reduced by more than [***] of the amount that would otherwise be due
hereunder; and provided further that any such reduction not fully taken as a result of the application of this Section
10.10.6, may be carried forward and applied against future [***] otherwise owed.
10.11. Other Amounts Payable. With respect to any amounts owed under this Agreement by one Party to the other
for which no other invoicing and payment procedure is specified in this Section 10 (which amounts may include, for
example, Manufacturing Costs pursuant to Section 8 and Third Party Payments that are the responsibility of one Party
or the other pursuant to Section 9.5), within [***] after the end of each Calendar Quarter, each Party will provide an
invoice, together with reasonable supporting documentation, to the other Party for such amounts owed in respect of
such Calendar Quarter. The owing Party will pay any undisputed amounts within [***] of receipt of the invoice, and
any disputed amounts owed by a Party will be paid within [***] of resolution of the dispute.
10.12. Payment Terms.
10.12.1. Manner of Payment. All payments to be made by a Party hereunder will be made in Dollars by wire transfer to
such bank account as the other Party may designate.
10.12.2. Reports and Royalty Payments. For as long as royalties are due under Section 10.9, to the extent a Party owes
royalties to the other Party hereunder, such paying Party will furnish to the other Party a written report, within [***]
after the end of each Calendar Quarter, showing in Dollars, the amount of Annual Net Sales of Licensed Products and
royalty due for such Calendar Quarter. Upon receipt of such written report, the receiving Party shall issue an invoice to
the paying Party. Royalty payments for each Calendar Quarter will be due within [***] of receipt of such written
invoice for the Calendar Quarter. The report will include, at a minimum, the following information for the applicable
Calendar Quarter, each listed by product and by country of sale: [***] such reports will be treated as Confidential
Information of Novartis or Surface, as applicable.
10.12.3. Records and Audits. Each Party shall keep complete, true and accurate books and records in accordance with
its Accounting Standards in relation to this Agreement, including in relation to Development Costs and Net Sales and
royalties. Each Party will keep such books and records for at least [***] following the Calendar Year to which they
pertain. Each Party (the “Auditing Party”) may, upon written request, cause an internationally-recognized
independent accounting firm (the “Auditor”), which is reasonably acceptable to the other Party (the “Audited
Party”), to inspect the relevant records of such Audited Party and its Affiliates to verify the payments
made by the Audited Party and the related reports, statements and books of accounts, as applicable. Before beginning
its audit, the Auditor shall execute an undertaking acceptable to the Audited Party by which the Auditor agrees to keep
confidential all information reviewed during the audit. The Auditor shall have the right to disclose to Auditing Party
only its conclusions regarding any payments owed under this Agreement. Each Party and its Affiliates shall make their
records available for inspection by the Auditor during regular business hours at such place or places where such
records are customarily kept, upon receipt of reasonable advance notice from the Auditing Partner. The records shall
be reviewed solely to verify the accuracy of the Audited Party’ royalties and other payment obligations and
compliance with the financial terms of this Agreement. Such inspection right shall not be exercised more than [***] in
any [***] and not more frequently than [***] with respect to records covering any specific period of time. In addition,
Auditing Party shall only be entitled to audit the books and records of Audited Party from the [***] prior to the
Calendar Year in which the audit request is made. The Auditing Party agrees to hold in strict confidence all
information received and all information learned in the course of any audit or inspection, except to the extent necessary
to enforce its rights under this Agreement or to the extent required to comply with any law, regulation or judicial order.
The Auditor shall provide its audit report and basis for any determination to Audited Party at the time such report is
provided to the Auditing Party before it is considered final. In the event that the final result of the inspection reveals an
undisputed underpayment or overpayment by either Party, the underpaid or overpaid amount shall be settled promptly.
The Auditing Party shall pay for such inspections, as well as its expenses associated with enforcing its rights with
respect to any payments hereunder. In addition, if an underpayment of more than [***] of the total payments due
hereunder for the applicable year is discovered, the fees and expenses charged by the Auditor shall be paid by Audited
Party.
10.12.4. Currency Exchange. With respect to Annual Net Sales invoiced in Dollars, the Annual Net Sales and the
amounts due to Surface hereunder will be expressed in Dollars. When conversion of payments from any foreign
currency is required to be undertaken by Novartis, the Dollar equivalent shall be calculated using Novartis’ then-
current standard exchange rate methodology as applied in its external reporting for the conversion of foreign currency
sales into Dollars.
10.12.5. Taxes.
10.12.5.1. Novartis may withhold from payments due to Surface amounts for payment of any withholding tax that is
required by Law to be paid to any taxing authority with respect to such payments. Novartis will provide Surface all
relevant documents and correspondence, and will also provide to Surface any other cooperation or assistance on a
reasonable basis as may be necessary to enable Surface to claim exemption from such withholding taxes and to receive
a refund of such withholding tax or claim a foreign tax credit. Novartis will give proper evidence from time to time as
to the payment of any such tax. The Parties will cooperate with each other in seeking deductions under any double
taxation or other similar treaty or agreement from time to time in force. Such cooperation may include Novartis
making payments from a single source in the U.S., where possible. Notwithstanding the foregoing, if Novartis assigns
its rights and obligations hereunder to, or otherwise causes payments to be made to Surface by, an Affiliate or Third
Party outside the United States pursuant to Section 16.1 or uses intellectual property described herein outside of the
United States, and if Novartis or such Affiliate or Third Party is required by applicable Law to withhold any additional
taxes from or in respect of any amount payable under this Agreement as a result of such assignment, then any such
amount payable under this Agreement shall be increased to take into account the additional taxes withheld as may be
necessary so that, after making all required withholdings (including withholdings on the withheld amounts), Surface
receives an amount equal to the sum it would have received had no such withholding been made, provided, however,
that that Novartis will have no obligation to pay any additional amount to the extent that the withholding tax would not
have been imposed but for (a) the failure by Surface to take advantage of an otherwise available exemption from or
reduction in the rate of withholding tax under any applicable income tax convention between the United States and the
jurisdiction in which such Affiliate or Third Party is domiciled, or (b) the assignment by Surface of its rights under this
Agreement or any redomiciliation of Surface outside of the United States. Notwithstanding the foregoing, if Novartis
has an obligation to pay additional amounts to account for withholding taxes, it will be entitled to a full amount of any
foreign tax credit attributable to Surface if and when realized in cash by Surface as a result of such payment.
10.12.5.2. Surface may withhold from payments due to Novartis amounts for payment of any withholding tax that is
required by Law to be paid to any taxing authority with respect to such payments. Surface will provide Novartis all
relevant documents and correspondence, and will also provide to Novartis any other cooperation or assistance on a
reasonable basis as may be necessary to enable Novartis to claim exemption from such withholding taxes and to
receive a refund of such withholding tax or claim a foreign tax credit. Surface will give proper evidence from time to
time as to the payment of any such tax. The Parties will cooperate with each other in seeking deductions under any
double taxation or other similar treaty or agreement from time to time in force. Such cooperation may include Surface
making payments from a single source in the U.S., where possible. Notwithstanding the foregoing, if Surface assigns
its rights and obligations hereunder to, or otherwise causes payments to be made to Novartis by, an Affiliate or Third
Party outside the United States pursuant to Section 16.1 or uses intellectual property described herein outside of the
United States, and if Surface or such Affiliate or Third Party is required by applicable Law to withhold any additional
taxes from or in respect of any amount payable under this Agreement as a result of such assignment, then any such
amount payable under this Agreement shall be increased to take into account the additional taxes withheld as may be
necessary so that, after making all required withholdings (including withholdings on the withheld amounts), Novartis
receives an amount equal to the sum it would have received had no such withholding been made, provided, however,
that that Surface will have no obligation to pay any additional amount to the extent that the withholding tax would not
have been imposed but for (a) the failure by Novartis to take advantage of an otherwise available exemption from or
reduction in the rate of withholding tax under any applicable income tax convention between the United States and the
jurisdiction in which such Affiliate or Third Party is domiciled, or (b) the assignment by Novartis of its rights under
this Agreement or any redomiciliation of Novartis outside of the United States. Notwithstanding the foregoing, if
Surface has an obligation to pay additional amounts to account for withholding taxes, it will be entitled to a full
amount of any foreign tax credit attributable to Novartis if and when realized in cash by Novartis as a result of such
payment.
10.12.5.3. Apart from any such permitted withholding and those deductions expressly included in the definition of Net
Sales, the amounts payable hereunder will not be reduced on account of any taxes, charges, duties or other levies.
10.12.6. Blocked Payments. In the event that, by reason of applicable Law in any country, it becomes impossible or
illegal for a Party to transfer, or have transferred on its behalf, payments owed the other Party hereunder, such Party
will promptly notify the other Party of the conditions preventing such transfer and such payments will be deposited in
local currency in the relevant country to the credit of the other Party in a recognized banking institution designated by
the other Party or, if none is designated by the other Party within a period of [***], in a recognized banking institution
selected by the transferring Party, as the case may be, and identified in a written notice given to the other Party.
10.12.7. Interest Due. Each paying Party will pay the other Party interest on any undisputed payments that are not paid
on or before the date such payments are due under this Agreement at a rate of [***] or the maximum applicable legal
rate, if less, calculated on the total number of days payment is delinquent.
10.13. Mutual Convenience. The royalty and other payment obligations set forth hereunder have been agreed to by
the Parties for the purpose of reflecting and advancing their mutual convenience, including the ease of calculating and
paying royalties and other amounts to each Party.
11. CONFIDENTIALITY AND PUBLICATION
11.1. Nondisclosure Obligation.
11.1.1. All Confidential Information disclosed by one Party to the other Party under this Agreement will be maintained
in confidence by the receiving Party and will not be disclosed to a Third Party or used for any purpose except to
exercise its licenses and other rights, to perform its obligations, or as otherwise set forth herein, without the prior
written consent of the disclosing Party, except to the extent that such Confidential Information:
(a) is known by the receiving Party at the time of its receipt, and not through a prior disclosure by the disclosing Party,
as documented by the receiving Party’s business records;
(b) is known to the public before its receipt from the disclosing Party, or thereafter becomes generally known to the
public through no breach of this Agreement by the receiving Party;
(c) is subsequently disclosed to the receiving Party by a Third Party who is not known by the receiving Party to be
under an obligation of confidentiality to the disclosing Party; or
(d) is developed by the receiving Party independently of Confidential Information received from the disclosing Party,
as documented by the receiving Party’s business records.
Specific aspects or details of Confidential Information will not be deemed to be within the public domain or in the
possession of the recipient Party merely because the Confidential Information is embraced by more general
information in the public domain or in the possession of the recipient Party. Further, any combination of Confidential
Information will not be considered in the public domain or in the possession of the recipient Party merely because
individual elements of such Confidential Information are in the public domain or in the possession of the recipient
Party unless the combination and its principles are in the public domain or in the possession of the recipient Party.
11.1.2. Notwithstanding the obligations of confidentiality and non-use set forth above and in Section 11.1.3. below, a
receiving Party may provide Confidential Information disclosed to it, and disclose the existence and terms of this
Agreement or the as may be reasonably required in order to perform its obligations and to exploit its licenses and other
rights under this Agreement, and specifically to (a) Related Parties, and their employees, directors, agents, consultants,
or advisors to the extent necessary for the potential or actual performance of its obligations or exercise of its licenses
and other rights under this Agreement in each case who are under an obligation of confidentiality with respect to such
information that is no less stringent than the terms of this Section 11.1; (b) governmental or other Regulatory
Authorities in order to obtain patents or perform its obligations or exploit its rights under this Agreement, provided that
such Confidential Information will be disclosed only to the extent reasonably necessary to do so, and where permitted,
subject to confidential treatment; (d) the extent required by Law, including by the rules or regulations of the United
States Securities and Exchange Commission or similar regulatory agency in a country other than the United States or
of any stock exchange or listing entity (including as a result of an initial public offering by Surface); [***] and (e) to
Third Parties to the extent a Party is required to do so pursuant to the terms of an In-License. If a Party is required by
Law to disclose Confidential Information of the other Party that is subject to the non-disclosure provisions of this
Section 11.1, such Party will promptly inform the other Party of the disclosure that is being sought in order to provide
the other Party an opportunity to challenge or limit the disclosure. Notwithstanding Section 11.1.1, Confidential
Information that is permitted or required to be disclosed will remain otherwise subject to the confidentiality and non-
use provisions of this Section 11.1.[***]
11.2. Publication and Publicity.
11.2.1. Publication. Except for disclosures permitted pursuant to Section 11.1 and 11.2.2, either Party wishing to make
a publication or public presentation that contains the Confidential Information of the other Party or any results of
Research and Development activities under the Collaboration will deliver to the other Party a copy of the proposed
written publication or presentation at least [***] prior to submission for publication or presentation. The reviewing
Party will have the right (a) to propose modifications to the publication or presentation for patent reasons or trade
secret reasons or to remove Confidential Information of the reviewing Party or its Related Parties, and the publishing
Party will remove all Confidential Information of the other Party if requested by the reviewing Party and otherwise
reflect such Party’s reasonable comments into consideration, or (b) to request a reasonable delay in publication or
presentation in order to protect patentable information. If the reviewing Party requests a delay, the publishing Party
will delay submission or presentation for a period of [***] (or such shorter period as may be mutually agreed by the
Parties) to enable the non-publishing Party to file patent applications protecting such Party’s rights in such information.
[***] Notwithstanding the foregoing, in no event will Surface, its Affiliates or Sublicensees make a publication or
public presentation with respect to any T1 Target, T1 Antibody Candidate, T1 Licensed Product, Global Target, Global
Antibody Candidate or Global Licensed Product without the prior written consent of Novartis. Further, neither Party
will submit or publish any article or other publication to or with any scientific journal or other publisher that requires,
as a condition of publication, that the submitting Party agree to make available to the publisher or Third Parties any
Antibodies or other Materials which are the subject of the publication.
11.2.2. Publicity. Except as set forth in Section 11.1, 11.2.1 and 11.3, the terms of this Agreement may not be disclosed
by either Party, and neither Party will use the name, Trademark, trade name or logo of the other Party or its employees
in any publicity, news release or disclosure relating to this Agreement, its subject matter, or the activities of the Parties
hereunder without the prior express written permission of the other Party except (a) as may be required by applicable
Law, including by the rules or regulations of the United States Securities and Exchange Commission or similar
regulatory agency in any country other than the United States or of any stock exchange or listing entity, provided that
the Party issuing such press release gives reasonable notice prior to use of such name, Trademark, trade name or logo
of the other Party, and otherwise complies with Section 11.1.2, or (b) as expressly permitted by the terms hereof.
11.3. Press Release.
11.3.1. Except as provided in Section 11.3.2, neither Party will issue a press release or public announcement relating to
this Agreement without the prior written approval of the other Party (such approval not to be unreasonably withheld,
conditioned or delayed), except that a Party may (a) once a press release or other public statement is approved in
writing by both Parties, make subsequent public disclosure of the information contained in such press release or other
written statement without the further approval of the other Party, and (b) issue a press release or public announcement
as required by applicable Law (including a press release corresponding to any securities disclosure, such as pursuant to
a Form 8-K), including by the rules or regulations of the United States Securities and Exchange Commission or similar
regulatory agency in a country other than the United States or of any stock exchange or listing entity, provided that the
Party issuing such press release gives reasonable prior notice to the other Party of and the opportunity to comment on
the press release or public announcement, and otherwise complies with this Section 11. In addition, Surface may with
Novartis’ prior written approval, such approval not to be unreasonably withheld, conditioned or delayed, issue a press
release regarding (x) the exercise of any Option, or (y) the payment or receipt of any milestone payments under this
Agreement with respect to any Licensed Products, provided, that (i) such press release does not identify the Antibody
Candidate or Licensed Target; and (ii) otherwise complies with this Section 11.
11.3.2. Notwithstanding anything in this Section 11.3 to the contrary, (a) either Party may issue a press release or make
a public disclosure relating to such Party’s Development, Manufacturing or Commercialization activities under this
Agreement with respect to Regional Licensed Products in such Party’s Territory; and (b) Novartis may issue a press
release or make a public disclosure relating to the Research, Development, Manufacturing or Commercialization
activities under this Agreement with respect to the T1 Target, T1 Antibody Candidates, T1 Licensed Products, Global
Targets, Global Antibody Candidates and Global Licensed Products, provided that such press release or public
disclosure does not disclose Confidential Information of the other Party. Prior to making any such disclosure under
clause (a) of this Section 11.3.2, however, the Party making the disclosure will provide the other Party with a draft of
such proposed disclosure within a reasonable time (but at least [***] prior to disclosure for the other Party’s review
and comment, and the disclosing Party will consider in good faith any timely comments provided by the other Party.
12. REPRESENTATIONS, WARRANTIES AND COVENANTS
12.1. Mutual Representations and Warranties as of the Effective Date. Each Party represents and warrants to the
other Party that, as of the Effective Date:
12.1.1. such Party is a corporation duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or formation;
12.1.2. such Party has all requisite corporate power and corporate authority to enter into this Agreement and to carry
out its obligations under this Agreement;
12.1.3. all requisite corporate action on the part of such Party, its directors and stockholders required by applicable
Law for the authorization, execution and delivery by such Party of this Agreement, and the performance of all
obligations of such Party under this Agreement, has been taken;
12.1.4. the execution, delivery and performance of this Agreement, and compliance with the provisions of this
Agreement, by such Party do not and will not: (a) violate any provision of applicable Law or any ruling, writ,
injunction, order, permit, judgment or decree of any Governmental Authority, (b) constitute a breach of, or default
under (or an event which, with notice or lapse of time or both, would become a default under) or conflict with, or give
rise to any right of termination, cancellation or acceleration of, any agreement, arrangement or instrument, whether
written or oral, by which such Party or any of its assets are bound, or (c) violate or conflict with any of the provisions
of such Party’s organizational documents (including any articles or memoranda of organization or association, charter,
bylaws or similar documents; and
12.1.5. no consent, approval, authorization or other order of, or filing with, or notice to, any Governmental Authority
or other Third Party is required to be obtained or made by such Party in connection with the authorization, execution
and delivery by the Company of this Agreement, except as required pursuant to the HSR Act.
12.2. Representations and Warranties by Surface. Surface represents and warrants to Novartis as of the Effective
Date that:
12.2.1. Schedule 12.2.1 sets forth a complete and accurate list of (a) all Surface Patents in existence as of the Effective
Date, indicating the owner; and (b) all license, assignment, distribution or other agreements in existence as of the
Effective Date relating to the Surface Technology, including all Existing Surface In-Licenses;
12.2.2. Except as set forth on Schedule 12.2.2, to Surface’s knowledge, the Surface Technology in existence as of the
Effective Date comprises all of the intellectual property rights used by or on behalf of Surface and its Affiliates in the
Research, Development and Manufacturing of the Antibody Candidates and Licensed Products as of the Effective
Date;
12.2.3. Except as set forth on Schedule 12.2.3, Surface (a) owns or has a valid license to, or has a valid option to
license, all Surface Technology in existence as of the Effective Date, including those Antibody Candidates and
Licensed Products in existence as of the Effective Date; and (b) has the right, or an option to obtain the right, and
authority to (i) grant to Novartis and its Related Parties, the licenses under the Surface Technology in existence as of
the Effective Date hereunder; and (ii) use, disclose, and commercially exploit, and to enable Novartis and its Related
Parties to use, disclose, and commercially exploit (in each case under appropriate conditions of confidentiality) the
Surface Technology in existence as of the Effective Date in the Field;
12.2.4. Surface has not granted its Affiliates or any Third Party, including any academic organization or agency, rights
that would otherwise interfere or be inconsistent with Novartis’ rights hereunder, and there are no agreements or
arrangements other than as set forth on Schedule 12.2.4 to which Surface or any of its Affiliates is a party relating to
Surface Technology, Antibody Candidates, or Licensed Product(s), that would (a) limit the rights granted to Novartis
under this Agreement or (b) that restrict or result in a restriction on Novartis’ ability to Research, Develop,
Manufacture, use or Commercialize the Antibody Candidates and Licensed Product(s) in the Novartis Territory, in
accordance with this Agreement;
12.2.5. with respect to any Surface Technology owned by Surface, (a) Surface and its Affiliates have obtained from all
individuals who participated in any respect in the invention or authorship thereof, effective assignments of all
ownership rights of such individuals in such Surface Technology, either pursuant to written agreement or by operation
of law; and (b) all of its employees, officers, and consultants have executed agreements or have existing obligations
under applicable Law requiring assignment to Surface or its Affiliate, as applicable, of all inventions made during the
course of and as the result of the Collaboration; and, no officer or employee of Surface or its Affiliate is subject to any
agreement with any other Third Party that requires such officer or employee to assign any interest in any Surface
Technology to any Third Party;
12.2.6. all employees, officers, and consultants of Surface and its Affiliates have executed agreements or have existing
obligations under applicable Law and obligating the individual to maintain as confidential Surface’s Confidential
Information as well as confidential information of other parties (including of Novartis and its Affiliates) that such
individual may receive in the conduct of the Collaboration, to the extent required to support Surface’s obligations
under this Agreement; and Surface and its Affiliates have taken all reasonable precautions to preserve the
confidentiality of the Surface Know-How;
12.2.7. Except as set forth on Schedule 12.2.7, to Surface’s knowledge, no sequence or any portion thereof of any
Antibody Candidate including has been publicly disclosed or provided or otherwise made available to any Third
Parties, including to any academic institutions or journals;
12.2.8. to Surface’s knowledge, Research, Development, Manufacture, use or Commercialization of the Antibody
Candidates and Licensed Products in the Field as proposed with this Agreement do not infringe or misappropriate the
intellectual property rights of any Third Party, nor has Surface or any Affiliate received, any written notice alleging
such infringement or misappropriation;
12.2.9. Neither Surface nor any Affiliate has initiated or been involved in any proceedings or other claims in which
such Person alleges that any Third Party is or was infringing or misappropriating any Surface Technology, nor have
any such proceedings been threatened by Surface or its Affiliates, nor does Surface or its Affiliates know of any valid
basis for any such proceedings;
12.2.10. Neither Surface nor its Affiliates have entered into a government funding relationship that would result in
rights to any Antibody Candidate or Licensed Product residing in the US Government, National Institutes of Health,
National Institute for Drug Abuse or other agency, and the licenses granted hereunder are not subject to overriding
obligations to the US Government as set forth in Public Law 96 517 (35 U.S.C. 200 204), as amended, or any similar
obligations under the laws of any other country;
12.2.11. to the knowledge of Surface, (a) the issued patents in the Surface Patents as of the Effective Date are valid and
enforceable without any claims, challenges, oppositions, nullity actions, interferences, inter-partes reexaminations,
inter-partes reviews, post-grant reviews, derivation proceedings, or other proceedings pending or threatened and
Surface has filed and prosecuted patent applications within the Surface Patents owned by Surface in good faith and
complied with all duties of disclosure with respect thereto; (b) Surface has not committed any act, or omitted to
commit any act, that may cause the Surface Patents to expire prematurely or be declared invalid or unenforceable; and
(c) all application, registration, maintenance and renewal fees in respect of the Surface Patents as of the Effective Date
have been paid and all necessary documents and certificates have been filed with the relevant agencies for the purpose
of maintaining the Surface Patents; and
12.2.12. Surface is its own “ultimate parent entity,” as that term is defined in 16 C.F.R.§ 801.1(a)(3) and as determined
in compliance with 16 C.F.R. §§ 801.1 and 801.12, and is not engaged in “manufacturing” as that term is defined in 16
C.F.R. § 801.1(j). Surface does not have “total assets” equal to or greater than Fifteen Million, Three Hundred
Thousand Dollars ($15,300,000), and Surface does not have “annual net sales” equal to or greater than One Hundred
and Fifty-Two Million, Five Hundred Thousand Dollars ($152,500,000), in both cases, as determined in compliance
with 16 C.F.R.§ 801.11 and used in Section 7A(a)(2)(B) of the Clayton Act, 15 U.S.C.§ 18A.
12.3. Warranty Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY OF ANY KIND,
EITHER EXPRESS OR IMPLIED, TO THE OTHER PARTY WITH RESPECT TO ANY PATENTS, KNOW-HOW,
MATERIALS, ANTIBODY CANDIDATE, LICENSED PRODUCT, GOODS, SERVICES, RIGHTS OR OTHER
SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS ALL IMPLIED WARRANTIES OF
MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY AND ALL
OF THE FOREGOING. EACH PARTY HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY THAT
THE RESEARCH, DEVELOPMENT, MANUFACTURE OR COMMERCIALIZATION OF ANY ANTIBODY
CANDIDATE OR LICENSED PRODUCT PURSUANT TO THIS AGREEMENT WILL BE SUCCESSFUL.
12.4. Certain Covenants.
12.4.1. Compliance. Each Party and its Related Parties will conduct the Collaboration and the Development,
Manufacture and Commercialization of the Licensed Products in accordance with all applicable Laws, including
governmental regulations concerning cGLP, cGCP and cGMP. In addition, if either Party is or becomes subject to a
legal obligation to a Regulatory Authority or other Governmental Authority (such as a corporate integrity agreement or
settlement agreement with a Governmental Authority), then the other Party will perform such activities as may be
reasonably requested by the obligated Party to enable the obligated Party to comply with its legal obligation to such
Regulatory Authority with respect to the Licensed Products.
12.4.2. Conflicting Transactions. During the Term, Surface will not, and will cause its Affiliates not to, enter into any
agreement granting a license or other right under the Surface Technology that is inconsistent with this Agreement.
During the Term, Novartis will not, and will cause its Affiliates not to, enter into any agreement granting a license or
other right under the Novartis Technology that is inconsistent with this Agreement.
12.4.3. In-Licenses. Each Party will use Commercially Reasonable Efforts to maintain Control of all Patents, and
Know-How licensed to such Party under the In-Licenses to which such Party is the contracting party. Each Party will
use Commercially Reasonable Efforts not to materially breach or be in material default under any of its obligations
under any In-License to which such Party is the contracting party that would be necessary or useful for the other Party
to Research, Develop, Manufacture and Commercialize any Antibody Candidates or Licensed Products in the Field in
such Party’s Territory pursuant to this Agreement. Each Party will not terminate any In-License to which such Party is
the contracting party in a manner that would terminate rights that are sublicensed to the other Party. In the event that a
Party receives notice of an alleged breach by such Party under an In-License to which it is a party and for which
termination of such In-License is being sought by the counterparty, then such Party will promptly, but in no event less
than [***] thereafter, provide written notice thereof to the other Party and grant the other Party the right (but not the
obligation) to cure such alleged breach. In the event that a Party intends to materially amend an In-License to which it
is a party, then such Party will promptly, but in no event less than [***]
before, provide written notice thereof to the other Party and grant the other Party the right (but not the obligation),
acting reasonably, to reject any amendment that would either increase the receiving Party’s obligations under this
Agreement, including any financial obligations or decrease the receiving Party’s rights under this Agreement.
12.4.4. Surface In-Licenses. Surface will [***]
12.4.5. No Debarment. Each Party will use Commercially Reasonable Efforts to not use, in any capacity in connection
with the Collaboration or the performance of its obligations under the Collaboration Agreement, any Person that has
been debarred pursuant to Section 306 of the FD&C Act, as amended, or that is the subject of a conviction described in
such section. Each Party agrees to inform the other Party in writing immediately if it or any Person that is performing
activities in the Collaboration or under the Collaboration Agreement, is debarred or is subject to debarment or is the
subject of a conviction described in Section 306 of the FD&C Act, or if any action, suit, claim, investigation or legal or
administrative proceeding is pending or, to the best of the notifying Party’s knowledge, is threatened, relating to the
debarment or conviction of the notifying Party or any Person or entity used in any capacity by such Party or any of its
Affiliates in connection with the Collaboration or the performance of its other obligations under the Collaboration
Agreement.
12.4.6. Novartis represents and warrants as of the Effective Date that it has determined in accordance with 16 C.F.R.
Parts §801.10 and §801.13 that the value of the assets and voting securities of Surface as identified in accordance with
the HSR Act rules including 16 C.F.R. §801.13, §801.14 and §801.15, that Novartis will acquire and hold as of the
Effective Date is less than [***]
12.5. Exclusivity.
12.5.1. Exclusivity.
12.5.1.1. During the Exclusivity Period for an Option Target, Surface will not, alone or with any Affiliates or Third
Parties, [***]
12.5.1.2. During the Exclusivity Period for an Option Target, Novartis will not, alone or with any Affiliates or Third
Parties, [***]
12.5.1.3. During the Exclusivity Period for a Licensed Target, Surface will not, alone or with any Affiliates or Third
Parties, [***]
12.5.1.4. During the Exclusivity Period for a Licensed Target, Novartis will not, alone or with any Affiliates or Third
Parties, [***]
12.5.1.5. The Parties hereby acknowledge and agree that (I) each Party’s obligations under this Section 12.5.1 will not
apply to (A) any Research, Development, Manufacture or Commercialization of any molecule (including any
Antibodies) that [***] and (B) any activities intended by either Party to ensure their compliance with this Section
12.5.1 (e.g., counter-screening), (II) this Section 12.5.1 will apply to any Antibody that is intended to [***]; and (III)
each Party retains (A) the right to Research (but not Develop or Commercialize), and, subject to the terms and
conditions of this Agreement, have others Research on its behalf, T1 Antibody Candidates, Option Target Antibody
Candidates, Regional Antibody Candidates, Global Antibody Candidates or Licensed Products outside of the
applicable Research Plan, (B) the right, solely to the extent reasonably necessary for any such Research, to
Manufacture, or subject to the terms and conditions of this Agreement, have others Manufacture on its behalf, T1
Antibody Candidates, Option Target Antibody Candidates, Regional Antibody Candidates, Global Antibody
Candidates or Licensed Products outside of the applicable Research Plan; and (C) the rights under the license grants in
Section 9; provided further [***]
12.5.1.6. [***]
12.5.2. Other Programs.
12.5.2.1. Surface.
(a) Notwithstanding Section 12.5.1, in the event that Surface or its Affiliates acquire a Third Party or a portion of the
business of a Third Party (whether by merger, stock purchase, purchase of assets, in-license or other means) (a “Third
Party Acquisition”) that is, prior to such acquisition, conducting a research, development or commercialization
program that, if conducted by Surface at such time, would be a breach of Surface’s exclusivity obligation in Section
12.5.1 (a “Surface Competing Program”), Surface will use commercially reasonable efforts
to divest such Surface Competing Program promptly following the closing of such acquisition, and in any event will
complete such divestment within [***] after the closing of such acquisition, provided that (i) such [***] period will be
extended if, at the expiration of such time period, Surface provides competent evidence of reasonable on-going efforts
to divest such Surface Competing Program, (ii) Surface may conduct the Surface Competing Program independently
of Surface’s activities under this Agreement during such time period and without any use of any Restricted
Technology, and (iii) Surface will cease all research, development and commercialization activities with respect to
such Surface Competing Program if Surface has not completed such divestment within [***] after the closing of such
acquisition (it being understood that Surface may thereafter continue its efforts to divest such asset). Surface will not
be deemed in breach of Section 12.5.1 with respect to such Surface Competing Program so long as Surface complies
with the terms of this Section 12.5.2.1.
(b) In the event of a Change of Control of Surface, the exclusivity obligations of Surface set forth in Section 12.5.1
will apply to and bind the Third Party referred to in the definition of Change of Control and its Affiliates subject to the
following provisions:
(i) [***]
(ii)[***]
(c) With respect to Sections 12.5.2.1(a), 12.5.2.1(b) and 12.5.2.1(c), Surface and its Affiliates (including such Third
Party and its Affiliates under Sections 12.5.2.1(b) and 12.5.2.1(c)) will adopt reasonable procedures (which include
appropriate administrative, physical and technical safeguards, including underlying operating system and network
security controls and other firewalls) to prevent the use of any Restricted Technology in a manner that is in violation of
this Agreement.
12.5.2.2. Novartis.
(a) Notwithstanding Section 12.5.1, in the event that Novartis or its Affiliates make a Third Party Acquisition where
the applicable Third Party or portion of such Third Party’s business, prior to such acquisition, conducting a research,
development or commercialization program that, if conducted by Novartis at such time, would be a breach of
Novartis’s exclusivity obligation in Section 12.5.1 (a “Novartis Competing Program”), Novartis will use
Commercially Reasonable Efforts to divest such Novartis Competing Program promptly following the closing of such
acquisition, unless Novartis has exercised its right to terminate this Agreement pursuant to Section 15.2 with respect to
the target of the Novartis Competing Program, and in any event will complete such divestment within [***] after the
closing of such acquisition, provided that (i) such [***] time period will be extended if, at the expiration of such time
period (and any extensions thereto), Novartis provides competent evidence of reasonable on-going efforts to divest
such Novartis Competing Program, (ii) Novartis may conduct the Novartis Competing Program independently of
Novartis’s activities under this Agreement during such time period and without any use of any Restricted Technology,
and (iii) Novartis will cease all research, development and commercialization activities with respect to such Novartis
Competing Program if Novartis has not completed such divestment within one (1) year after the closing of such
acquisition (it being understood that Novartis may thereafter continue its efforts to divest such asset). Novartis will not
be deemed in breach of Section 12.5.1 with respect to such Novartis Competing Program so long as Novartis complies
with the terms of this Section 12.5.2.2.
(b) In the event of a Change of Control of Novartis, the exclusivity obligations of Novartis set forth in Section 12.5.1
will apply to and bind the Third Party referred to in the definition of Change of Control and its Affiliates subject to the
following provisions:
(i) [***]
(ii) [***]
(c) With respect to Sections 12.5.2.2(a), 12.5.2.2(b) and 12.5.2.1(c), Novartis and its Affiliates (including such Third
Party and its Affiliates under Sections 12.5.2.2(b) and 12.5.2.1(c)) will adopt reasonable procedures (which include
appropriate administrative, physical and technical safeguards, including underlying operating system and network
security controls and other firewalls) to prevent the use of any Restricted Technology in a manner that is in violation of
this Agreement.
13. INDEMNIFICATION; LIMITATION OF LIABILITY; INSURANCE
13.1. General Indemnification by Novartis. Novartis will indemnify, hold harmless and defend Surface, its Related
Parties, and their respective directors, officers, employees and agents (“Surface Indemnitees”) from and against any
and all Third Party claims, suits, losses, liabilities, damages, costs, fees and expenses (including reasonable attorneys’
fees and litigation expenses) (collectively, “Losses”) arising out of or resulting from, directly or indirectly, (a) any
breach of, or inaccuracy in, any representation or warranty made by Novartis in this Agreement, or any breach or
violation of any covenant or agreement of Novartis in or in the performance of this Agreement, (b) the negligence or
willful misconduct by or of Novartis and its Related Parties, and their respective directors, officers, employees and
agents in the performance of Novartis’s obligations under this Agreement, or (c) to the extent such Losses arise out of
the Research, Development, Manufacturing or Commercialization of Antibody Candidates or Licensed Products by or
on behalf of Novartis or its Related Parties pursuant to this Agreement. Novartis will have no obligation to indemnify
the Surface Indemnitees to the extent that the Losses arise out of or result from, directly or indirectly, any breach of, or
inaccuracy in, any representation or warranty made by Surface in this Agreement, or any breach or violation of any
covenant or agreement of Surface in, or in the performance of, this Agreement, or the negligence or willful misconduct
by or of any of the Surface Indemnitees, or matters for which Surface is obligated to indemnify Novartis under
Sections 13.2 or 13.3.
13.2. General Indemnification by Surface. Surface will indemnify, hold harmless, and defend Novartis, its Related
Parties and their respective directors, officers, employees and agents (“Novartis Indemnitees”) from and against any
and all Losses arising out of or resulting from, directly or indirectly, (a) any breach of, or inaccuracy in, any
representation or warranty made by Surface in this Agreement, or any breach or violation of any covenant or
agreement of Surface in, or in the performance of, this Agreement, (b) the negligence or willful misconduct by or of
Surface and its Related Parties, and their respective directors, officers, employees and agents in the performance of
Surface’s obligations under this Agreement, or (c) to the extent such Losses arise out of the Research, Development,
Manufacturing or Commercialization of Antibody Candidates or Licensed Products by or on behalf of Surface and its
Related Parties pursuant to this Agreement. Surface will have no obligation to indemnify the Novartis Indemnitees to
the extent that the Losses arise out of or result from, directly or indirectly, any breach of, or inaccuracy in, any
representation or warranty made by Novartis in this Agreement, or any breach or violation of any covenant or
agreement of Novartis in or in the performance of this Agreement, or the negligence or willful misconduct by or of any
of the Novartis Indemnitees, or matters for which Novartis is obligated to indemnify Surface under Sections 13.1 or
13.3.
13.3. Product Liability. Subject to any Supply Agreement, any Losses arising out of Third Party product liability
claims arising from the Development, Manufacture or Commercialization of Licensed Products will be (a) borne by
Novartis, to the extent such Losses arise out of (i) the Research, Manufacture or Commercialization in or for the
Novartis Territory by or on behalf of Novartis or its Related Parties of a Regional Licensed Product, or (ii) a T1
Licensed Product or Global Licensed Product anywhere in or for the world by or on behalf of Novartis and its Related
Parties, and (b) borne by Surface, to the extent such Losses arise out of the Research, Manufacture or
Commercialization in or for the Surface Territory by or on behalf of Surface and its Related Parties of a Regional
Licensed Product. Subject to any Supply Agreement, any Losses arising out of Third Party product liability claims
arising from the Development of Regional Licensed Products will be treated as Development Costs in accordance with
Section 5.2.4; provided that (x) with respect to any Additional Development Activities, the Proposing Party will be
solely responsible for any such liability claims unless and until the Non-Proposing Party delivers an Additional
Development Opt-In Notice with respect to such Additional Development Activity; (y) after Surface exercises its Opt-
Out Right, Surface will remain responsible for its portion of any such liability claims with respect to Development
activities occurring up to and through the [***] period following Novartis’ receipt of Surface’s Opt-Out Notice; and (z)
after termination of this Agreement with respect to any Licensed Target by Novartis pursuant to Section 15.2 or by
Surface pursuant to Section 15.3.1.1 or 15.4, (i) Novartis will remain responsible for its portion of any such liability
claims with respect to any ongoing Clinical Studies that Surface elects to wind down under Section 15.5.1(b) until
such wind-down process is complete, and (ii) Surface will be responsible for any liability claims with respect to any
ongoing Clinical Studies that Surface elects to continue. The Party bearing such Losses in accordance with the
immediately preceding two sentences will indemnify, hold harmless and defend the other Party and its Related Parties
and their respective directors, officers, employees and agents from and against such Losses.
13.4. Indemnification Procedure. The Party entitled to indemnification under Section 13 (an “Indemnified Party”)
shall notify the Party potentially responsible for such indemnification (the “Indemnifying Party”) in writing promptly
upon being notified of or actual knowledge of any claim or claims asserted or threatened against the Indemnified Party
which could give rise to a right of indemnification under this Agreement; provided, that the
failure to give such notice shall not relieve the Indemnifying Party of its indemnity obligation hereunder except to the
extent that such failure materially prejudices the Indemnifying Party. If the Indemnifying Party has acknowledged in
writing to the Indemnified Party the Indemnifying Party’s responsibility for defending a claim, the Indemnifying Party
shall have the right to defend, at its sole cost and expense, such claim by all appropriate proceedings; provided, that the
Indemnifying Party may not enter into any compromise or settlement unless (i) such compromise or settlement
imposes only a monetary obligation on the Indemnifying Party and which includes as an unconditional term thereof,
the giving by each claimant or plaintiff to the Indemnified Party of a release from all liability in respect of such claim;
or (ii) the Indemnified Party consents to such compromise or settlement, which consent shall not be unreasonably
withheld, conditioned or delayed unless such compromise or settlement involves (A) any admission of legal
wrongdoing by the Indemnified Party, (B) any payment by the Indemnified Party that is not indemnified hereunder or
(C) the imposition of any equitable relief against the Indemnified Party. If the Indemnifying Party does not elect to
assume control of the defense of a claim or if a good faith and diligent defense, in the Indemnified Party’s reasonable
opinion, is not being or ceases to be materially conducted by the Indemnifying Party, the Indemnified Party shall have
the right, at the expense of the Indemnifying Party, upon at least [***] prior written notice to the Indemnifying Party of
its intent to do so, to undertake the defense of such claim for the account of the Indemnifying Party (with counsel
reasonably selected by the Indemnified Party and approved by the Indemnifying Party, such approval not to be
unreasonably withheld, conditioned or delayed); provided that the Indemnified Party shall keep the Indemnifying Party
apprised of all material developments with respect to such claim. The Indemnified Party may not enter into any
compromise or settlement without the prior written consent of the Indemnifying Party, such consent not to be
unreasonably withheld, conditioned or delayed. The Indemnified Party will cooperate with the Indemnifying Party and
may participate in, but not control, any defense or settlement of any claim controlled by the Indemnifying Party
pursuant to this Section 13.4 and shall bear its own costs and expenses with respect to such participation; provided that
the Indemnifying Party shall bear such costs and expenses if counsel for the Indemnifying Party shall have reasonably
determined that such counsel may not properly represent both the Indemnifying Party and the Indemnified Party.
13.5. Limitation of Liability. NEITHER PARTY HERETO WILL BE LIABLE FOR SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF THIS AGREEMENT, OR THE EXERCISE OF
ITS RIGHTS OR THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER, INCLUDING LOST PROFITS
ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE
OF SUCH DAMAGES, EXCEPT AS A RESULT OF [***] NOTHING IN THIS SECTION 13.5 IS INTENDED TO
LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY.
13.6. Insurance. Commencing not later than the Initiation of the first Phase 1 Study under this Agreement, each Party
will obtain and maintain insurance during the Term and for a period of at least [***] after the last commercial sale of
any Licensed Product generated under the Collaboration for which it is responsible, with a reputable, solvent insurer in
an amount appropriate for its business and products of the type that are the subject of this Agreement, and for its
obligations under this Agreement. Specifically, each Party will maintain product liability insurance and clinical trial
liability insurance with limits of at least [***] per occurrence and in annual aggregate. Upon request, each Party will
provide the other Party with evidence of the existence and maintenance of such insurance coverage. Notwithstanding
the foregoing, in the case of Novartis, and, in the case of Surface (whether or not after a Change of Control of
Surface), after such time that Surface and its Affiliates have sales within one of the top [***] pharmaceutical
companies by global sales, such obligation may be satisfied by a program of self-insurance.
13.7. Disclaimer. The Parties each acknowledge and agree, that (a) Research, Development, and Commercialization is
inherently uncertain, (b) no outcome or success of any Antibody Candidates or Licensed Products is or can be assured
and (c) failure to achieve Development and Commercialization of Licensed Products will not in and of itself constitute
a breach or default of any obligation in this Agreement.
14. INTELLECTUAL PROPERTY
14.1. Inventorship.
14.1.1. Inventorship for inventions and discoveries (including Know-How) first made during the course of the
performance of activities pursuant to the Collaboration will be determined in accordance with United States patent
Laws for determining inventorship.
14.1.2. Notwithstanding anything to the contrary in this Agreement, each Party will have the right to invoke the
Cooperative Research and Technology Enhancement Act of 2004, 35 U.S.C. § 103(c)(2)-(c)(3) (the “CREATE Act”)
when exercising its rights under this Agreement, but with respect to any Other Patents, only with the prior written
consent of Surface in its sole discretion, and with respect to any Patents within Novartis Technology, only with the
prior written consent of Novartis in its sole discretion. In the event that a Party intends to invoke the CREATE Act,
once agreed to by the other Party if required by the preceding sentence, it will notify the other Party and the other Party
will cooperate and coordinate its activities with such Party with respect to any filings or other activities in support
thereof. The Parties acknowledge and agree that this Agreement is a “joint research agreement” as defined in the
CREATE Act.
14.2. Ownership. Surface will own the entire right, title and interest in and to all Know-How (and Patents claiming
inventions therein) first developed or conceived solely by employee(s), agent(s) or consultant(s) of Surface or its
Affiliates in the conduct of the Collaboration. Novartis will own the entire right, title and interest in and to all Know-
How (and Patents claiming inventions therein) first developed or conceived solely by employee(s), agent(s) or
consultant(s) of Novartis or its Affiliates in the conduct of the Collaboration. The Parties will jointly own the entire
right, title and interest in and to all Know-How (and Patents claiming inventions therein) first developed or conceived
jointly by employee(s), agent(s) or consultant(s) acting on behalf of Surface or its Affiliates, on the one hand, and
employee(s), agent(s) or consultant(s) acting on behalf of Novartis or its Affiliates, on the other hand, in the conduct of
the Collaboration.
14.3. Prosecution and Maintenance of Patents.
14.3.1. IP Committee.
14.3.1.1. Composition. The IP Committee will be comprised of at least [***] representative who is an employee of
each Party. Each Party will appoint its respective representatives to the IP Committee within [***] of the Effective
Date, and from time to time, may substitute one or more of its representatives, in its sole discretion, effective upon
notice to the other Party of such change. All IP Committee representatives will have appropriate expertise, seniority,
decision-making authority and ongoing familiarity with the Collaboration and each Party’s representatives collectively
will have relevant expertise in intellectual property portfolio management and licensing matters. Additional
representatives or consultants may from time to time, by mutual consent of the Parties, be invited to attend IP
Committee meetings, subject to such representatives and consultants (or the representative’s or consultant’s employer)
undertaking confidentiality obligations, whether in a written agreement or by operation of law, no less stringent than
the requirements of Section 11.1.
14.3.1.2. Meetings. The IP Committee will meet as necessary to carry out its duties under Section 14.3.1.3, but no
more often than once per Calendar Quarter, unless otherwise agreed by its members. The IP Committee will meet in-
person at Surface or Novartis or, alternatively, by means of teleconference, videoconference or other similar
communications equipment.
14.3.1.3. IP Committee Responsibilities. The IP Committee will provide input regarding the following with respect to
Licensed Products:
(a) strategies for Prosecuting and Maintaining Patents within the Novartis Technology and the Surface Technology;
and
(b) such other matters as the Parties agree in writing will be the responsibility of the IP Committee.
14.3.1.4. Decision-Making. [***]
14.3.1.5. Term. Either Party will have the right to terminate the IP Committee upon [***] advance written notice to the
other Party. Notwithstanding the foregoing, on a Regional Licensed Product-by-Regional Licensed Product basis
during the Term for such Regional Licensed Product, Surface will have the right (but not the obligation) to continue to
participate in the IP Committee in relation to any such Licensed Product until the fifteenth (15th) anniversary of the
First Commercial Sale of such Regional Licensed Product in the Novartis Territory.
14.3.2. Novartis Technology.
14.3.2.1. General. Subject to remainder of this Section 14.3.2, as between the Parties, Novartis will have the sole
responsibility to, at Novartis’s sole discretion, and sole responsibility for all applicable Patents Costs, to Prosecute and
Maintain all Patents within Novartis Technology (other than within Joint Collaboration IP), in Novartis’s name.
Novartis will consult with Surface, including through the IP Committee, on its strategy for the Prosecution and
Maintenance of all such Patents. Novartis will furnish Surface, via electronic mail or such other method as mutually
agreed by the Parties, copies of substantive proposed filings and documents received from outside counsel in the
course of Prosecuting and Maintaining such Patents, or copies of substantive documents filed with the relevant patent
offices with respect to such Patents, and such other documents related to the Prosecution and Maintenance of such
Patents, and as applicable in sufficient time prior to filing such document or making any payment due thereunder to
allow for review and comment by Surface and will consider in good faith timely comments from Surface thereon.
Novartis will furnish Surface, via electronic mail or such other method as mutually agreed by the Parties, copies of
documents filed with the relevant national patent offices or other Governmental Authorities with respect to such
Patents.
14.3.2.2. Regional Licensed Products in the Surface Territory and Novartis Technology. In the event that Novartis
elects not to Prosecute and Maintain (or continue to Prosecute and Maintain, including filing a Patent claiming priority
to a Patent prior to its issuance), any Patent within the Novartis Technology (other than within Joint Collaboration IP)
in the Surface Territory that Covers the sale, offer for sale, manufacture, use or import of any Regional Licensed
Product, Novartis will notify Surface at least [***] before any such Patent would become abandoned, no longer
available or otherwise forfeited, and subject to the provisions of any applicable Novartis In-License, Surface will have
the right (but not the obligation), at Surface’s sole discretion, and sole responsibility for all applicable Patent Costs, to
Prosecute and Maintain in the Surface Territory such Patent in the name of Novartis (which right will include the right
to file additional Patents claiming priority to such Patent). Surface will consult with Novartis, including through the IP
Committee, on its strategy for the Prosecution and Maintenance of all such Patents. Surface will furnish Novartis, via
electronic mail or such other method as mutually agreed by the Parties, copies of substantive proposed filings and
documents received from outside counsel in the course of Prosecuting and Maintaining such Patents, or copies of
documents filed with the relevant patent offices with respect to such Patents, and such other substantive documents
related to the Prosecution and Maintenance of such Patents, and as applicable in sufficient time prior to filing such
document or making any payment due thereunder to allow for review and comment by Novartis and will consider in
good faith timely comments from Novartis thereon. Surface will furnish Novartis, via electronic mail or such other
method as mutually agreed by the Parties, copies of documents filed with the relevant national patent offices or other
Governmental Authorities with respect to such Patents. Novartis will use Commercially Reasonable Efforts to make
available to Surface its authorized attorneys, agents or representatives, or such of its employees as are reasonably
necessary to assist Surface in exercising its rights described under this Section 14.3.2.2. Novartis will sign, or will use
Commercially Reasonable Efforts to have signed, all legal documents as are reasonably necessary to Prosecute and
Maintain such Patents.
14.3.2.3. T1 Licensed Products and Global Licensed Products Worldwide, and Regional Licensed Products in the
Novartis Territory, and Novartis Technology. In the event that Novartis elects not to Prosecute and Maintain (or
continue to Prosecute and Maintain, including filing a Patent claiming priority to a Patent prior to its issuance), any
Patent within the Novartis Technology (other than within Joint Collaboration IP) in the Novartis Territory that Covers
the sale, offer for sale, manufacture, use or import of any T1 Licensed Product, Global Licensed Product or Regional
Licensed Product (where, for clarity, the applicable territory is worldwide for any T1 Licensed Product or Global
Licensed Product, and worldwide minus the Surface Territory for any Regional Licensed Product), Novartis will notify
Surface at least [***] before any such Patent would become abandoned, no longer available or otherwise forfeited,
whereupon at the written request of Surface
Confidential
- 144 -
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
the Parties will meet to discuss any such decision by Novartis. Subject to Novartis’s consent, and subject to the
provisions of any applicable Novartis In-License, Surface will have the right (but not the obligation), at Surface’s sole
discretion, and sole responsibility for all applicable Patent Costs, to Prosecute and Maintain such Patent in the
applicable territory described above in the name of Novartis (which right will include the right to file additional
Patents claiming priority to such Patent). Surface will consult with Novartis, including through the IP Committee, on
its strategy for the Prosecution and Maintenance of all such Patents. Surface will furnish Novartis, via electronic
mail or such other method as mutually agreed by the Parties, copies of substantive proposed filings and documents
received from outside counsel in the course of Prosecuting and Maintaining such Patents, or copies of documents filed
with the relevant patent offices or other Governmental Authorities with respect to such Patents, and such other
substantive documents related to the Prosecution and Maintenance of such Patents, and as applicable in sufficient time
prior to filing such document or making any payment due thereunder to allow for review and comment by Novartis
and will consider in good faith timely comments from Novartis thereon. Surface will furnish Novartis, via electronic
mail or such other method as mutually agreed by the Parties, copies of documents filed with the relevant national
patent offices or other Governmental Authorities with respect to such Patents. Novartis will use Commercially
Reasonable Efforts to make available to Surface its authorized attorneys, agents or representatives, or such of its
employees as are reasonably necessary to assist Surface in exercising its rights described under this Section 14.3.2.3.
Novartis will sign, or will use Commercially Reasonable Efforts to have signed, all legal documents as are reasonably
necessary to Prosecute and Maintain such Patents.
14.3.3. Surface Technology.
14.3.3.1. General. Subject to remainder of this Section 14.3.3, as between the Parties, Surface will have the sole
responsibility to, at Surface’s sole discretion, and sole responsibility for all applicable Patents Costs, to Prosecute and
Maintain all Patents within Surface Technology (other than within Joint Collaboration IP or Prosecution Patents)
(“Other Patents”), in Surface’s name. Surface will consult with Novartis, including through the IP Committee, on its
strategy for the Prosecution and Maintenance of all such Other Patents. Surface will furnish Novartis, via electronic
mail or such other method as mutually agreed by the Parties, copies of substantive proposed filings and documents
received from outside counsel in the course of Prosecuting and Maintaining such Other Patents, or copies of
documents filed with the relevant patent offices or other Governmental Authorities with respect to such Other Patents,
and such other substantive documents related to the Prosecution and Maintenance of such Other Patents, and as
applicable in sufficient time prior to filing such document or making any payment due thereunder to allow for review
and comment by Novartis and will consider in good faith timely comments from Novartis thereon. Surface will furnish
Novartis, via electronic mail or such other method as mutually agreed by the Parties, copies of documents filed with
the relevant national patent offices or other Governmental Authorities with respect to such Other Patents.
14.3.3.2. Licensed Products in the Surface Territory and Novartis Territory and Surface Technology. In the event that
Surface elects not to Prosecute and Maintain (or continue to Prosecute and Maintain, including filing a Patent claiming
priority to a Patent prior to its issuance), any Other Patent that Covers the sale, offer for sale, manufacture, use or
import of any Licensed Product, Surface will notify Novartis at least [***] before any such Other Patent would
become abandoned, no longer available or otherwise forfeited, whereupon at the written request of Novartis the Parties
will meet to discuss any such decision by Surface. Subject to Surface’s consent, and subject to the provisions of any
applicable Surface In-License, Novartis will have the right (but not the obligation), at Novartis’s sole discretion, and
sole responsibility for all applicable Patents Costs, to Prosecute and Maintain in the Surface Territory such Other
Patent in the name of Surface (which right will include the right to file additional Patents claiming priority to such
Other Patent). Novartis will consult with Surface, including through the IP Committee, on its strategy for the
Prosecution and Maintenance of all such Other Patents. Novartis will furnish Surface, via electronic mail or such other
method as mutually agreed by the Parties, copies of substantive proposed filings and documents received from outside
counsel in the course of Prosecuting and Maintaining such Other Patents, or copies of documents filed with the
relevant patent offices or Governmental Authorities with respect to such Other Patents, and such other substantive
documents related to the Prosecution and Maintenance of such Other Patents, and as applicable in sufficient time prior
to filing such document or making any payment due thereunder to allow for review and comment by Surface and will
consider in good faith timely comments from Surface thereon. Novartis will furnish Surface, via electronic mail or
such other method as mutually agreed by the Parties, copies of documents filed with the relevant national patent
offices or other Governmental Authorities with respect to such Other Patents. Surface will use Commercially
Reasonable Efforts to make available to Novartis its authorized attorneys, agents or representatives, or such of its
employees as are reasonably necessary to assist Novartis in exercising its rights described under this Section 14.3.3.2.
Surface will sign, or will use Commercially Reasonable Efforts to have signed, all legal documents as are reasonably
necessary to Prosecute and Maintain such Other Patents.
14.3.4. Joint Collaboration IP and Prosecution Patents.
14.3.4.1. Subject to remainder of this Section 14.3.4, as between the Parties, Novartis will have the right (but not the
obligation), at Novartis’s sole discretion, and sole responsibility for all applicable Patents Costs, to Prosecute and
Maintain all Patents (a) within Joint Collaboration IP, in the names of both Novartis and Surface; and (b) all
Prosecution Patents in the name of Surface. Novartis will consult with Surface, including through the IP Committee,
on its strategy for the Prosecution and Maintenance of all such Patents within Joint Collaboration IP and Prosecution
Patents. Novartis will furnish Surface, via electronic mail or such other method as mutually agreed by the Parties,
copies of substantive proposed filings and documents received from outside counsel in the course of Prosecuting and
Maintaining such Patents within Joint Collaboration IP and Prosecution Patents, or copies of documents filed with the
relevant patent offices or other Governmental Authorities with respect to such Patents within Joint Collaboration IP
and Prosecution Patents, and such other substantive documents related to the Prosecution and Maintenance of such
Patents within Joint Collaboration IP and Prosecution Patents, and as applicable in sufficient time prior to filing such
document or making any payment due thereunder to allow for review and comment by Surface and will consider in
good faith timely comments from Surface thereon. Novartis will furnish Surface, via electronic mail or such other
method as mutually agreed by the Parties, copies of documents filed with the relevant national patent offices or other
Governmental Authorities with respect to such Patents within Joint Collaboration IP and Prosecution Patents.
14.3.4.2. In the event that Novartis elects not to Prosecute and Maintain (or continue to Prosecute and Maintain,
including filing a Patent claiming priority to a Patent prior to its issuance), any Patent within Joint Collaboration IP or
any Prosecution Patent anywhere in the world, Novartis will notify Surface at least [***] before any such Patent within
Joint Collaboration IP and Prosecution Patent would become abandoned, no longer available or otherwise forfeited,
Surface will have the right (but not the obligation), at Surface’s sole discretion, and sole responsibility for all
applicable Patents Costs, to Prosecute and Maintain such Patent worldwide (a) within Joint Collaboration IP in the
names of both Novartis and Surface and (b) within Prosecution Patent in the name of Surface only. Surface will
consult with Novartis, including through the IP Committee, on its strategy for the Prosecution and Maintenance of all
such Patents within Joint Collaboration IP and Prosecution Patents. Surface will furnish Novartis, via electronic mail
or such other method as mutually agreed by the Parties, copies of substantive proposed filings and documents received
from outside counsel in the course of Prosecuting and Maintaining such Patents within Joint Collaboration IP and
Prosecution Patents, or copies of documents filed with the relevant patent offices or other Governmental Authorities
with respect to such Patents within Joint Collaboration IP and Prosecution Patents, and such other substantive
documents related to the Prosecution and Maintenance of such Patents, and as applicable in sufficient time prior to
filing such document or making any payment due thereunder to allow for review and comment by Novartis and will
consider in good faith timely comments from Novartis thereon. Surface will furnish Novartis, via electronic mail or
such other method as mutually agreed by the Parties, copies of documents filed with the relevant national patent
offices or other Governmental Authorities with respect to such Patents within Joint Collaboration IP and Prosecution
Patents.
14.3.4.3. Each Party will use Commercially Reasonable Efforts to make available to the other its authorized attorneys,
agents or representatives, or such of its employees as are reasonably necessary to assist the other Party in exercising its
rights described under this Section 14.3.4. Each Party will sign, or will use Commercially Reasonable Efforts to have
signed, all legal documents as are reasonably necessary to Prosecute and Maintain Patents within Joint Collaboration
IP and Prosecution Patents.
14.3.5. Patent Miscellaneous. Each Party hereby agrees: (a) to use Commercially Reasonable Efforts to make its
employees, agents and consultants reasonably available to the other Party (or to the other Party’s authorized attorneys,
agents or representatives), to the extent reasonably necessary to enable such Party to undertake any Prosecution and
Maintenance described herein; and (b) to reasonably cooperate in any such Prosecution and Maintenance by the other
Party.
14.4. Third Party Infringement and Defense.
14.4.1. Notices. Each Party will promptly report in writing to the other Party of any Competitive Infringement of
which such Party (or any of its Affiliates or Sublicensees) becomes aware, and will provide the other Party with all
available evidence of such Competitive Infringement in such Party’s Control. Subject to the terms of this Section 14.4,
the JSC will discuss in good faith strategies for abating such Competitive Infringement of any Regional Licensed
Product within each of the Party’s respective Territory.
14.4.2. Rights to Enforce.
14.4.2.1. Competitive (Novartis) Infringement. As between the Parties, Novartis will have the exclusive right (but not
the obligation), at Novartis’s sole discretion, through counsel of its choosing which is reasonably acceptable to
Surface, to seek to abate any Competitive (Novartis) Infringement by enforcing any Patents within Surface Technology
exclusively (even as to Surface) licensed to Novartis hereunder or any Novartis Technology. If Novartis does not take
steps to abate such Competitive (Novartis) Infringement, within [***] after receipt of written notice of such
Competitive (Novartis) Infringement (or such shorter period of time as is required to comply with the provisions of
Section 14.4.2.3 or any other applicable Law in the United States or any other country in the Territory to not waive any
statutory rights). Novartis will provide Surface with notice of such decision. Novartis will pay all Patent Costs incurred
by Novartis for such enforcement.
14.4.2.2. Competitive (Surface) Infringement. As between the Parties, Surface will have the exclusive right (but not the
obligation), at Surface’s sole discretion, through counsel of its choosing which is reasonably acceptable to Novartis, to
seek to abate any Competitive (Surface) Infringement by enforcing any Patents within Novartis Technology
exclusively (even as to Novartis) licensed to Surface hereunder or any Surface Technology. If Surface does not take
steps to abate such Competitive (Surface) Infringement, within [***] after receipt of written notice of such
Competitive (Surface) Infringement (or such shorter period of time as is required to comply with the provisions of
Section 14.4.2.3 or any other applicable Law in the United States or any other country in the Territory to not waive any
statutory rights), Surface will provide Novartis will notice of such decision. Surface will pay all Patent Costs incurred
by such Surface for such enforcement.
14.4.2.3. Biosimilar Application. Notwithstanding Sections 14.4.2.1 or 14.4.2.2, if either Party (or any of their Related
Parties) receives a copy of a Biosimilar Application naming a Licensed Product as a reference product or otherwise
becomes aware that such a Biosimilar Application has been filed (such as in an instance described in Section 351(1)(9)
(C) of the PHSA), such Party will promptly notify the other Party. If either Party receives any equivalent or similar
certification or notice in the United States or any other jurisdiction, either Party will, promptly, notify and provide the
other Party copies of such communication. Regardless of the Party that is the “reference product sponsor” for purposes
of such Biosimilar Application:
(a) The Party with the enforcement rights under Sections 14.4.2.1 or 14.4.2.2 (the “Lead Party” for the remainder of
this Section 14.4.2.3) will designate pursuant to Section 351(l)(1)(B)(ii) of the PHSA the outside counsel and in-house
counsel who will receive confidential access to the Biosimilar Application. The Lead Party will pay all Patent Costs
incurred by such Party for such enforcement under this Section 14.4.2.3.
(b) The Lead Party will have the right, after consulting with the other Party, to list any Patents for which the
enforcement rights in Sections 14.4.2.1 and 14.4.2.2 are applicable, insofar as they meet the statutory requirements
pursuant to Section 351(l)(1)(3)(A), Section 351(l)(5)(b)(i)(II), or Section 351(l)(7) of the PHSA, to respond to any
communications with respect to such lists from the filer of the Biosimilar Application, and to negotiate with the filer of
the Biosimilar Application as to whether to utilize a different mechanism for information exchange other than that
specified in Section 351(l) of the PHSA.
(c) The Lead Party will have the right, after consulting with the other Party, to identify Patents for which the
enforcement rights in Sections 14.4.2.1 and 14.4.2.2 are applicable, or respond to relevant communications under any
equivalent or similar listing to those described in the preceding Section 14.4.2.3(b) in any other jurisdiction outside of
the United States. If required pursuant to applicable Law, upon the Lead Party’s request, the other Party will assist in
the preparation of such list and make such response after consulting with the Lead Party.
(d) The other Party will (1) within [***] after the Lead Party’s written request, provide to the Lead Party all
information, including a list of Patents Controlled by such other Party and for which the enforcement rights in Sections
14.4.2.1 and 14.4.2.2 are applicable, that is necessary or reasonably useful to enable the Lead Party to make any lists or
communications with respect to such Patents that are described in the foregoing Sections 14.4.2.3(b) or 14.4.2.3(c),
and (2) cooperate with the Lead Party’s reasonable requests in connection therewith to the extent required or not
prohibited by applicable Law. The Lead Party will consult with the other Party prior to identifying any Patents
controlled by such other Party as contemplated by this Section 14.4.2.3. The Lead Party will consider in good faith
advice and suggestions with respect thereto received from the other Party, and will notify the other Party of any such
lists or communications promptly after they are made.
(e) The Parties recognize that procedures other than those set forth above in this Section 14.4.2.3 may be applicable to
Biosimilar Applications that are not governed by the PHSA. As a result, in the event that the Parties acting in
good faith mutually determine that certain provisions of Law in the United States or in any other country in the
Territory are applicable to actions taken by the Parties with respect to Biosimilar Applications under this Section
14.4.2.3 in such country, the Parties will comply with any such applicable Law in such country (and any relevant and
reasonable procedures established by the) in exercising their rights and obligations with respect to Biosimilar
Applications under this Section 14.4.2.3.
14.4.3. Defense. As between the Parties, the Party controlling the Prosecution and Maintenance of any Patent under
Section 14.3 (i.e., initially, Novartis for Patents contained in Novartis Technology and Joint Collaboration IP and
Prosecution Patents and Surface for Other Patents ), will have the right (but not the obligation), at its sole discretion, to
defend against a declaratory judgment action or other action challenging any such Patent, other than with respect to (a)
any counter-claims in any enforcement action brought by the other Party pursuant to Section 14.4.2 or (b) any action
by a Third Party in response to an enforcement action brought by the other Party, which in both cases ((a) and (b)) will
be controlled by such other Party. If the Party controlling such Prosecution and Maintenance of Patents under Section
14.3 does not defend such Patent under this Section 14.4.3 within [***] (or such shorter period of time as is required to
comply with the provisions of Section 14.4.2.3 or any other applicable Law in the United States or any other country in
the Territory to not waive any statutory rights), or elects not to continue any such defense (in which case it will
promptly provide notice thereof to the other Party), then the other Party will have the right (but not the obligation), at
its sole discretion, to defend any such Patent.
14.4.4. Withdrawal, Cooperation and Participation. With respect to any infringement or defensive action identified
above in this Section 14.4 and subject to the terms of this Section:
14.4.4.1. If the controlling Party ceases to pursue or withdraws from such action, it will promptly notify the other Party
(in sufficient time to enable the other Party to meet any deadlines by which any action must be taken to preserve any
rights in such infringement or defensive action (including any such period of time as is required to comply with the
provisions of Section 14.4.2.3)) and, if permitted under Sections 14.4.3, such other Party may substitute itself for the
withdrawing Party and proceed under the terms and conditions of this Section 14.4.
14.4.4.2. The non-controlling Party will cooperate with the Party controlling any such action (as may be reasonably
requested by the controlling Party), including, at the controlling Party’s sole cost and expense, (1) providing access to
relevant documents and other evidence, (2) using reasonable efforts to make its and its Affiliates and licensees and
Sublicensees and all of their respective employees, subcontractors, consultants and agents available at reasonable
business hours and for reasonable periods of time, but only to the extent relevant to such action, and (3) if reasonably
necessary, by being joined as a party, subject for this clause (3) to the controlling Party agreeing to indemnify such
non-controlling Party for its involvement as a named party in such action and paying those Patent Costs incurred by
such non-controlling Party in connection with such joinder. The Party controlling any such action will keep the other
Party reasonably updated with respect to any such action, including providing copies of all materials documents
received or filed in connection with any such action.
14.4.4.3. Each Party will have the right to consult with the other Party regarding any such action controlled by such
other Party, in each case at such first Party’s sole cost and expense. If a Party elects to so be involved, the controlling
Party will provide the other Party and its counsel with an opportunity to consult with the controlling Party and its
counsel regarding the prosecution of such action (including reviewing the contents of any correspondence, legal papers
or other documents related thereto), and the controlling Party will take into account reasonable and timely requests of
the other Party regarding such enforcement or defense. Nothing in this Section 14.4.4.3 will limit the controlling
Party’s ability to prosecute any such action.
14.4.5. Settlement. With respect to any infringement or defensive action identified above in this Section 14.4, the Party
controlling such action will have the right to settle or otherwise dispose of such action on such terms as such Party will
determine in its sole discretion, including by granting a license or sublicense to a Third Party under the rights granted
to such Party in Section 9; provided that, notwithstanding the foregoing, no such settlement or other disposition will
(a) impose any monetary restriction or obligation on or admit fault of the other Party and (b) adversely affect the other
Party’s rights under this Agreement to any such Patent then being enforced or defended, in each case ((a) and (b)
without the prior written consent of the other Party, not to be unreasonably withheld, delayed, or conditioned.)
14.4.6. Damages. [***]
14.5. Patent Extensions. For clarity, the Party controlling the Prosecution and Maintenance of any Patent under
Section 14.3 (i.e., initially, Novartis for Patents contained in Novartis Technology and Joint Collaboration IP and
Prosecution Patents and Surface for Other Patents), will have the right to elect and file for patent term restoration or
extension, supplemental protection certificate or any of their equivalents with respect to such Patents with respect to
any Licensed Product in their respective Territories; provided that with respect to any Other Patents (whether so
controlled by Novartis or Surface) in the Novartis Territory for any Licensed Product, Novartis will have the right to
make any such election or filing in any country or region, other than the United States or any other country or region
where such election or filing would impair the ability to obtain any other restoration, extension, certificate or
equivalent for the same Other Patent in such country or region. The Parties will cooperate and shall take the other
Party’s reasonable input into account in determining whether to obtain such patent term restoration, extension,
supplemental protection certificate or equivalent thereof. Upon the request by a Party, such other Party will reasonably
cooperate in the implementation of such requesting Party’s decisions made in a manner with this Section 14.5.
14.6. Patent Listings. With respect to any filings made to Regulatory Authorities with respect to any Patents within
the Novartis Technology or the Surface Technology for any Licensed Product within such Party’s Territory, including
as required or allowed in connection with in the United States, the FDA’s Orange or Purple Book, if applicable, or
outside the United States, other international equivalents, but subject to Section 14.4.2.3, (a) the Parties will list any
such Patents as may be required by applicable Laws, and (b) otherwise (i) Novartis will have the sole right to make
any such decision whether to list for Patents within the Collaboration IP or Joint Collaboration IP for the Novartis
Territory and for any Licensed Product (other than any Regional Licensed Product in the Surface Territory); (ii)
Surface will have the sole right to make any such decision whether to list for Patents within the Collaboration IP or
Joint Collaboration IP for the Surface Territory for any Regional Licensed Product; and (iii) each Party will have the
sole right to make any such decision whether to list for Patents otherwise within the Novartis Technology for Novartis
or the Surface Technology for Surface with respect to any Licensed Product. Upon the request by a Party, such other
Party will reasonably cooperate in the implementation of such requesting Party’s decisions made in a manner with this
Section 14.6.
14.7. Third Party Rights. Notwithstanding the foregoing provisions of this Section 14, each Party’s rights and
obligations with respect to any Patent under this Section 14 will be subject to the Third Party rights and obligations
(including under any applicable In- License).
14.8. Common Interest. All information exchanged between the Parties regarding the Prosecution and Maintenance,
and enforcement and defense, of the Patents under this Section 14 will be deemed Confidential Information of the
disclosing Party. In addition, the Parties acknowledge and agree that, with regard to such Prosecution and
Maintenance, and enforcement and defense, the interests of the Parties as collaborators and licensor and licensee are to
obtain the strongest patent protection possible, and as such, are aligned and are legal in nature. The Parties agree and
acknowledge that they have not waived, and nothing in this Agreement constitutes a waiver of, any legal privilege
concerning the Patents under this Section 14, including privilege under the common interest doctrine and similar or
related doctrines. Notwithstanding anything to the contrary contained herein, to the extent a Party has a good faith
believe that any information required to be disclosed by such Party to the other Party under this Section 14 is protected
by attorney-client privilege or any other applicable legal privilege or immunity, such Party shall not be required to
disclose such information and the Parties shall in good faith cooperate to agree upon a procedure (including entering
into a specific common interest agreement, disclosing such information on a “for counsel eyes only” basis or similar
procedure) under which such information may be disclosed without waiving or breaching such privilege or immunity.
14.9. Trademarks.
14.9.1. T1 Licensed Products and Global Licensed Products.
14.9.1.1. As between the Parties, Novartis has the sole and exclusive right to select and develop one or more Product
Global Trademark(s) for use throughout the Novartis Territory for all T1 Licensed Products and Global Licensed
Products. Such Product Global Trademark(s) may not include Trademarks owned or controlled by Surface. Novartis
will own all rights to Product Global Trademarks and all goodwill associated therewith, throughout the Novartis
Territory. Novartis will also own rights to any Internet domain names incorporating the applicable Product Global
Trademarks or any variation or part of such Product Global Trademarks used as its URL address or any part of such
address.
14.9.1.2. In the event that Surface becomes aware of any infringement of any Product Global Trademark by a Third
Party, Surface will promptly notify Novartis and the Parties will reasonably consult with each other and jointly
determine the best way to prevent such infringement, including by the institution of legal proceedings against such
Third Party; provided further that Novartis retains the sole right (but not obligation) to seek to abate any such
infringement.
14.9.2. Regional Licensed Products.
14.9.2.1. Each Party has the right to use any Trademark it owns or controls for Regional Licensed Products in its
Territory at its sole discretion, and each Party and its Affiliates will retain all right, title and interest in and to its and
their respective corporate names and logos.
14.9.2.2. Pursuant to Section 6.2.5, each Party will develop and propose, and the JSC will review and comment on, one
or more RLP Trademark(s) for use throughout the Novartis Territory and Surface Territory, as applicable. Such RLP
Trademark(s) considered by the JSC may include, in each Party’s sole discretion, the RLP Trademark(s) developed by
the other Party with respect to the Commercialization of Regional Licensed Products in such Party’s Territory, but may
not include other Trademarks owned or controlled by the other Party. Any RLP Trademark(s) that are developed and
used by Novartis to promote and sell Regional Licensed Products in the Novartis Territory are hereinafter referred to
as the “Novartis RLP Trademarks”. Any RLP Trademark(s) that are developed and used by Surface to promote and
sell Regional Licensed Products in the Surface Territory are hereinafter referred to as the “Surface RLP
Trademarks”. As between the Parties, Surface will own all rights to Surface RLP Trademarks and all goodwill
associated therewith, throughout the Surface Territory and, if Novartis chooses to use such Surface RLP Trademarks
for the Regional Licensed Products in the Novartis Territory, the Novartis Territory. As between the Parties, Novartis
will own all rights to Novartis RLP Trademarks and all goodwill associated therewith, throughout the Novartis
Territory and, if Surface chooses to use such Novartis RLP Trademarks for the Regional Licensed Products in the
Surface Territory, the Surface Territory. Surface will also own rights to any Internet domain names incorporating the
applicable Surface RLP Trademarks or any variation or part of such Surface RLP Trademarks used as its URL address
or any part of such address; and Novartis will also own rights to any Internet domain names incorporating the
applicable Novartis RLP Trademarks or any variation or part of such Novartis RLP Trademarks used as its URL
address or any part of such address.
14.9.2.3. If a Party determines to use the other Party’s RLP Trademarks to promote and sell any Regional Licensed
Product in its Territory, then Surface and Novartis will enter into a separate trademark license agreement containing
commercially reasonable and customary terms pursuant to which the Party owning such RLP Trademark will grant the
other Party an exclusive, royalty-free license to use the applicable RLP Trademark(s) to Commercialize Regional
Licensed Products in the other Party’s Territory.
14.9.2.4. In the event either Party becomes aware of any infringement of any RLP Trademark by a Third Party, such
Party will promptly notify the other Party and the Parties will consult with each other and jointly determine the best
way to prevent such infringement, including by the institution of legal proceedings against such Third Party; provided
further that the Party owning such RLP Trademark retains the sole right (but not obligation) to seek to abate any such
infringement.
14.9.3. No Other Trademark Rights. For the avoidance of doubt, neither Party will have any right to use the other
Party’s or the other Party’s Affiliates’ corporate names or logos in connection with Research, Development,
Manufacturing and Commercialization of Regional Licensed Products.
15. TERM AND TERMINATION
15.1. Term. This Agreement will be effective as of the Effective Date and, unless terminated earlier, this Agreement
will continue until the date on which neither Party is Researching, Developing, Manufacturing or Commercializing any
Antibody Candidates or Licensed Products under this Agreement (“Term”).
15.2. Termination for Novartis at Will. Novartis may terminate this Agreement for any reason or no reason on an
Option Target-by Option Target or Licensed Target-by-Licensed Target basis at any time upon [***] prior written
notice. Notwithstanding the foregoing, Novartis may not terminate this Agreement with respect to the T1 Licensed
Target with effect prior to the earlier of (a) [***] following the Effective Date or (b) [***] following the first IND
Filing with respect to a T1 Licensed Product; provided that this sentence shall not apply in the event of a Change of
Control of Novartis or a Third Party Acquisition by Novartis or its Affiliates where the applicable Third Party or its
Affiliates have a Competing Program (and in the case of a Third Party Acquisition, in Novartis’ reasonable judgment,
the Competing Program constitutes [***] or less of the value of the Third Party or business acquired in such Third
Party Acquisition).
15.3. Termination for Material Breach.
15.3.1. Material Breach.
15.3.1.1. Subject to Section 15.3.2, Surface will have the right to terminate this Agreement, on an Option Target-by-
Option Target basis or Licensed Target-by-Licensed Target basis, upon delivery of written notice to Novartis in the
event of any material breach by Novartis of any terms and conditions of this Agreement in a manner that
fundamentally frustrates the transactions contemplated by this Agreement with respect to such Target, provided that
such termination will not be effective if such breach has been cured within [***] after written notice thereof is given
by Surface to Novartis specifying the nature of the alleged breach (or, if such default cannot be cured within such
[***] period, within [***] after such notice if Novartis commences actions to cure such default within such [***]
period and thereafter diligently continues such actions, but fails to cure the default by the end of such [***]; provided,
however, that to the extent such material breach involves the failure to make a payment when due, such breach must be
cured within [***] after written notice thereof is given by Surface to Novartis.
15.3.1.2. Subject to Section 15.3.2, Novartis will have the right to terminate this Agreement, on an Option Target-by-
Option Target basis or Licensed Target-by-Licensed Target basis, upon delivery of written notice to Surface in the
event of any material breach by Surface of any terms and conditions of this Agreement in a manner that fundamentally
frustrates the transactions contemplated by this Agreement with respect to such Target, provided that such termination
will not be effective if such breach has been cured within [***] after written notice thereof is given by Novartis to
Surface specifying the nature of the alleged breach (or, if such default cannot be cured within such [***] period, within
[***] after such notice if Surface commences actions to cure such default within such [***] period and thereafter
diligently continues such actions, but fails to cure the default by the end of such [***]; provided, however, that to the
extent such material breach involves the failure to make a payment when due, such breach must be cured within [***]
after written notice thereof is given by Novartis to Surface.
15.3.2. Disputed Breach. If the alleged breaching Party disputes in good faith the existence or materiality of a breach
specified in a notice provided by the other Party in accordance with Section 15.3.1 and such alleged breaching Party
provides the other Party notice of such dispute within such [***] or [***] period, as applicable, then the non-breaching
Party will not have the right to terminate this Agreement under Section 15.3.1 unless and until the dispute resolution
process set forth in Section 16.3 has be completed (including the tolling and cure periods set forth therein).
15.4. Termination for Insolvency. If, at any time during the Term (a) a case is commenced by or against either Party
under Title 11, United States Code, as amended, or analogous provisions of applicable Law outside the United States
(the “Bankruptcy Code”) and, in the event of an involuntary case under the Bankruptcy Code, such case is not
dismissed within [***] after the commencement thereof, (b) either Party files for or is subject to the institution of
bankruptcy, liquidation or receivership proceedings (other than a case under the Bankruptcy Code), (c) either Party
assigns all or a substantial portion of its assets for the benefit of creditors, (d) a receiver or custodian is appointed for
either Party’s business, or (e) a substantial portion of either Party’s business is subject to attachment or similar process;
then, in any such case ((a), (b), (c), (d) or (e)), the other Party may terminate this Agreement upon written notice to the
extent permitted under applicable Law.
15.5. Effect of Termination by Surface for Cause or by Novartis for Convenience. Upon termination of this
Agreement with respect to any Licensed Target or any Option Target by Novartis pursuant to Section 15.2 or by
Surface pursuant to Section 15.3.1.1 or 15.4:
15.5.1. With respect to such terminated Licensed Target, Novartis will pay for (a) for a period of [***] after the
effective date of termination for the applicable Licensed Target, its portion of Development Costs for those Antibody
Candidates or Licensed Products against such Licensed Target in the budget for the applicable Development Plan, and
(b) its portion of reasonable costs and expenses (calculated in the same manner as
Development Costs) to wind down those then on-going associated Clinical Studies that Surface identifies, by written
notice to Novartis provided no later than [***] after the effective date of termination, will not be continued.
15.5.2. All licenses granted under Section 9 and other rights and obligations under this Agreement with respect to such
Licensed Target will terminate.
15.5.3. [***]
15.5.4. Novartis will as promptly as practicable (a) assign to Surface or Surface’s designee possession and ownership
of all material governmental or regulatory filings and approvals (including all material Regulatory Approvals,
Regulatory Materials, Pricing Approvals) and copies of material correspondence and conversation logs [***] (to the
extent assignable under applicable Laws), and (b) provide to Surface or Surface’s designee copies of all material data,
reports, records and materials, and other material sales and marketing related information in Novartis’s possession and
Control [***] In addition, Novartis will appoint Surface as Novartis’s or Novartis’s Affiliates’ (and to the extent
permitted by the applicable sublicense, its Sublicensees’) agent for [***] involving Regulatory Authorities in the
Novartis Territory until all Regulatory Approvals, Regulatory Materials, Pricing Approvals and other governmental or
regulatory filings required to be assigned to Surface hereunder have, in fact, been assigned to Surface or its designee
but in no event longer than the [***] anniversary of the effective date of termination. In the event of failure to obtain
assignment of any of the items required to be assigned under this Section 15.5.4, Novartis hereby consents and grants
to Surface the right to access and reference (without any further action required on the part of Novartis, whose
authorization to file this consent with any Regulatory Authority is hereby granted) [***]
15.5.5. If the effective date of termination is after [***] then, to the extent permitted by applicable Laws, Novartis or
its Affiliates’ (or to the extent permitted by the applicable sublicense, its Sublicensees’) will appoint Surface as its
exclusive distributor [***] and grant Surface the right to appoint sub-distributors, until such time as all Regulatory
Approvals in the Novartis Territory have been transferred to Surface or its designee but in no event longer than the
[***] anniversary of the effective date of termination.
15.5.6. With respect to [***] if Novartis or its Affiliates (or to the extent permitted by the applicable sublicense, its
Sublicensees) are Manufacturing [***]
15.5.7. Manufacturing of Combinations.
15.5.7.1. With respect to the Novartis Component of [***] that is a Combination:
(a) if Novartis or its Affiliates (or to the extent permitted by the applicable sublicense, its Sublicensees’) are selling
such Novartis Component [***] following the effective date of termination).
(b) if Novartis or its Affiliates (or to the extent permitted by the applicable sublicense, its Sublicensees’) are not selling
such Novartis Component [***] following the effective date of termination).
(c) if Novartis or its Affiliates (or to the extent permitted by the applicable sublicense, its Sublicensees’) are
Manufacturing and supplying such Novartis Component [***] to Surface [***] following the effective date of
termination.
15.5.7.2. With respect to the Surface Component of [***] that is a Combination, if Novartis or its Affiliates’ (or to the
extent permitted by the applicable sublicense, its Sublicensees’) are Manufacturing and supplying the Surface
Component [***] following the effective date of termination.
15.5.7.3. For clarity, in no event will Novartis or its Related Parties be obligated to (or obligated to use Commercially
Reasonable Efforts to) Develop or Commercialize any Novartis Component [***] that is a Combination Product after
the effective date of termination anywhere in the world other than the U.S.
15.5.8. If Surface so requests, and to the extent permitted under Novartis’s obligations to Third Parties on the effective
date of termination, Novartis will [***] any Third Party [***]
15.5.9. Novartis will promptly transfer and assign to Surface all of Novartis’s and its Affiliates’ rights, title and
interests in and to the Novartis Trademark(s) solely used to identify the Reversion Products (but not any house marks,
or logos or any trademark of Novartis or its Affiliates, containing the word “Novartis” or any such Affiliate) owned by
Novartis and used for the Reversion Products in the Field.
15.5.10. Novartis will transfer to Surface any finished goods inventory of the Reversion Products Controlled by
Novartis or its Affiliates as of the termination date at [***]
15.5.11. Novartis will execute all documents and take all such further actions as may be reasonably requested by
Surface in order to give effect to the foregoing clauses.
15.6. Effect of Termination by Novartis for Cause. Upon termination of this Agreement with respect to a Licensed
Target or Option Target by Novartis pursuant to Sections 15.3.1.2 or 15.4:
15.6.1. All licenses granted under Section 9 by Novartis to Surface with respect to such Licensed Target will terminate;
15.6.2. The licenses and other rights granted by Surface to Novartis under the Surface Technology with respect to such
Licensed Target will remain in effect in accordance with their respective terms; provided, however, that [***] and
15.6.3. Surface will be deemed to have exercised its right pursuant to Section 2.8 to discontinue its participation in all
Committees with respect to such Target, and Novartis’ obligations to provide updates to Surface on the Research,
Development, Manufacture or Commercialization of any affected Licensed Antibody Candidates or Licensed Product
with respect to such Target shall be limited to that information set forth on Exhibit N.
15.6.4. Except as set forth in this Section 15.6. the rights and obligations of the Parties hereunder shall terminate with
respect to such Licensed Target as of the effective date of such termination.
15.6.5. Surface will execute all documents and take all such further actions as may be reasonably requested by
Novartis in order to give effect to the foregoing clauses.
15.6.5.1. Effect of Expiration or Termination; Survival. In addition to the termination consequences set forth in
Sections 15.5 and 15.6, the following provisions will survive expiration or termination of this Agreement for any
reason: all of Sections 1, 10 (but only with respect to any payments accrued thereunder prior to any such termination or
expiration), 11, 13, 15 and 16, and Sections 4.2.7, 9.4, 9.6, 9.7, 9.8, 10.12.3, 10.12.5, 10.13, 12.3, 14.1, 14.2 and 14.8.
Expiration or termination of this Agreement for any reason will not relieve the Parties of any liability or obligation
which accrued hereunder prior to the effective date of such termination or expiration, nor preclude either Party from
pursuing all rights and remedies it may have hereunder or at law or in equity, with respect to any breach of this
Agreement. For the avoidance of doubt, termination of this Agreement will not affect any SDEA, which will continue
to survive so long as any Licensed Products thereunder are being Commercialized.
16. MISCELLANEOUS
16.1. Assignment. Except as provided in this Section 16.1, this Agreement may not be assigned or otherwise
transferred, nor may any right or obligation hereunder be assigned or transferred, by either Party without the written
consent of the other Party. Notwithstanding the foregoing, either Party may, without the other Party’s written consent,
assign this Agreement and its rights and obligations hereunder in whole or in part to an Affiliate or to a party that
acquires, by or otherwise in connection with, merger, sale of assets or otherwise, all or substantially all of the business
of the assigning Party to which the subject matter of this Agreement relates. The assigning Party will remain
responsible for the performance by its assignee of any obligation hereunder so assigned. An assignment to an Affiliate
will terminate, and all rights so assigned will revert to the assigning Party, if and when such Affiliate ceases to be an
Affiliate of the assigning Party. Any purported assignment in violation of this Section 16.1 will be void.
16.2. Governing Law. The Agreement will be construed and the respective rights of the Parties determined in
accordance with the substantive Laws of the State of New York, notwithstanding any provisions of New York Law or
any other Law governing conflicts of laws to the contrary.
16.3. Arbitration.
16.3.1. Disputes. Except as otherwise expressly set forth in this Agreement, including Section 2.6.3, disputes of any
nature arising under, relating to, or in connection with this Agreement (“Disputes”) will be resolved pursuant to this
Section 16.3.
16.3.2. Dispute Escalation. In the event of a Dispute between the Parties, the Parties will first attempt to resolve such
Dispute by negotiation and consultation between themselves or at the JSC. In the event that such Dispute is not
resolved on an informal basis within [***] from receipt of the written notice of a Dispute, any Party may, by written
notice to the other, have such Dispute referred to the Executive Officers (or their designees, which designee is required
to have decision-making authority on behalf of such Party), who will attempt to resolve such Dispute by negotiation
and consultation for a [***] period following receipt of such written notice.
16.3.3. Full Arbitration. Except as otherwise expressly set forth in this Agreement, in the event the Parties have not
resolved such Dispute within [***] of receipt of the written notice referring such Dispute to the Executive Officers,
either Party may at any time after such [***] period submit such Dispute to be finally settled by arbitration
administered in accordance with the procedural rules of the American Arbitration Association (the “AAA”) in effect at
the time of submission, as modified by this Section 16.3. The arbitration will be governed by the Laws of the State of
New York. The arbitration will be heard and determined by [***] arbitrators who are retired judges or attorneys with at
least [***] of relevant experience in the pharmaceutical and biotechnology industry, each of whom will be impartial
and independent. Each Party will appoint [***] and the [***] arbitrator will be selected by the [***] Party-appointed
arbitrators, or, failing agreement within [***] following appointment of the second arbitrator, by the AAA. Such
arbitration will take place in New York, New York. The arbitration award so given will, absent manifest error, be a
final and binding determination of the Dispute, will be fully enforceable in any court of competent jurisdiction, and
will not include any damages expressly prohibited by Section 13.5. Fees, costs and expenses of arbitration are to be
divided by the Parties in the following manner: Novartis [***] it chooses, Surface [***] it chooses, and the Parties
[***] arbitrator. Except in a proceeding to enforce the results of the arbitration or as otherwise required by Law, neither
Party nor any arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior
written consent of both Parties.
16.3.4. Expedited Arbitration.
16.3.4.1. If a Party exercises its rights under this Agreement to refer a dispute to expedited arbitration (an “Expedited
Dispute”), then the Parties will follow the expedited dispute resolution process in this Section 16.3.4 (and not the
dispute resolution process in Section 16.3.3 of this Agreement) (“Expedited Arbitration”). The Parties agree and
acknowledge that any good faith dispute under Expedited Arbitration will not be deemed to be a material breach of this
Agreement.
16.3.4.2. The Expedited Dispute will be submitted to fast-track, binding arbitration in accordance with the following:
(a) Arbitration will be conducted in New York, New York under the rules of the AAA for the resolution of commercial
disputes in the most expedited manner permitted by such rules. The Parties will appoint a single arbitrator to be - 166 -
selected by mutual agreement. If the Parties are unable to agree on an arbitrator, the Parties will request that the AAA
select the arbitrator. The arbitrator will be a professional in business or licensing experienced [***] The cost of the
arbitration will be borne equally by the Parties. Except in a proceeding to enforce the results of the arbitration or as
otherwise required by applicable Laws, neither Novartis nor Surface nor any arbitrator may disclose the existence,
content or results of any arbitration hereunder without the prior written agreement of Novartis and Surface.
(b) Within [***] after such matter is referred to arbitration, each Party will provide the arbitrator with a proposal and
written memorandum in support of its position regarding the Expedited Dispute, as well as any documentary evidence
it wishes to provide in support thereof (each a “Brief”) and the arbitrator will provide each Party’s Brief to the other
Party after it receives it from both Parties.
(c) Within [***] after a Party submits its Brief, the other Party will have the right to respond thereto. The response and
any material in support thereof will be provided to the arbitrator and the other Party.
(d) The arbitrator will have the right to meet with the Parties as necessary to inform the arbitrator’s determination and
to perform independent research and analysis. Within [***] of the receipt by the arbitrator of both Parties’ responses
(or expiration of the [***] period if any Party fails to submit a response), the arbitrator will deliver his/her decision
regarding the Expedited Dispute in writing; provided that the arbitrator will select one of the resolutions proposed by
the Parties.
16.3.5. Injunctive Relief. Notwithstanding the dispute resolution procedures set forth in this Section 16.3, in the event
of an actual or threatened breach of this Agreement, the aggrieved Party may seek provisional equitable relief
(including restraining orders, specific performance or other injunctive relief), without first submitting to any dispute
resolution procedures hereunder.
16.3.6. [***]
16.4. Entire Agreement; Amendments. This Agreement, together with the Equity Agreements, Supply Agreements
and SDEA, contains the entire understanding of the Parties with respect to the subject matter hereof, and supersedes all
previous arrangements with respect to the subject matter hereof, whether written or oral, including, effective as of the
Effective Date, that Confidentiality Agreement between Surface and Novartis Institutes for BioMedical Research, Inc.,
dated as of [***] (provided that all information disclosed or exchanged under such agreement will be treated as
Confidential Information hereunder). This Agreement may be amended, or any term hereof modified, only by a written
instrument duly-executed by authorized representatives of both Parties hereto. The Exhibits and Schedules attached
hereto may be amended, or any term hereof modified, only by a written instrument duly-executed by authorized
representatives of both Parties hereto.
16.5. Severability. If any provision hereof should be held invalid, illegal or unenforceable in any respect in any
jurisdiction, the Parties hereto will substitute, by mutual consent, valid provisions for such invalid, illegal or
unenforceable provisions, which valid provisions in their economic effect are sufficiently similar to the invalid, illegal
or unenforceable provisions that it can be reasonably assumed that the Parties would have entered into this Agreement
with such valid provisions. In case such valid provisions cannot be agreed upon, the invalid, illegal or unenforceable of
one or several provisions of this Agreement will not affect the validity of this Agreement as a whole, unless the
invalid, illegal or unenforceable provisions are of such essential importance to this Agreement that it is to be
reasonably assumed that the Parties would not have entered into this Agreement without the invalid, illegal or
unenforceable provisions.
16.6. Headings. The captions to the Sections hereof are not a part of this Agreement, but are merely for convenience
to assist in locating and reading the several Sections hereof.
16.7. Waiver of Rule of Construction. Each Party has had the opportunity to consult with counsel in connection with
the review, drafting and negotiation of this Agreement. Accordingly, the rule of construction that any ambiguity in this
Agreement will be construed against the drafting Party will not apply.
16.8. Interpretation. Except where the context expressly requires otherwise, (a) the use of any gender herein will be
deemed to encompass references to either or both genders, and the use of the singular will be deemed to include the
plural (and vice versa); (b) the words “include”, “includes” and “including” will be deemed to be followed by the
phrase “without limitation” and will not be interpreted to limit the provision to which it relates; (c) the word “shall”
will be construed to have the same meaning and effect as the word “will”; (d) any definition of or reference to any
agreement, instrument or other document herein will be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein); (e) any reference herein to any Person will be construed
to include the Person’s successors and assigns; (f) the words “herein”, “hereof” and “hereunder”, and words of similar
import, will be construed to refer to this Agreement in each of their entirety, as the context requires, and not to any
particular provision hereof; (g) all references herein to Sections, Exhibits or Schedules will be construed to refer to
Sections, Exhibits or Schedules of this Agreement, and references to this Agreement include all Exhibits and
Schedules hereto; (h) the word “notice” means notice in writing (whether or not specifically stated) and will include
notices, consents, approvals and other written communications contemplated under this Agreement; (i) provisions that
require that a Party, the Parties or any committee hereunder “agree,” “consent” or “approve” or the like will require
that such agreement, consent or approval be specific and in writing, whether by written agreement, letter, approved
minutes or otherwise (but excluding e-mail and instant messaging); (j) references to any specific law, rule or
regulation, or article, section or other division thereof, will be deemed to include the then-current amendments thereto
or any replacement or successor law, rule or regulation thereof; and (k) the term “or” will be interpreted in the
inclusive sense commonly associated with the term “and/or”.
16.9. No Implied Waivers; Rights Cumulative. No failure on the part of Surface or Novartis to exercise, and no
delay in exercising, any right, power, remedy or privilege under this Agreement, or provided by statute or at Law or in
equity or otherwise, will impair, prejudice or constitute a waiver of any such right, power, remedy or privilege or be
construed as a waiver of any breach of this Agreement or as an acquiescence therein, nor will any single or partial
exercise of any such right, power, remedy or privilege preclude any other or further exercise thereof or the exercise of
any other right, power, remedy or privilege.
16.10. Notices. All notices which are required or permitted hereunder will be in writing and sufficient if delivered
personally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight
courier), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to Surface, to:
With a copy to:
If to Novartis, to:
With a copy to:
Surface Oncology, Inc.
215 First Street, Suite 400-S
Cambridge, Massachusetts 02142
Attention: Chief Executive Officer
Facsimile No.: (617) 945-9574
Goodwin Procter LLP
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: Kingsley L. Taft, Esq.
Facsimile No.: (617) 523-1231
Novartis Institutes for BioMedical Research, Inc.
250 Massachusetts Avenue
Cambridge, MA 02139
Attention: General Counsel
Facsimile No.: (617) 871-5786
Hogan Lovells US LLP
875 Third Avenue
New York, NY 10022
Attention: Adam H. Golden, Esq.
Facsimile No.: (212) 918-3100
or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in
accordance herewith. Any such notice will be deemed to have been given: (a) when delivered if personally delivered
on a Business Day (or if delivered or sent on a non-Business Day, then on the next Business Day); (b) on the Business
Day of receipt if sent by overnight courier or facsimile; or (c) on the Business Day of receipt if sent by mail.
16.11. Compliance with Export Regulations. Neither Party will export any technology licensed to it by the other
Party under this Agreement except in compliance with U.S. export Laws and regulations.
16.12. Force Majeure. Neither Party will be held liable to the other Party nor be deemed to have defaulted under or
breached this Agreement for failure or delay in performing any obligation under this Agreement to the extent that such
failure or delay is caused by or results from causes beyond the reasonable control of the affected Party, potentially
including embargoes, war, acts of war (whether war be declared or not), insurrections, riots, civil commotions, strikes,
lockouts or other labor disturbances, fire, earthquakes, floods, or other acts of God. The affected Party will notify the
other Party of such force majeure circumstances as soon as reasonably practical, and will promptly undertake all
reasonable efforts necessary to cure such force majeure circumstances and resume performance of its obligations
hereunder.
16.13. Independent Parties. It is expressly agreed that Surface and Novartis will be independent contractors and that
the relationship between Surface and Novartis will not constitute a partnership, joint venture or agency. Surface will
not have the authority to make any statements, representations or commitments of any kind, or to take any action,
which will be binding on Novartis, without the prior written consent of Novartis, and Novartis will not have the
authority to make any statements, representations or commitments of any kind, or to take any action, which will be
binding on Surface, without the prior written consent of Surface.
16.14. Counterparts. The Agreement may be executed in two or more counterparts, including by facsimile or PDF
signature pages, each of which will be deemed an original, but all of which together will constitute one and the same
instrument.
16.15. Performance by Affiliates. Each Party acknowledges and accepts that the other Party may exercise its rights
and perform its obligations (including granting or continuing licenses and other rights) under this Agreement either
directly or through one or more of its Affiliates. A Party’s Affiliates will have the benefit of all rights (including all
licenses and other rights) of such Party under this Agreement, but not be subject to such Party’s obligation, unless
expressly provided herein, or in the case of a permitted assignment, in accordance with Section 16.1. Accordingly, in
this Agreement “Novartis” will be interpreted to mean “Novartis or its Affiliates” and “Surface” will be interpreted to
mean “Surface or its Affiliates” where necessary to give each Party’s Affiliates the benefit of the rights provided to
such Party in this Agreement and the ability to perform its obligations (including granting or continuing licenses and
other rights) under this Agreement; provided, however, that in any event each Party will remain responsible for the acts
and omissions, including financial liabilities, of its Affiliates.
16.16. Binding Effect; No Third Party Beneficiaries. As of the Effective Date, this Agreement will be binding upon
and inure to the benefit of the Parties and their respective permitted successors and permitted assigns. Except as
expressly set forth in this Agreement, no Person other than the Parties and their respective Affiliates and permitted
assignees hereunder will be deemed an intended beneficiary hereunder or have any right to enforce any obligation of
this Agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.
NOVARTIS INSTITUTES FOR
BIOMEDICAL RESEARCH, INC.
SURFACE ONCOLOGY, INC.
/s/ H. MARTIN SEIDEL
BY:
NAME: H. MARTIN SEIDEL
TITLE: GLOBAL HEAD, STRATEGIC ALLIANCES
/s/ Detlev Biniszkiewicz
BY:
NAME: Detlev Biniszkiewicz
TITLE: President and CEO
[***]
Exhibit A-1
Determination of Component Value
EXHIBIT A-2
Manufacturing Costs for Combinations for Regional Licensed Products in the Surface Territory
[***]
EXHIBIT B
“Manufacturing Costs” means a [***]
Manufacturing Costs
EXHIBIT C
Form of Option Exercise Notice
[Novartis Institutes for Biomedical Research, Inc.]
[250 Massachusetts Ave.]
[Cambridge, MA 02139]
[ , 20 ]
Surface Oncology, Inc.
215 First Street, Suite 400-S
Cambridge, MA 02142
Attn: Chief Executive Officer
Dear Sir or Madam:
In accordance with Section 4.2.6 of that certain Collaboration Agreement by and between Surface Oncology, Inc.
(“Surface”) and Novartis Institutes for Biomedical Research, Inc. (“Novartis”) executed as of January 9, 2016 (the
“Collaboration Agreement”), Novartis hereby provides written notice exercising the Option set forth in Exhibit A
attached hereto, for which Novartis previously provided an Option Purchase Notice, pursuant to the terms of the
Collaboration Agreement. Capitalized terms used but not defined herein will have the meanings assigned to them in
the Collaboration Agreement.
Very truly yours,
[NOVARTIS INSTITUTES FOR
BIOMEDICAL RESEARCH, INC.]
By:
Name:
Title:
cc: Goodwin Proctor LLP
Exchange Place
55 State Street
Boston, MA 02109
Attn: Kingsley L. Taft, Esq.
Confidential
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
Exhibit A
1. Option: .
2. Novartis has determined that:
☐ a filing or notification under applicable Antitrust Laws is not necessary.
☐ a filing or notification must be made under applicable Antitrust Laws.
Summary of any such filing(s) or notification(s):
EXHIBIT D
Form of Option Purchase Notice
[Novartis Institutes for Biomedical Research, Inc.]
[250 Massachusetts Ave.]
[Cambridge, MA 02139]
[ , 20 ]
Surface Oncology, Inc.
215 First Street, Suite 400-S
Cambridge, MA 02142
Attn: Chief Executive Officer
Dear Sir or Madam:
In accordance with Section 4.1.1 of that certain Collaboration Agreement by and between Surface Oncology, Inc.
(“Surface”) and Novartis Institutes for Biomedical Research, Inc. (“Novartis”) executed as of January 9, 2016 (the
“Collaboration Agreement”), Novartis hereby provides written notice to purchase the Option set forth in Exhibit A
attached hereto, pursuant to the terms of the Collaboration Agreement. Capitalized terms used but not defined herein
will have the meanings assigned to them in the Collaboration Agreement.
Very truly yours,
[NOVARTIS INSTITUTES FOR
BIOMEDICAL RESEARCH, INC.]
By:
Name:
Title:
cc: Goodwin Proctor LLP
Exchange Place
55 State Street
Boston, MA 02109
Attn: Kingsley L. Taft, Esq.
1. Option: .
2.
In accordance with Section 10.3, Novartis will pay to Surface an option exercise right purchase fee of:
☐ Five Million Dollars ($5,000,000)
☐ [***]
Exhibit A
EXHIBIT E
Initial JSC Representatives
For Novartis:
[***]
For Surface:
[***]
EXHIBIT F
T1 Research Plan
[***]
[***]
EXHIBIT G
Surface T1 Target Third Party Agreements (§3.1.7, 5.1.7)
EXHIBIT H-1
CD47 Research Plan
EXHIBIT H-2
IL-27 Research Plan
[***]
[***]
EXHIBIT H-3
[***]
[***]
EXHIBIT H-4
[***]
EXHIBIT I
Surface Option Target Third Party Agreements (§3.2.6, 5.2.8, 5.3.7)
[***]
[***]
[***]
[***]
[***]
EXHIBIT J
Form of Option Selection Notice
[Novartis Institutes of Biomedical Research, Inc.]/[Surface Oncology, Inc.]
[250 Massachusetts Ave.]/[215 First Street, Suite 400-S]
Cambridge, MA [02139]/[02142]
[ , 20 ]
[Surface Oncology, Inc.
215 First Street, Suite 400-S
Cambridge, MA 02142
Attn: Chief Executive Officer]
[Novartis Institutes for Biomedical Research, Inc.]
[250 Massachusetts Ave.]
[Cambridge, MA 02139]
Attn: [ ]
Dear Sir or Madam:
In accordance with Section 4.2.3 of that certain Collaboration Agreement by and between Surface Oncology, Inc.
(“Surface”) and Novartis Institutes of Biomedical Research, Inc. (“Novartis”) executed as of January 9, 2016 (the
“Collaboration Agreement”), [Novartis]/[Surface] hereby provides written notice indicating the selection of the Option
set forth in Exhibit A attached hereto, pursuant to the terms of the Collaboration Agreement. Capitalized terms used
but not defined herein will have the meanings assigned to them in the Collaboration Agreement.
Very truly yours,
[NOVARTIS INSTITUTES FOR
BIOMEDICAL RESEARCH,
INC.]/[SURFACE ONCOLOGY, INC.]
By:
Name:
Title:
[Goodwin Proctor LLP
cc:
Exchange Place
55 State Street
Boston, MA 02109
Attn: Kingsley L. Taft, Esq.]
[Hogan Lovells US LLP
cc:
875 Third Avenue
New York, NY 10022
Attention: Adam H. Golden, Esq.
Facsimile No.: (212) 918-3100]
1. Option: .
2.
[Novartis]/[Surface] is designating the Option listed above as a:
[***]
Exhibit A
EXHIBIT K
Surface Manufacturing Third Party Agreements (§8.5)
EXHIBIT L
Form of Invoice
INVOICE
DATE: Month Day, Year
INVOICE #: XX
NOVARTIS PO#: XXXXXXXX
[***]
Company Name
Street Address
City, State ZIP Code
Phone 1xxxxxx
Fax 1xxxxxx
Bill To:
Novartis Institutes for Biomedical Research, Inc.
Attn: Novartis Contact Name
P.O. Box 5990
Portland OR, 97228-5990
Re: Collaborative Agreement between Surface Oncology, Inc. and Novartis Institutes for BioMedical Research,
Inc. effective as of January 9, 2016.
PO Line
Number
AMOUNT
X
DESCRIPTION
[Upfront/Development Milestone/Sales Milestone] payment with
reference made to the relevant section of the contract
$XX.XX
Remit to:
Bank Wire Information:
Bank Name:
Account No.:
ABA#:
IBAN:
SWIFT CODE:
XX
XX
XX (only applicable in the US)
XX (only applicable in Europe)
XX (applicable US and Europe)
TOTAL
$XX.XX
Note for e-mail submission of invoices:
• The address is: [***]
• Attached invoice files must contain a Novartis issued purchase order number (PO) on them and cannot be
zipped. Invoices without a PO number on them or zipped attachments will not be accepted for
processing.
EXHIBIT M
Royalty Calculation Examples
Section 10.9.1
[***]
Section 10.9.2
[***]
Section 10.9.3.1
[***]
Section 10.9.3.2
[***]
Royalty Reduction Sample Calculation
[***]
Ex-U.S.:
[***]
U.S.:
[***]
[***]
[***]
EXHIBIT N
Disclosure Obligations
Schedule 1.1.158
Option IND Package Information
Schedule 1.1.167
Option Tox Package Information
Schedule 12.2
Exceptions to Representations and Warranties
[***]
12.2.1:
[***]
[***]
[***]
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
FIRST AMENDMENT TO COLLABORATION AGREEMENT
This first amendment (the “First Amendment”) to the Agreement (as defined below), is entered into as of May 6, 2016
(the “Amendment Effective Date”), by and between Surface Oncology, Inc., a corporation organized and existing
under the Laws of the State of Delaware (“Surface”), and Novartis Institutes for BioMedical Research, Inc., a
corporation organized and existing under the Laws of the State of Delaware (“Novartis”).
WHEREAS, Surface and Novartis are parties to that certain Collaboration Agreement dated January 9, 2016 (the
“Agreement”);
WHEREAS, Surface and Novartis desire to have Novartis assume Manufacturing responsibilities with respect to Tl
Antibody Candidates and Tl Licensed Products; and
WHEREAS, Surface and Novartis desire to amend the Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual provisions and covenants herein, the receipt and sufficiency of
which are hereby acknowledged, Surface and Novartis hereby agree as follows:
1.
Section 8.1.1.1 is hereby amended by deleting Section 8.1.1.1 in its entirety and replacing it with the
following:
“8.1.1.1. Subject to the oversight of the JRC, the responsibility to Manufacture (or have Manufactured) Tl Antibody
Candidates for use in the Tl Research Program shall be allocated between Surface and Novartis (or such Party’s
designated Third Party contract manufacturers) in accordance with the Tl Research Plan.”
2.
Section 8.1.1.2 is hereby amended by deleting Section 8.1.1.2 in its entirety and replacing it with the
following:
“8.1.1.2. Subject to the oversight of the JDC, Novartis has the sole responsibility to Manufacture (or have
Manufactured) Tl Antibody Candidates and Tl Licensed Products for use in the first Phase 1 Safety Study for the Tl
Antibody Candidates and Tl Licensed Products in accordance with the Tl Development Plan.”
3.
Section 8.1.1.3 is hereby amended by deleting Section 8.1.1.3 in its entirety and replacing it with the
following:
“8.1.1.3. Novartis has the sole responsibility to Manufacture (or have Manufactured) Tl Antibody Candidates and Tl
Licensed Products for use in Development and Commercialization of such Tl Antibody Candidates and Tl Licensed
Products in the Novartis Territory.”
4.
Section 8.1.2.1 is hereby amended by deleting Section 8.1.2.1 in its entirety and replacing it with the
following:
“8.1.2.1. Surface will be responsible for [***] of all Manufacturing Costs relating to Tl Antibody Candidates incurred
to support the Tl Research Program, including reimbursement to Novartis of all Manufacturing Costs
reasonably incurred by or on behalf of Novartis for the Manufacture of Tl Antibody Candidates for use in the Tl
Research Program.”
5.
Section 8.1.2.2 is hereby amended by deleting Section 8.1.2.2 in its entirety and replacing it with the
following:
“8.1.2.2. Novartis will be responsible for [***] of all Manufacturing Costs relating to the first Phase 1 Safety Study for
Tl Antibody Candidates and Tl Licensed Products set forth in the Novartis approved budget for such Phase 1 Safety
Study.”
6.
Section 8.1.2.3 is hereby amended by deleting Section 8.1.2.3 in its entirety and replacing it with the
following:
“8.1.2.3. Except as provided in Section 8.1.2.1, Novartis will be responsible for [***] of all Manufacturing Costs
relating to Tl Antibody Candidates and Tl Licensed Products for use in the Research, Development and
Commercialization of such Tl Antibody Candidates and Tl Licensed Products in the Novartis Territory incurred by or
on behalf of Novartis.”
7.
Section 15.5.3 is hereby amended by deleting Section 15.5.3 in its entirety and replacing it with the
following:
“15.5.3. [***]
8.
Section 15.5.8 is hereby amended by deleting Section 15.5.8 in its entirety and replacing it with the
following:
“15.5.8. If Surface so requests, and to the extent permitted under Novartis’s obligations to Third Parties on the
effective date of termination, Novartis will [***] any Third Party [***]”
9. Exhibit F (Tl Research Plan) is hereby deleted in its entirety and replaced by the Exhibit F as appended to
this First Amendment.
10. Except as expressly set forth in this First Amendment, all provisions of the Agreement shall remain in full
force and effect.
[Signature Page Follows]
IN WITNESS WHEREOF, Surface and Novartis have caused this First Amendment to be executed by their respective
authorized representatives as of the Amendment Effective Date.
SURFACE ONCOLOGY, INC.
NOVARTIS INSTITUTES FOR BIOMEDICAL
RESEARCH, INC.
/s/ Nick Buffinger
Name: Nick Buffinger
Title: VP, Corporate Development & IP Strategy
Date: 9 May 2016
/s/ H. Martin Seidel
Name: H. Martin Seidel
Title: Global Head of Strategic Alliances
Date: May 11, 2016
EXHIBIT F
T1 Research Plan
[***]
[***]
[***]
[***]
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
SECOND AMENDMENT TO COLLABORATION AGREEMENT
This second amendment (the “Second Amendment”) to the Agreement (as defined below), is entered into as of July
14, 2017 (the “Amendment Effective Date”), by and between Surface Oncology, Inc., a corporation organized and
existing under the Laws of the State of Delaware (“Surface”), and Novartis Institutes for BioMedical Research, Inc., a
corporation organized and existing under the Laws of the State of Delaware (“Novartis”).
WHEREAS, Surface and Novartis are parties to that certain Collaboration Agreement dated January 9, 2016 (the
“Agreement”), as amended by the May 6, 2016 First Amendment to Collaboration Agreement;
WHEREAS, Surface and Novartis desire to [***] and
WHEREAS, Surface and Novartis desire to amend the Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual provisions and covenants herein, the receipt and sufficiency of
which are hereby acknowledged, Surface and Novartis hereby agree as follows:
1. Exhibit F (Tl Research Plan) is hereby deleted in its entirety and replaced by the Exhibit F as appended to
this Second Amendment.
2. Except as expressly set forth in this First Amendment, all provisions of the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, Surface and Novartis have caused this Second Amendment to be executed by their
respective authorized representatives as of the Amendment Effective Date.
SURFACE ONCOLOGY, INC.
NOVARTIS INSTITUTES FOR BIOMEDICAL
RESEARCH, INC.
/s/ Detlev Biniszkiewicz
Name: Detlev Biniszkiewicz
Title: President & CEO
Date:
July 14, 2017
/s/ Scott A Brown
Name: Scott A Brown
Title: VP, General Counsel
Date: 7/17/17
EXHIBIT F
T1 Research Plan
[***]
[***]
[***]
[***]
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
THIRD AMENDMENT TO COLLABORATION AGREEMENT
This Third Amendment (the “Third Amendment”) to the Agreement (as defined below), is entered into as of
September 18th, 2017 (the “Amendment Effective Date”), by and between Surface Oncology, Inc., a corporation
organized and existing under the Laws of the State of Delaware (“Surface”), and Novartis Institutes for BioMedical
Research, Inc., a corporation organized and existing under the Laws of the State of Delaware (“Novartis”).
WHEREAS, Surface and Novartis are parties to that certain Collaboration Agreement dated January 9, 2016, as
amended by that certain First Amendment to Collaboration Agreement dated May 6, 2016, and that certain Second
Amendment to Collaboration Agreement dated July 14, 2017 (the “Agreement”);
WHEREAS, Surface and Novartis desire to clarify the Parties’ respective responsibilities relating to certain Research,
Development and regulatory activities with respect to T1 Antibody Candidates and T1 Licensed Products;
WHEREAS, Surface and Novartis desire to [***] and
WHEREAS, Surface and Novartis desire to amend the Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual provisions and covenants herein, the receipt and sufficiency of
which are hereby acknowledged, Surface and Novartis hereby agree as follows:
1. Clause (a) of Section 1.1.204 is hereby amended by deleting Section 1.1.204 in its entirety and replacing it
with the following:
“1.1.204. “Research Term” means, [***]
2. A new Section 1.1.265 is hereby added as follows:
“1.1.265 “Final Audited GLP Toxicology Study Report” means [***]
3. A new Section 1.1.266 is hereby added as follows:
“l.1.266 “Receipt” means [***]
4.
Section 3.1.2 is hereby amended by deleting Section 3.1.2 in its entirety and replacing it with the following:
“3.1.2 Diligence; Standards of Conduct. During the Research Term, Surface (itself or through its Affiliates or by
permitted subcontracting pursuant to Section 3.1.7) will use Commercially Reasonable Efforts to [***] Surface will
conduct its activities under the T1 Research Plan in a good scientific manner and in compliance with applicable Law.”
Section 5.1.2 is hereby amended by deleting Section 5.1.2 in its entirety and replacing it with the following:
5.
“5.1.2. Transition. By no later than [***] for a T1 Licensed Product, Surface will prepare and provide to Novartis a
draft plan for the transition of the Development of such T1 Licensed Products from Surface to Novartis or its designee
(a “T1 Transition Plan”). The T1 Transition Plan for each T1 Licensed Product will require Surface to, as soon as
reasonably practicable following the Research Term: (a) transfer to Novartis of a copy of all Know-How Controlled by
Surface that is reasonably necessary or useful for Development of such T1 Antibody Candidates or T1 Licensed
Products, or obtaining or maintaining Regulatory Approval for such T1 Licensed Products in the Novartis Territory,
including information and materials reasonably requested by Novartis, in a format reasonably acceptable to Novartis
(which will be specified in such T1 Transition Plan, along with the process of transferring such Know-How); (b)
assign to Novartis any Regulatory Materials submitted to, or filed with, any Regulatory Authority with respect to such
T1 Antibody Candidates or T1 Licensed Products; (c) transfer to Novartis a copy of all written correspondence with
any Regulatory Authority with respect to such T1 Antibody Candidates or T1 Licensed Products and all written
minutes of meetings and memoranda of oral communications with any Regulatory Authority with respect to such T1
Antibody Candidates or T1 Licensed Products; and (d) transfer to Novartis a copy of any other information or
materials reasonably requested by Novartis that are reasonably necessary or useful for Development of such T1
Antibody Candidates or T1 Licensed Products in the Novartis Territory, including if so reasonably requested by
Novartis, and Third Party agreements relating solely thereto (the items described in clauses (a) through (d) collectively,
“T1 Development Information”). The T1 Transition Plan for each T1 Licensed Product will also describe any
Development activities with respect to such T1 Licensed Product that Surface is required to perform as requested by
Novartis and mutually agreed upon by the Parties (collectively, “T1 Transition Activities”). Each Party will use
Commercially Reasonable Efforts to perform the obligations assigned to it under the T1 Transition Plan in accordance
with any timelines set forth therein, [***]”
6.
Section 7.1.1.1 is hereby amended by deleting Section 7.1.1.1 in its entirety and replacing it with the
following:
“7.1.1.1. Ownership of Regulatory Filings. Novartis will be responsible for filing, and Novartis will own, all INDs,
NDAs, Regulatory Materials and related regulatory documentation with respect to any T1 Licensed Product. At
Novartis’s request following [***] for the T1 Research Program, Surface will promptly assign and transfer to Novartis
all Regulatory Materials and other regulatory documentation in the Novartis Territory
with respect to such T1 Licensed Product that is in the possession or control of Surface, and each Party will submit all
filings, letters and other documentation necessary to effect such assignment and transfer to the applicable Regulatory
Authority as soon as reasonably practicable, but no later than [***] days after such request for such T1 Licensed
Product. Surface hereby appoints Novartis as Surface’s agent for all matters related to each T1 Licensed Product
involving Regulatory Authorities in the Novartis Territory during the period beginning on the Effective
Date for the T1 Licensed Product and ending on the date that the transfer of all Regulatory Materials and related
regulatory documents in the Novartis Territory that relate to such T1 Licensed Product, and Novartis hereby accepts
such appointment.”
7.
Section 10.7.1 is hereby amended by deleting the second row in the table set forth in Section 10.7.1 and
replacing it with the following:
Developmental Milestone Event
[***]
8.
Developmental Milestone Payment
[***]
Section 10.7.4 is hereby amended by deleting Section 10.7.4 in its entirety and replacing it with the
following:
“10.7.4 Payment Terms for Development Milestone Payments. The Party who achieves a Development Milestone
Event shall provide the other Party with written notice of its achievement of such Development Milestone Event within
[***] days after such Development Milestone Event is achieved. After Surface’s delivery or receipt of such notice (as
applicable), Surface shall submit an invoice to Novartis substantially in the form of Exhibit L for the corresponding
Development Milestone Payment. Novartis shall make the corresponding Development Milestone Payment within
[***] days after receipt of such invoice. Notwithstanding the foregoing, in the event that Surface achieves a given
Development Milestone Event, Novartis shall make the corresponding Development Milestone Payment within [***]
days after receipt of the relevant invoice from Surface.”
9. Exhibit F (T1 Research Plan) is hereby deleted in its entirety and replaced by Exhibit F as appended to this
Third Amendment.
10. Except as expressly set forth in this Third Amendment, all provisions of the Agreement shall remain in full
force and effect.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, Surface and Novartis have caused this Third Amendment to be executed by their respective
authorized representatives as of the Amendment Effective Date.
NOVARTIS INSTITUTES FOR
BIOMEDICAL RESEARCH, INC.
SURFACE ONCOLOGY, INC.
/s/ Scott Brown
BY:
NAME: Scott Brown
TITLE: VP General Counsel
/s/ Scott Chappel
BY:
NAME: Scott Chappel
TITLE: CTO
4
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
EXHIBIT F
T1 Research Plan
[***]
[***]
[***]
Exhibit 10.33
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
FOURTH AMENDMENT TO COLLABORATION AGREEMENT
CONFIDENTIAL
This Fourth Amendment (the “Fourth Amendment”) to the Agreement (as defined below), is entered into as
of October 9, 2018 (the “Amendment Effective Date”), by and between Surface Oncology, Inc., a
corporation organized and existing under the Laws of the State of Delaware (“Surface”), and Novartis
Institutes for BioMedical Research, Inc., a corporation organized and existing under the Laws of the State of
Delaware (“Novartis”).
WHEREAS, Surface and Novartis are parties to that certain Collaboration Agreement dated January 9,
2016, as amended by that certain First Amendment to Collaboration Agreement dated May 6, 2016, that
certain Second Amendment to Collaboration Agreement dated July 14, 2017 and that certain Third
Amendment to Collaboration Agreement dated September 18, 2017 (the “Agreement”);
WHEREAS, Surface has entered into that certain Amended and Restated Development and Option
Agreement with Adimab, LLC, dated as of October 4, 2018 (the “A&R Adimab Agreement”);
WHEREAS, Surface and Novartis desire to clarify the Parties’ respective rights and responsibilities relating
to the A&R Adimab Agreement and diagnostic products; and
WHEREAS, Surface and Novartis desire to amend the Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual provisions and covenants herein, the receipt and
sufficiency of which are hereby acknowledged, Surface and Novartis hereby agree as follows:
1. Novartis hereby acknowledges and agrees that Surface was entitled to enter into the A&R Adimab
Agreement in accordance with Section 12.4.3, and all references to the “Adimab Agreement” in the
Agreement will refer to the A&R Adimab Agreement, as such agreement may be amended, restated
or otherwise replaced from time to time to the extent permitted under Section 12.4.3 of the
Agreement.
2. Section 9.5.1.1 of the Agreement is hereby amended by appending the following to the end thereof:
“For each Licensed Target, Surface acknowledges and agrees that Novartis shall not owe any (a) payments
to Surface under this Agreement or (b) Third Party Payments to Surface or Adimab under the Adimab
Agreement, in each case ((a)-(b)) with respect to the Research, Development, Manufacture or
Commercialization of any Adimab Diagnostic Product (as defined in the Adimab Agreement) for such
Licensed Target solely for the purposes of Research, Development or Commercialization of therapeutic or
prophylactic Licensed Products that Specifically Binds to such Licensed Target in accordance with the
terms and conditions of this Agreement.”
3. Section 9.5.2 of the Agreement is hereby amended by appending the following to the end thereof:
“Novartis hereby acknowledges and agrees that Surface has not granted to Novartis any licenses or
rights under the Surface Technology to Research, Develop, Manufacture or Commercialize any
Adimab Diagnostic Product (as defined in the Adimab Agreement) for a Licensed Target other than
solely for the purposes of Research, Development or Commercialization of therapeutic or
prophylactic Licensed Products that Specifically Binds to such Licensed Target in accordance with
the terms and conditions of this Agreement.”
4. Section 12.5.1.4 of the Agreement is hereby amended by appending the following to the end
thereof:
“[***].”
5. Except as expressly set forth in this Fourth Amendment, all provisions of the Agreement shall
remain in full force and effect.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, Surface and Novartis have caused this Fourth Amendment to be executed by
their respective authorized representatives as of the Amendment Effective Date.
NOVARTIS INSTITUTES FOR BIOMEDICAL
RESEARCH, INC.
BY:
NAME:
TITLE:
/s/ Scott Brown
Scott Brown
General Counsel and Chief
Administrative Officer, NIBR
SURFACE ONCOLOGY, INC.
BY:
NAME:
TITLE:
/s/ J. Jeffrey Goater
Jeff Goater
CEO
3
CERTAIN IDENTIFIED INFORMATION CONTAINED IN THIS EXHIBIT, MARKED BY “[***]”, HAS BEEN
EXCLUDED BECAUSE IT IS BOTH (i) NOT MATERIAL AND (ii) WOULD LIKELY CAUSE COMPETITIVE
HARM TO THE COMPANY IF PUBLICLY DISCLOSED.
Exhibit 10.34
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this “Agreement”), is entered into as of December 16, 2020 (the “Effective Date”),
by and between Surface Oncology, Inc., a Delaware corporation having business offices at 50 Hampshire Street,
Cambridge MA 02139 (“Surface”), and GLAXOSMITHKLINE INTELLECTUAL PROPERTY (No. 4) LIMITED, a
company registered in England and Wales (registered number 11721880) and having business offices at 980 Great
West Road, Brentford, Middlesex TW8 9GS United Kingdom (“GSK”).
INTRODUCTION
WHEREAS, Surface Controls certain Patent Rights, Know-How and other intellectual property rights related to the
Licensed Target and the Licensed Antibody known as SRF813;
WHEREAS, Surface obtained certain intellectual property rights related to Licensed Antibodies targeting the Licensed
Target from [***] pursuant to the [***];
WHEREAS, GSK wishes to obtain from Surface and Surface wishes to grant to GSK certain rights and licenses under
certain Patent Rights, Know-How, and other intellectual property rights Controlled by Surface to Develop,
Manufacture and Commercialize Licensed Antibodies and Licensed Products in the Territory, subject to the terms and
conditions set forth herein; and
WHEREAS, in connection with this Agreement, [***].
NOW, THEREFORE, in consideration of the premises and the mutual promises and conditions hereinafter set forth,
and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties,
intending to be legally bound, do hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms used in this Agreement will have the meanings set forth in this ARTICLE I:
1.1. “Accounting Standards” means, with respect to GSK, IFRS (International Financial Reporting Standards) as
adopted by the United Kingdom, or such other generally accepted accounting standard as it may from time
to time adopt, in each case, consistently applied, and with respect to Surface, GAAP (accounting principles
generally accepted in the United States of America), or such other generally accepted accounting standard
as it may from time to time adopt, in each case, consistently applied.
1.2. “Action” means any claim, action, cause of action or suit (whether in contract or tort or otherwise),
litigation (whether at law or in equity, whether civil or criminal), assessment, arbitration, investigation,
hearing, charge, complaint, demand, notice or proceeding of, to, from, by or before any Governmental
Authority.
1.3. “Acquisition Third Party” has the meaning set forth in Section 2.8(b).
1.4. “Acquisition Transaction” has the meaning set forth in Section 2.8(b).
1.5.
[***].
1.6. “Affiliate” means, (a) with respect to GSK, any Person controlling, controlled by or under common control
with such first Person, at the time that the determination of affiliation is made and for as long as such
control exists, (b) with respect to Surface, any entity that is controlled by Surface at the time that the
determination of affiliation is made and for as long as such control exists, and (c) with respect to any other
Person, any entity controlling, controlled by or under common control with such first Person, at the time
that the determination of affiliation is made and for as long as such control exists. For purposes of this
definition, “control” means (i) direct or indirect ownership of fifty percent (50%) or more of the stock or
shares having the right to vote for the election of directors of such Person (or if the jurisdiction where such
Person is domiciled prohibits foreign ownership of such entity, the maximum foreign ownership interest
permitted under such Laws; provided, however, that such ownership interest provides actual control over
such Person), (ii) status as a general partner in any partnership, or (iii) the possession, directly or indirectly,
of the power to direct, or cause the direction of, the management or policies of such Person, whether
through the ownership of voting securities, by contract or otherwise. Affiliates of a Party will exclude
Persons who are financial investors of such Party or under common control of such financial investors other
than such Party and its subsidiary entities.
1.7. “Alternative Product” has the meaning set forth in Section 2.8(c).
1.8. “Antibody” means, with respect to the Licensed Target, any monoclonal antibody or antigen-binding
fragment, modification, or derivative thereof that binds to such Licensed Target, and includes an
immunoglobulin, such as IgA, IgD, IgE, IgG and IgM, in each case, whether multiple or single chain,
recombinant or naturally occurring or a combination of the foregoing in any species, whole or antigen-
binding fragment, including any monospecific or any bispecific/multi-specific/multivalent antibody, and any
analogs, constructs, conjugates, fusions or chemical or other modifications or attachments thereof or thereto.
An antigen binding portion of an Antibody includes an antigen binding heavy chain, light chain, heavy
chain dimer, diabody, Fab fragment, F(ab’)2 fragment, single domain, or any FV fragment, including a
single chain FV (SCFV), a disulfide stabilized FV fragment (DSFV), or a bispecific DSFV, or a conjugate
containing the immunoglobulin or an antigen-binding fragment thereof. For clarity, an antibody that differs
in amino acid sequence with respect to the antigen-binding portion thereof will be treated as a separate
antibody.
1.9. “Audited Site” has the meaning set forth in Section 4.3(d).
1.10. “Auditor” has the meaning set forth in Section 7.5(a).
1.11. “Biosimilar Application” has the meaning set forth in Section 8.2(f)(iii).
1.12. “Biosimilar Product” means, with respect to a given Licensed Product in a particular country in the
Territory, any product sold by a Third Party not authorized by GSK or its Affiliates or its or their
Sublicensees that is approved by the applicable Regulatory Authority for such country through any
application or submission filed with a Regulatory Authority for Regulatory Approval of a biological product
claimed to be biosimilar or interchangeable to such Licensed Product or otherwise relying on the approval
of such Licensed Product in such country, including, an application filed under 42 U.S.C. § 262(k) or any
similar provisions in a country outside the United States, based in reliance, at least in part, on data generated
for a Regulatory Approval of such Licensed Product.
1.13. “Breaching Party” has the meaning set forth in Section 13.3(a).
1.14. “Business Day” means any day, other than a Saturday or a Sunday, on which banking institutions in
Massachusetts, United States and London, England are open for business, but excluding the nine (9)
consecutive calendar days beginning on December 24th and continuing through January 1st of each
Calendar Year during the Term.
1.15. “Calendar Quarter” means each of the three month periods ending on March 31, June 30, September 30, and
December 31 of any Calendar Year; provided, however: (a) the first Calendar Quarter of the Term will
extend from the Effective Date to the end of the Calendar Quarter in which the Effective Date occurs; and
(b) the last Calendar Quarter will extend from the beginning of the Calendar Quarter in which this
Agreement expires or terminates until the effective date of such expiration or termination.
1.16. “Calendar Year” means, for the first Calendar Year, the period beginning on the Effective Date and ending
on December 31, 2020, and for each Calendar Year thereafter each twelve (12)-month period commencing
on January 1, and ending on December 31, except that the last Calendar Year will commence on January 1
of the year in which this Agreement expires or terminates and end on the effective date of such expiration or
termination.
1.17. “CAPA” has the meaning set forth in Section 4.3(d).
1.18. “Cessation of Development” has the meaning set forth in Section 13.3(e).
1.19. “Change of Control” means, with respect to a Party, (a) a merger, consolidation, reorganization,
amalgamation, arrangement, share exchange, tender or exchange offer, private purchase, business
combination or other transaction of such Party with a Third Party that results in the voting securities of such
Party outstanding immediately prior thereto, or any securities into which such voting securities have been
converted or exchanged, ceasing to represent at least fifty percent (50%) of the combined voting power of
the surviving entity or the parent of the surviving entity immediately after such merger or consolidation, (b)
a transaction or series of related transactions in which a Third Party, together with its Affiliates, becomes the
direct or indirect beneficial owner of more than fifty percent (50%) of the combined voting power of the
outstanding securities of such Party, or (c) the sale or other transfer to a Third Party of all or substantially all
of such Party’s and its controlled Affiliates’ assets. Notwithstanding the foregoing, any transaction or series
of transactions effected for the primary purpose of financing the operations of the applicable Party or
changing the form or jurisdiction of organization of such Party will not be deemed a “Change of Control”
for purposes of this Agreement.
1.20. “Clinical Data” means the original human subject data and case report forms (CRFs) collected or generated
with respect to Clinical Studies of any Licensed Antibody or Licensed Product, together with all analysis,
reports, and results with respect thereto.
1.21. “Clinical Study” means a study in which human subjects or patients are dosed with a drug, whether
approved or investigational, pursuant to a prospectively defined clinical protocol.
1.22. “Combination Product” means any pharmaceutical preparation containing as its active ingredients both a
Licensed Antibody and one or more other therapeutically or prophylactically active ingredients (each an
“Other Component”), so long as the applicable Licensed Product and other pharmaceutical preparation are
fixed dose combinations and
co-packaged combinations of the Licensed Antibody and the Other Components. Drug delivery vehicles,
adjuvants, and excipients will not be deemed to be “active ingredients”, except in the case where such
delivery vehicle, adjuvant, or excipient is recognized as an active ingredient in accordance with 21 C.F.R. §
210.3(b)(7) (as amended), or any foreign counterpart.
1.23. “Commercialization,” “Commercializing” or “Commercialize” means any and all activities related to the
pre-marketing, launching, marketing, promotion (including advertising and detailing), labeling, bidding and
listing, pricing and reimbursement, distribution, having distributed, storage, handling, offering for sale,
selling, having sold, importing and exporting for sale, having imported and exported for sale, customer
service and support, and post-marketing safety surveillance and reporting of a product (including the
Licensed Product).
1.24. “Commercially Reasonable Efforts” means, with respect to any Licensed Antibody or Licensed Product,
such efforts that are consistent with the efforts and resources [***].
1.25. “Confidential Information” means (a) all trade secrets or confidential or proprietary information (including
any tangible materials embodying any of the foregoing) of the disclosing Party or its Affiliates provided or
disclosed to the other Party or any of its Affiliates in connection with this Agreement, (b) “Confidential
Information” (as defined in the Prior CDA) that was disclosed by a Party or any of its Affiliates to the other
Party or any of its Affiliates under the Prior CDA, and (c) the terms and conditions of this Agreement;
provided, however, that Confidential Information will not include information that:
(i) has been published by a Third Party or otherwise is or hereafter becomes part of the public domain by public use,
publication, general knowledge or the like through no breach of this Agreement on the part of the receiving Party;
(ii) has been in the receiving Party’s possession prior to disclosure by the disclosing Party hereunder, and not through a
prior disclosure by the disclosing Party, without any obligation of confidentiality with respect to such information (as
evidenced by the receiving Party’s or such Affiliate’s written records or other competent evidence);
(iii) is subsequently received by the receiving Party from a Third Party who is not known by the receiving Party to be
under an obligation of confidentiality to the disclosing Party under any agreement between such Third Party and the
disclosing Party; or
(iv) has been independently developed by or for the receiving Party without reference to, or use or disclosure of, the
disclosing Party’s Confidential Information (as evidenced by the receiving Party’s or such Affiliate’s written records or
other competent evidence);
provided, further, that clauses (ii) through (iv) above will not apply to the terms and conditions of this Agreement.
1.26. “Control” or “Controlled” means, with respect to any Know-How, Patent Right, Regulatory Material,
Regulatory Approval or other property right, the legal authority or right (whether by ownership, license
(other than a license granted pursuant to this Agreement) or otherwise) of a Person or its Affiliate, to grant
access, a license or a sublicense of or under such Know-How, Patent Right, Regulatory Material, Regulatory
Approval or other property right, without (a) breaching the terms of any agreement with a Third Party and
(b) with respect to any Patent Rights which are reasonably useful [***] for the Development, Manufacture,
or Commercialization of the Licensed Antibodies or Licensed Products in the Field in the Territory, [***] to
any Third Party, except for that which a Party in-licenses and under which the other Party [***] as
contemplated in [***].
1.27. “Cover,” “Covering” or “Covered” means, when referring to the Licensed Product or Licensed Antibody:
(a) with respect to a Patent Right, that, in the absence of a license granted to a Person under an issued claim
included in such Patent Right, the practice by such Person of a specified activity with respect to such
Licensed Product or Licensed Antibody would infringe such claim, or (b) with respect to an application for
Patent Rights, that, in the absence of a license granted to a Person under a claim included in such
application, the practice by such Person of a specified activity with respect to such Licensed Product or
Licensed Antibody would infringe such claim if such patent application were to issue as a patent.
1.28. “Data Security Breach” has the meaning set forth in Section 9.1(d).
1.29. “Data Sharing Initiative” means GSK’s policy initiative (as may be amended from time to time), known at
the Effective Date as the “SHARE Initiative,” to provide researchers with access to Clinical Data, including
anonymized patient level data.
1.30. “Development,” “Developing” or “Develop” means non-clinical, pre-clinical, and clinical drug research and
development activities, whether before or after Regulatory Approval, including drug metabolism and
pharmacokinetics, translational research, toxicology, pharmacology, test method development and stability
testing, process and packaging development and improvement, process validation, process scale-up,
formulation development, delivery system development, quality assurance and quality control development,
statistical analysis, conduct of Clinical Studies, regulatory affairs, the preparation and submission of
Regulatory Materials, Clinical Study regulatory activities, and any other activities directed towards
obtaining or maintaining Regulatory Approval of any Licensed Product. Development includes use and
importation of the relevant Licensed Antibody or Licensed Product to conduct such Development activities.
1.31. “Development Milestone Event” has the meaning set forth in Section 7.1(b).
1.32. “Development Milestone Payment” has the meaning set forth in Section 7.1(b).
1.33. “Distributor” means any Third Party appointed by GSK or any of its Affiliates or its or their Sublicensees to
distribute, market and sell Licensed Product, with or without packaging rights, in one or more countries in
the Territory, in circumstances where such Third Party purchases its requirements of Licensed Product from
GSK or its Affiliates or its or their Sublicensees.
1.34. “Dollars” or “US$” means United States dollars.
1.35. “Effective Date” has the meaning set forth in the preamble.
1.36. “EU” means the European Union, as its membership may be constituted from time to time, and any
successor thereto.
1.37. “European Opposition Proceeding” means [***].
1.38. “Existing CMO” means [***].
1.39. “Existing CMO Agreements” means [***].
1.40. “External Costs” means [***].
1.41. “FDA” means the United States Food and Drug Administration or any successor agency thereto.
1.42. “FFDCA” means the Federal Food, Drug and Cosmetic Act under United States Code, Title 21, as amended
from time to time, together with any rules, regulations, and requirements promulgated thereunder (including
all additions, supplements, extensions, and modifications thereto).
1.43. “Field” means any use or purpose, including the treatment, palliation, diagnosis, cure or prevention of any
human or animal disease, disorder or condition.
1.44. “First Commercial Sale” means with respect to the Licensed Product in any country in the Territory, the first
sale for monetary value for use or consumption by the end user of such Licensed Product in such country
after the Regulatory Approval (and Pricing and Reimbursement Approval where relevant) for such Licensed
Product has been obtained in such country. First Commercial Sale shall not include any transfer of a
Licensed Product (a) between or among GSK and its Affiliates or its or their Sublicensees or (b) for
purposes of patient assistance programs, treatment IND sales, named patient sales, compassionate use sales
or the like.
1.45. “First Indication” means, on a country-by-country basis, the first Indication for which Regulatory Approval
for a Licensed Product in (a) [***], (b) [***] or (c) [***], as applicable, has been filed with, or approved by,
the applicable Regulatory Authority.
1.46. “FTE” means the equivalent of a full-time individual’s work, performed by one or more individuals, at
[***] per year for a twelve-month period, carried out by an appropriately qualified employee of Surface or
its Affiliates performing activities pursuant to this Agreement. [***].
1.47. “FTE Rate” means the rate of [***] per one full FTE per Calendar Year, which rate shall be prorated on a
daily basis as necessary. [***].
1.48. “GCP” or “Good Clinical Practice” means all applicable then-current standards for the design, conduct,
performance, monitoring, auditing, recording, analyses and reporting of Clinical Studies, including, as
applicable, (a) as set forth in the International Conference on Harmonisation of Technical Requirements for
Registration of Pharmaceuticals for Human Use Harmonised Tripartite Guideline for Good Clinical Practice
(CPMP/ICH/135/95) and any other guidelines for good clinical practice for trials on medicinal products, (b)
the Declaration of Helsinki (2013) as last amended at the 64th World Medical Association in October 2013
and any further amendments or clarifications
thereto, (c) U.S. Code of Federal Regulations Title 21, Parts 50 (Protection of Human Subjects), 56
(Institutional Review Boards) and 312 (Investigational New Drug Application), and (d) the equivalent
applicable Laws in any relevant country, each as may be amended and applicable from time to time and in
each case, that provide for, among other things, assurance that the Clinical Data and reported results are
credible and accurate and protect the rights, integrity, and confidentiality of trial subjects.
1.49. “GLP” or “Good Laboratory Practice” means all applicable then-current standards for laboratory activities
for pharmaceuticals, as set forth in the FDA’s Good Laboratory Practice regulations as defined in 21 C.F.R.
Part 58, or the Good Laboratory Practice principles of the Organization for Economic Co-Operation and
Development (OECD), and such standards of good laboratory practice as are required by the equivalent
applicable Laws in the relevant country and other organizations and Governmental Authorities in countries
in which the Licensed Product is intended to be sold by the Party that is subject to such standards.
1.50. “GMP” or “Good Manufacturing Practice” means all applicable then-current standards for Manufacturing,
including, as applicable, (a) the principles detailed in the U.S. Current Good Manufacturing Practices, 21
C.F.R. §§ 201, 211, 600 and 610 and all applicable FDA guidelines and requirements, (b) European
Directive 2003/94/EC for medicines and investigational medicines for human use and the applicable
guidelines stated in the EudraLex guidelines, (c) the principles detailed in the applicable ICH guidelines, (d)
the conduct of an inspection by a Qualified Person (as defined therein) and the execution by such Qualified
Person of an appropriate certification of inspection; and (e) the equivalent applicable Laws in any relevant
country, each as may be amended and applicable from time to time.
1.51. “Government Official” (where “government” means all levels and subdivisions of governments, i.e. local,
regional, national, administrative, legislative, executive, or judicial, and royal or ruling families) means: (a)
any officer or employee of a government or any department, agency or instrumentality of a government
(which includes public enterprises, and entities owned or controlled by the state); (b) any officer or
employee of a public international organization such as the World Bank or United Nations; (c) any officer or
employee of a political party, or any candidate for public office; (d) any person defined as a government or
public official under applicable local Laws and not already covered by any of the above; and (e) any person
acting in an official capacity for or on behalf of any of the above. “Government Official” shall include any
person with close family members who are Government Officials (as defined above) with the capacity,
actual or perceived, to influence or take official decisions affecting a Party’s business.
1.52. “Governmental Authority” means any multinational, federal, national, state, provincial, local or other entity,
office, commission, bureau, agency, political subdivision, instrumentality, branch, department, authority,
board, court, arbitral or other tribunal, official or officer, exercising executive, judicial, legislative, police,
regulatory, administrative or taxing authority or functions of any nature pertaining to government.
1.53. “GSK” has the meaning set forth in the preamble.
1.54. “GSK Indemnified Party” has the meaning set forth in Section 11.1.
1.55. “GSK Patents” has the meaning set forth in Section 8.1(b).
1.56. “GSK Sole Inventions” has the meaning set forth in Section 8.1(b).
1.57. “Human Biological Samples” means any human biological material (including any derivative or progeny
thereof), including any portion of an organ, any tissue, skin, bone, muscle, connective tissue, blood,
cerebrospinal fluid, cells, gametes, or sub-cellular structures such as DNA, or any derivative of such
biological material such as stem cells or cell lines; and any human biological product, including, but not
limited to, hair, nail clippings, teeth, urine, feces, breast milk, and sweat.
1.58. “ICH” means the International Conference on Harmonization of Technical Requirements for Registration of
Pharmaceuticals for Human Use.
1.59. “Incremental Withholding” has the meaning set forth in Section 7.6.
1.60. “IND” means an Investigational New Drug application, clinical trial application or similar application or
submission for approval to conduct human clinical investigations filed with or submitted to a Regulatory
Authority in conformance with the requirement of such Regulatory Authority, and any amendments thereto.
1.61. “IND Acceptance” means, with respect to an IND, the earlier of: (a) receipt by GSK, its Affiliate or a
Sublicensee of written confirmation from a Regulatory Authority or other applicable Person that Clinical
Studies may proceed under such IND; and (b) expiration of the applicable waiting period after which
Clinical Studies may proceed under such IND.
1.62. “Indemnified Party” means a Person entitled to indemnification under ARTICLE XI.
1.63. “Indemnifying Party” means a Party from whom indemnification is sought under ARTICLE XI.
1.64. “Indication” means a disease, disorder or pathological condition for which clinical results for such disease,
disorder or pathological condition and a separate Regulatory Approval application or a supplement (or other
addition) to a Regulatory Approval application are required for the purpose of obtaining Regulatory
Approval in a country or territory. For clarity, (a) moving from one line of therapy to another within an
Indication will not be considered to be a new Indication, a non-limiting example of which is moving from
second line therapy to first line therapy, (b) a single Indication would include the primary disease, disorder
or condition and all variants or sub-divisions or sub-classifications within such primary disease, disorder or
condition, and regardless of prophylactic or therapeutic use, pediatric or adult use and irrespective of
different formulation(s), dosage forms, dosage strengths, or delivery system(s) used, (c) in cancer, (i) a
single Indication means a tumor of a specific organ or a specific hematological malignancy or any discrete
form of precursor condition of such tumor or malignancy, and the treatment of any of them, and (ii) a new
Indication will require a different tissue of origin (e.g., pancreatic cancer vs endometrial cancer) and will not
mean a different line of therapy or combination within the same tumor type; (d) obtaining a label expansion
for use of a Licensed Product as a Combination Product or as part of a combination therapy will not be
considered to be a new Indication; and (e) the use of a Licensed Product in a biomarker-directed study
across a range of tumor types shall be a single Indication based on the applicable biomarker-specified
product use for such Licensed Product being studied (e.g. unresectable or metastatic microsatellite
instability-high (MSI-H) or mismatch repair deficient (dMMR) solid tumors).
1.65. “Infringement” has the meaning set forth in Section 8.3(a).
1.66. “Infringement Action” has the meaning set forth in Section 8.3(b).
1.67. “Infringement Claim” has the meaning set forth in Section 8.4.
1.68. “Initiation” means, as to a Clinical Study, the date upon which the first patient is dosed in such Clinical
Study.
1.69. “Internal Costs” means, [***].
1.70. “JDC” has the meaning set forth in Section 6.1(a).
1.71. “Joint Inventions” has the meaning set forth in Section 8.1(c).
1.72. “Joint Patents” means the Patent Rights Covering the Joint Inventions.
1.73. “Know-How” means all chemical and biological materials and other tangible materials, inventions,
practices, methods, protocols, formulae, knowledge, improvements, know-how, trade secrets, quality
assurance, quality control, analytical test methods, processes, procedures, assays, skills, experience,
techniques, technology, information, data and results of experimentation and testing, including
pharmacological, toxicological and pre-clinical and clinical test data and analytical and quality control data,
patentable or otherwise.
1.74. “Law” or “Laws” means any applicable federal, state, local, municipal, foreign, or other law, statute,
legislation, constitution, principle of common law, code, treaty, ordinance, regulation, rule, or order of any
kind whatsoever put into place under the authority of any Governmental Authority, including the FFDCA,
PHSA, Prescription Drug Marketing Act, the Generic Drug Enforcement Act of 1992 (21 U.S.C. §335a et
seq.), U.S. Patent Act (35 U.S.C. §1 et seq.), Federal Civil False Claims Act (31 U.S.C. §3729 et seq.), and
the Anti-Kickback Statute (42 U.S.C. §1320a-7b et seq.), all as amended from time to time, together with
any rules, regulations, and compliance guidance promulgated thereunder. “Law” will include the applicable
regulations and guidance of the FDA and European Union (and national implementations thereof) that
constitute GLP, GMP, and GCP (and, if and as appropriate under the circumstances, ICH guidance or other
comparable regulation and guidance of any applicable Governmental Authority).
1.75. “Licensed Antibody” means (a) the antibody SRF813, further described on Exhibit A, and (b) any other
Antibody listed on Exhibit A.
1.76. “Licensed Antibody Materials” has the meaning set forth in Section 3.8.
1.77. “Licensed Know-How” means any and all Know-How relating to the Licensed Antibody or Licensed
Products that is Controlled by Surface as of the Effective Date or at any time during the Term, in each case,
that is necessary or useful to research, Develop, Manufacture, import, export, use, sell or Commercialize the
Licensed Antibody or Licensed Products in the Field and in the Territory. For clarity, Licensed Know-How
includes Surface Sole Inventions.
1.78. “Licensed Patents” means (a) the issued patents and patent applications listed in Exhibit B attached hereto,
plus (i) all divisionals, continuations, continuations-in-part thereof or any other patent rights claiming
priority directly or indirectly to any of the issued patents or patent applications identified on Exhibit B, and
(ii) all patents issuing on any of the foregoing, together with all registrations, reissues, re-examinations,
renewals, supplemental protection certificates and extensions of any of the foregoing, and all foreign
counterparts thereof, and (b) any other Patent Rights, existing as of the Effective Date or arising during the
Term, Controlled by Surface, that (i) claim the composition, Manufacture or use of the Licensed
Antibody(s) (including use as a monotherapy or in combination with other compositions of matter), or (ii)
are necessary or useful for the research, Development, Manufacture, import, export, use, sale or
Commercialization of any Licensed Antibodies or Licensed Products in the Field in the Territory.
1.79. “Licensed Product” means any pharmaceutical product in final form containing the Licensed Antibody
(whether alone as the sole active pharmaceutical ingredient or as a combination with other active
pharmaceutical ingredient(s)) in any presentation, formulation or dosage form. For clarification, Licensed
Product will include any Combination Product.
1.80. “Licensed Target” means the inhibitory receptor CD112R (also known as Poliovirus receptor-related
immunoglobulin domain-containing protein (PVRIG), Nectin-2 Receptor, C7orf15 and MGC2463).
1.81. “Licensed Technology” means collectively, Licensed Patents, Licensed Know-How and Surface’s interest in
Joint Inventions and Joint Patents.
1.82. “Losses” means damages, losses, liabilities, costs (including costs of investigation and defense), fines,
penalties, taxes, expenses, or amounts paid in settlement (in each case, including reasonable attorneys’ and
experts’ fees and expenses), in each case resulting from an Action.
1.83. “Major European Country” means [***].
1.84. “Manufacture” or “Manufacturing” means all activities related to the production of the Licensed Product,
including the production of any of the following to the extent used in the Licensed Product: any drug
substance produced in bulk form for use as an active pharmaceutical ingredient, drug product, compounded
or finished final packaged and labeled form, and in intermediate states, including the following activities:
planning, purchasing, reference standard preparation, cell bank preparation, mammalian cell production,
purification, formulation, scale-up, packaging, quality assurance oversight, quality control testing (including
in-process release and stability testing), testing, release, sample retention, stability testing, storage, shipping,
validation activities directly related to all of the foregoing, and data management and recordkeeping related
to all of the foregoing. References to a Person engaging in Manufacturing activities will include having any
or all of the foregoing activities performed by a Third Party.
1.85. “Net Sales” means gross invoiced sales of Licensed Products to Third Parties by GSK, its Affiliates and its
and their Sublicensees, less the following deductions from such gross amounts which are actually incurred,
allowed, paid, accrued or specifically allocated to the extent that such amounts are deducted from gross
invoiced sales amounts as reported by GSK in its financial statements in accordance with the applicable
Accounting Standards:
1.85.1. [***];
1.85.2. [***];
1.85.3. [***];
1.85.4. [***];
1.85.5. [***];
1.85.6. [***]; and
1.85.7. [***].
[***].
1.86. “Non-Breaching Party” has the meaning set forth in Section 13.3(a).
1.87. “Party” means either Surface or GSK; “Parties” means Surface and GSK, collectively.
1.88. “Patent Challenge” has the meaning set forth in Section 13.3(d)(i).
1.89. “Patent Rights” means the rights and interests in and to (a) all patents and patent applications (including
provisional applications), including all divisionals, continuations, substitutions, continuations-in-part, re-
examinations, re-issues, additions, renewals, extensions, confirmations, registrations, any other pre- or post-
grant forms of any of the foregoing, (b) any confirmation patent or registration patent or patent of addition,
utility models, patent term extensions, and supplemental protection certificates or requests for continued
examinations, foreign counterparts, and the like of any of the foregoing, (c) any and all patents that have
issued or in the future issue from the foregoing patent applications, including author certificates, utility
models, petty patents, innovation patents and design patents and certificates of invention.
1.90. “Person” means any natural person, corporation, general partnership, limited partnership, joint venture,
proprietorship or other business organization or a Governmental Authority.
1.91. “Phase 1 Study” means a Clinical Study of an investigational product in subjects with the primary objective
of characterizing its safety, tolerability, and pharmacokinetics and identifying a recommended dose and
regimen for future studies as described in 21 C.F.R. 312.21(a), or a comparable Clinical Study prescribed by
the relevant Regulatory Authority in a country other than the United States.
1.92. “Phase 2 Study” means a Clinical Study of an investigational product in subjects with the primary objective
of characterizing its activity in a specific disease state as well as generating more detailed safety, tolerability,
pharmacokinetics, pharmacodynamics, and dose finding information as described in 21 C.F.R. 312.21(b), or
a comparable Clinical Study prescribed by the relevant Regulatory Authority in a country other than the
United States including a human clinical trial that is also designed to satisfy the requirements of 21 C.F.R.
312.21(a) or corresponding foreign regulations and is subsequently optimized or expanded to satisfy the
requirements of 21 C.F.R. 312.21(b) (or corresponding foreign regulations) or otherwise to enable a Phase 3
Study (e.g., a Phase 1 Study/ Phase 2 Study).
1.93. “Phase 3 Study” means a Clinical Study of an investigational product in subjects that incorporates accepted
endpoints for confirmation of statistical significance of efficacy and safety with the aim to generate data and
results that can be submitted to obtain Regulatory Approval as described in 21 C.F.R. 312.21(c), or a
comparable Clinical Study prescribed by the relevant Regulatory Authority in a country other than the
United States.
1.94. “Pricing and Reimbursement Approval” means, with respect to the Licensed Product, the governmental
approval, agreement, determination or decision establishing the price or level of reimbursement for such
Licensed Product, in a given country in the Territory prior to the sale of such Licensed Product in such
jurisdiction in the Territory.
1.95. “Prior CDA” means the Confidentiality Agreement executed by the Parties as of July 10, 2020.
1.96. “Products Warranties” has the meaning set forth in Section 10.2(k).
1.97. “Prosecute” or “Prosecution” means in relation to any Patent Rights, (a) to prepare and file patent
applications, including re-examinations or re-issues thereof, and represent applicants or assignees before
relevant patent offices or other relevant Governmental Authorities during examination, re-examination and
re-issue thereof, in appeal processes, interferences, oppositions or any equivalent proceedings, (b) to defend
all such applications against Third Party oppositions or other challenges, (c) to secure the grant of any
patents arising from such patent application, (d) to maintain in force any issued patent (including through
payment of any relevant maintenance fees), and (e) to make all decisions with regard to any of the foregoing
activities.
1.98. “Public Health Service Act” or “PHSA” means the United States Public Health Service Act, as amended.
1.99. “Randomized Controlled Study” means, with respect to a Licensed Product, (a) a Phase 2 Study that has
been approved or accepted by the applicable Regulatory Authority to be a registrational study sufficient for
enabling the filing for Regulatory Approval in the applicable jurisdiction (whether such approval or
acceptance occurs prior to Initiation thereof or at a later date on which such Phase 2 Study is amended or
supplemented), or (b) a Phase 3 Study of such Licensed Product.
1.100.“Regulatory Approval” means the final or conditional approval of the applicable Regulatory Authority
necessary for the marketing and sale of the Licensed Product in the Field in a country(ies), excluding
separate Pricing and Reimbursement Approval that may be required.
1.101.“Regulatory Authority” means any multinational, federal, national, state, provincial or local regulatory
agency, department, bureau or other Governmental Authority with authority over the Development,
Manufacture, or Commercialization of the Licensed Product in a country.
1.102.“Regulatory Exclusivity Period” means, with respect to each Licensed Product in any country in the
Territory, a period of exclusivity (other than Patent Rights exclusivity) granted or afforded by applicable
Law or by a Regulatory Authority in such country that prevents the approval or marketing of any Biosimilar
Product of such Licensed Product in such country, including reference product exclusivity under Section
351(k)(7)(C) of the PHSA and pediatric exclusivity under Section 351(m) of the same and any foreign
equivalents.
1.103.“Regulatory Materials” means (a) any regulatory application, submission, notification, communication,
correspondence, registration, Regulatory Approvals and other filings made to, received from or otherwise
conducted with a Regulatory Authority related to Developing, Manufacturing, obtaining marketing
authorization, marketing, selling or otherwise Commercializing a pharmaceutical product in a particular
country or jurisdiction, (b) all supplements and amendments to any of the foregoing, and (c) all data,
including Clinical Data, and other information contained in any of the foregoing.
1.104.“Royalty Term” has the meaning set forth in Section 7.2(b).
1.105.“Rules” has the meaning set forth in Section 14.3.
1.106.“Sales Milestone Event” has the meaning set forth in Section 7.1(c).
1.107.“Sales Milestone Payment” has the meaning set forth in Section 7.1(c).
1.108.“Second Indication” means on a country-by-country basis, an Indication that is separate and distinct from
the First Indication for the same or a different Licensed Product for which an application for Regulatory
Approval has been filed with, or approved by, the applicable Regulatory Authority in (a) [***], (b) [***] or
(c) [***], as applicable.
1.109.“Senior Officers” means the [***] of Surface and the [***] of GSK, or in each case, his or her designee. If
the position of any of the Senior Officers identified in this definition no longer exists due to a corporate
reorganization, corporate restructuring or the like that results in the elimination of the identified position,
the applicable title of the Senior Officer set forth herein will be replaced with the title of another executive
officer with responsibilities and seniority comparable to the eliminated Senior Officer, and the relevant
Party will promptly provide notice of such replacement title to the other Party.
1.110.“Sole Inventions” has the meaning set forth in Section 8.1(b).
1.111. “Sublicense” means a grant of rights from GSK to a Sublicensee under any of the rights licensed to GSK by
Surface under Section 2.1.
1.112.“Sublicensee” means a Person, other than an Affiliate or a Distributor of GSK, that is granted a sublicense
by GSK or its Affiliates to the rights granted to GSK in Section 2.1, as provided in Section 2.3.
1.113.“Surface” has the meaning set forth in the preamble.
1.114.“Surface Indemnified Party” has the meaning set forth in Section 11.1.
1.115.“Surface Sole Inventions” has the meaning set forth in Section 8.1(b).
1.116.“Technical Transition Services” has the meaning set forth in Section 3.2.
1.117.“Term” has the meaning set forth in Section 13.1.
1.118.“Territory” means worldwide.
1.119.“Third Party” means any Person other than a Party or any of its Affiliates.
1.120.“Third Party Claim” has the meaning set forth in Section 11.3(a).
1.121.“Third Party IP” has the meaning set forth in Section 2.7.
1.122.“Third Party Losses” means Losses resulting from an Action by a Third Party.
1.123.“Trademark” means all registered and unregistered trademarks, service marks, trade dress, trade names,
logos, insignias, domain names, symbols, designs, and combinations thereof.
1.124.“Transition Costs” means with respect to a Calendar Quarter, the Internal Costs plus the External Costs
incurred in connection with the Technical Transition Services for such Calendar Quarter as set forth in the
Transition Plan.
1.125.“Transition Period” means the period commencing on the Effective Date and ending upon the date of first
IND Acceptance for SRF813 in the Territory. Any extensions of the Transition Period will require the
mutual written agreement of both Parties.
1.126.“Transition Plan” has the meaning set forth in Section 3.2.
1.127.“United States” or “U.S.” or “US” means the United States and its territories, possessions and
commonwealths.
1.128.“Valid Claim” means a claim of any issued, unexpired patent within the Licensed Patents that has not been
irrevocably or unappealably disclaimed or abandoned, or been held unenforceable, unpatentable or invalid
by a decision of a court or other Governmental Authority of competent jurisdiction and has not been
admitted to be invalid or unenforceable through reissue, disclaimer, or otherwise.
1.129.“VAT & Indirect Taxes” means any value added, sales, purchase, turnover or consumption tax as may be
applicable in any relevant jurisdiction, including value added tax chargeable under legislation implementing
Council Directive 2006/112/EC.
1.130.“Withholding Action” has the meaning set forth in Section 7.6.
ARTICLE II
LICENSE GRANTS; EXCLUSIVITY
Section 2.1. License Grant.
(a) Exclusive License Grant. Subject to the terms and conditions of this Agreement, Surface hereby grants to GSK a
non-transferable (except in accordance with Section 15.1), exclusive (even with respect to Surface and its Affiliates,
subject to Section 2.2), sublicensable (subject to Section 2.3(a)), royalty-bearing right and license under the Licensed
Technology, to Develop, Manufacture and Commercialize Licensed Antibodies and Licensed Products in the Field and
in the Territory.
(b) Notwithstanding any other provision of this Agreement, for the purposes of the license grant under this Section 2.1
with respect to any Licensed Product that is a Combination Product, (i) such license will only include a license with
respect to the Licensed Antibody contained in such Licensed Product, and (ii) in no event is a license granted
hereunder with respect to any Other Component of a Combination Product.
Section 2.2. Retained Surface Rights. Notwithstanding the license granted to GSK pursuant to Section 2.1(a), Surface
will retain for itself, and its Affiliates for so long as they remain as Affiliates, the right to practice the Licensed
Technology solely to the extent necessary to perform any Technical Transition Services under the Transition Plan and
perform other obligations expressly set forth in this Agreement.
Section 2.3. Sublicensing and Subcontracting.
(a) GSK Right to Sublicense. GSK will have the right to grant Sublicenses (through multiple tiers) of the rights granted
to GSK pursuant to Section 2.1 as follows: (i) to its Affiliates, provided such Sublicense only remains in effect for as
long as such Sublicensee remains an Affiliate of GSK, and (ii) to Third Parties, in each case, subject to the
requirements of Section 2.3(b).
(b) Sublicense Requirements. Each Sublicense granted by GSK to a Third Party pursuant to Section 2.3(a) will be in
writing and will be subject and subordinate to, and consistent with, the terms and conditions of this Agreement. No
Sublicense will diminish, reduce or eliminate any obligation of either Party under this Agreement. GSK will be liable
for any act or omission of any Sublicensee that is in breach of any of GSK’s obligations under this Agreement as
though the same were a breach by GSK, and Surface will have the right to proceed directly against GSK without any
obligation to first proceed against such Sublicensee. Each Sublicense will contain the following provisions: (i) a
requirement that the Sublicensee comply with all applicable terms of this Agreement, (ii) if such Sublicense contains a
right to Commercialize Licensed Products, such Sublicense will also contain the following provisions: (A) a
requirement that the Sublicensee submit applicable sales or other reports to GSK to the extent necessary or relevant to
the reports required to be made or records required to be maintained under this Agreement, and (B) the audit
requirement set forth in Section 7.5, and (iii) provisions whereby GSK obtains, upon termination of such Sublicense,
(A) assignment and transfer of ownership and possession of, or a right to reference all Regulatory Materials and
Regulatory Approvals Controlled by such Sublicensee that relate to any Licensed Product (which assignment or right
of reference may also be provided directly to GSK), and (B) GSK’s ownership of, or a fully sublicensable exclusive
license under and to, any Know-How and Patent Rights that are developed by the Sublicensee in the
performance of such agreement and are necessary or actually used for the Development, Manufacture or
Commercialization of Licensed Products. Any Sublicense granted hereunder that is inconsistent with this Section
2.3(b) will be null and void. GSK will promptly provide Surface with a true and complete copy of any material
Sublicense agreement and each material amendment thereto that it enters into with a Third Party after the execution
thereof; provided that the financial and any other terms of any such agreement not pertinent to an understanding of a
Party’s obligations or benefits under this Agreement may be redacted. Each Sublicense granted by GSK to any rights
licensed to it hereunder will terminate immediately upon the termination of the license from Surface to GSK with
respect to such rights.
Section 2.4. Performance by Independent Contractors. Each Party may contract or delegate any portion of its
obligations or activities hereunder to a Third Party contractor subject to the terms and condition of Section 15.8 and
provided that, (a) the contractor shall be appropriately qualified to conduct the activities it is engaged to conduct under
this Agreement; (b) the contractor undertakes in writing commercially reasonable obligations of confidentiality and
non-use regarding Confidential Information, that are substantially the same as those undertaken by the Parties with
respect to Confidential Information pursuant to ARTICLE IX hereof; and (c) the contractor undertakes in writing to
assign or exclusively license back (with the right to sublicense) all intellectual property that GSK deems to be material
to the Development, Manufacture or Commercialization of a Licensed Antibody or Licensed Product developed in the
course of performing any such work to the corresponding Party.
Section 2.5. Reservation of Rights. No rights, other than those expressly set forth in this Agreement, are granted to
either Party under this Agreement, and no additional rights will be deemed granted to either Party by implication,
estoppel or otherwise, with respect to any intellectual property rights. All rights not expressly granted by either Party
or its Affiliates to the other Party under this Agreement are reserved. Neither Party nor any of its Affiliates will use or
practice any Know-How or Patent Rights licensed or provided to such Party or any of its Affiliates outside the scope of
or otherwise not in compliance with the rights and licenses granted to such Party and its Affiliates under this
Agreement.
Section 2.6. [***].
Section 2.7. Third Party IP. If Surface or any of its Affiliates enters into any agreement or other arrangement with a
Third Party with respect to a grant of rights under any Patent Rights or Know-How of such Third Party (whether by
acquisition or by license) that are reasonably useful (but not necessary) for the Development, Manufacture, or
Commercialization of the Licensed Antibodies or Licensed Products in the Field in the Territory (“Third Party IP”),
Surface shall notify GSK of such Third Party IP. Promptly following the execution of any such agreement, Surface will
provide GSK with a copy of the applicable agreement with such Third Party. Within [***] following receipt of such
contract, GSK will decide, in its sole discretion, whether or not to [***] and provide Surface written notice of such
decision. If GSK desires to [***], (a) GSK shall notify Surface in writing of such election, (b) such [***] under this
Agreement and included in [***], (c) [***], and (d) GSK will be [***]. The obligations of Surface set forth above
under this Section 2.7 will terminate upon a Change of Control of Surface. For the avoidance of doubt, as between the
Parties, it shall be GSK’s determination and responsibility to obtain rights to any Patent Rights or Know-How that is
necessary for the Development, Manufacture or Commercialization of the Licensed Antibodies in the Field in the
Territory. For purposes of this Section 2.7, a Patent Right claiming [***] for a Licensed Antibody or a Licensed
Product shall be deemed to be necessary for the Development, Manufacture, or Commercialization of such Licensed
Antibody or Licensed Product in the Field in the Territory.
Section 2.8. Exclusivity and Alternative Products.
(a) Surface Exclusivity. During the Term, neither Surface nor any of its Affiliates will directly or indirectly research,
develop, manufacture or commercialize, nor collaborate with, enable or otherwise authorize, license or grant any right
to any Third Party to research, develop, manufacture or commercialize, any Alternative Product anywhere in the
Territory.
(b) Acquisition of Alternative Product Rights. In addition, notwithstanding anything to the contrary in this Agreement,
in the event Surface or any of its Affiliates acquires or otherwise obtains rights to research, develop, manufacture or
commercialize any Alternative Product as the result of any license, merger, acquisition,
reorganization, consolidation or combination with or of a Third Party other than a Change of Control of Surface or its
Affiliates (each, an “Acquisition Transaction,” and the Third Party involved in such transaction, the “Acquisition Third
Party”) and, on the date of the completion of such Acquisition Transaction, such Alternative Product is being
researched, developed, manufactured or commercialized by such Third Party in a matter that, if done by Surface,
would violate Surface’s exclusivity obligations in Section 2.8(a), then Surface or such Affiliate will: [***].
(c) For purposes hereof, “Alternative Product” means [***].
ARTICLE III
TRANSITION MATTERS; TECHNOLOGY TRANSFER
Section 3.1. Technical Transition Services. During the Transition Period, Surface will perform certain transition and
research services in connection with the Development and Manufacture of Licensed Antibodies and Licensed Products
(“Technical Transition Services”), as more fully detailed in the Transition Plan.
Section 3.2. Transition Plan. The Technical Transition Services will be performed in accordance with the terms of a
written plan, which sets forth (a) a description of the Technical Transition Services, (b) the proposed timetable for
conducting such Technical Transition Services, (c) the estimated Transition Costs for completion of such Technical
Transition Services, and (d) the deliverables (the “Transition Plan,” the initial version of which is attached hereto as
Exhibit C). Surface will use reasonable efforts to complete the Technical Transition Services set forth in the Transition
Plan within the timeframes set forth in the Transition Plan and within the estimated Transition Costs. In the event of
any inconsistency between the Transition Plan and this Agreement, the terms of this Agreement will prevail. During
the Transition Period, each Party will have the right to propose modifications or amendments to the Transition Plan;
provided, however that any modifications or amendments to such Transition Plan that are proposed by either Party will
be subject to review by the JDC pursuant to Section 6.1(b) and approved by GSK.
Section 3.3. Technical Transition Services Reporting. At each meeting of the JDC, Surface will provide an update
regarding the Technical Transition Services it has performed, or caused to be performed, since the previous meeting of
the JDC, its Technical Transition Services in process, and the future Technical Transition Services it expects to initiate
prior to the next meeting of the JDC. Surface will respond to the reasonable questions or requests of the JDC or GSK,
as applicable, for additional information relating to such Technical Transition Services in a timely manner.
Section 3.4. Technical Transition Services Costs. Within [***] after the end of [***] during the Transition Period,
Surface shall submit to GSK an invoice and reasonably detailed report (including FTE hours) and any additional
documentation reasonably requested by GSK, setting forth all Transition Costs incurred by Surface during such [***].
Surface shall promptly inform GSK upon Surface determining that it is likely to overspend by more than [***] of the
Transition Costs for an activity set forth in the Transition Plan. Any and all portion of such overspend shall be borne
by Surface unless otherwise approved by GSK prior to the incurrence thereof. GSK shall reimburse Transition Costs
within [***] after receipt of an invoice from Surface.
Section 3.5. Data Integrity Practices. All activities conducted under the Transition Plan will be conducted in
accordance with the following practices:
(a) data will be generated using sound scientific techniques and processes;
(b) data will be accurately recorded by the persons performing the applicable Technical Transition Services in
accordance with data integrity practices;
(c) data will be analyzed appropriately without bias in accordance with data integrity practices;
(d) data and results from experiments will be stored securely such that it can be retrieved without undue burden; and
(e) data trails will exist to demonstrate or reconstruct without undue burden key decisions made during the
performance of, presentations made about, and conclusions reached with respect to the activities undertaken in the
performance of the Transition Plan.
GSK may request changes to the requirements set forth above in this Section 3.5 where GSK reasonably believes such
changes are required to ensure that such activities are undertaken in compliance with data integrity practices, and
Surface shall use reasonable efforts to accommodate such changes. GSK shall be permitted, in its sole discretion and
sole cost and expense, no more than once per Calendar Year, to undertake on-site compliance audits of Surface’s data
integrity practices in respect of the activities performed by Surface under the Transition Plan by providing Surface
with [***] written notice of GSK’s intent to do so, such audits to be conducted at a time mutually convenient to both
Parties. All information revealed to GSK in such audit shall be considered Confidential Information of Surface.
Section 3.6. Animal Welfare. Surface agrees to comply with all applicable Laws for the care, welfare and ethical
treatment of animals in the country where the animal studies are being performed. Surface further agrees to comply
with the “3Rs” Principles – reducing the number of animals used, replacing animals with non-animal methods
whenever possible, and refining the research techniques used. All work must be conducted in adherence to the core
principles for animals identified below. Applicable Laws may be additive to the core principles, but Surface agrees to
comply, and shall procure and ensure that those acting for or on behalf of Surface (including its subcontractors)
comply, at a minimum, with these core principles:
(a) access to species appropriate food and water,
(b) access to species specific housing, including species appropriate temperature and humidity levels,
(c) provision of humane care and a program of veterinary care through guidance of a veterinarian,
(d) animal housing that minimizes the development of abnormal behaviors,
(e) adherence to principles of replacement, refinement and reduction in the design of in vivo or ex vivo studies with
processes to optimize animal use and to ensure effective population management,
(f) work using animals is supported by a relevant scientific justification/rationale, approved by an institutional ethical
review process and subjected to independent scientific review,
(g) commitment to minimizing pain and distress during in vivo and ex vivo studies, and
(h) work is performed by staff documented as trained and competent to conduct the procedures for which they are
responsible.
Upon reasonable advanced written notice, GSK (or its delegate) shall have the right to inspect Surface’s or its
subcontractor’s records and facilities; provided, that if Surface’s contracts with its subcontractors do not permit GSK
(or its delegate) to so inspect, then GSK may request that Surface conduct such inspection on GSK’s behalf. The scope
of the inspection may include a tour of the facility, the opportunity to view relevant SOPs, training records, building
management records, animal health records, ethical review documents, and any other documents reasonably necessary
to assess compliance by Surface or its subcontractor with the terms of this Section 3.6; provided that such inspection
shall not extend to those parts of records and facilities which Surface or its subcontractor can demonstrate to be subject
to confidentiality arrangements with other programs or customers. To the extent that any significant deficiencies are
identified as the result of such inspection, Surface shall endeavor in good faith to take reasonable and practical
corrective measures to remedy any such material deficiencies.
Section 3.7. Transfer of Licensed Know-How. Surface will use reasonable efforts to disclose and make available to
GSK the Licensed Know-How that exists as of the Effective Date pursuant to and within the timeframes set forth in
the Transition Plan. Following the Transition Period, Surface will use reasonable efforts to disclose and make available
to GSK any additional Licensed Know-How of which Surface or GSK become aware, and respond to any requests by
GSK for additional Licensed Know-How Controlled by Surface relating to the Development and Manufacture of the
Licensed Antibodies and Licensed Products. Surface will be permitted to make such Licensed Know-How available in
such form as Surface will determine, including, if Surface so elects, in the form such Licensed Know-How is
maintained by Surface. GSK will bear all Third Party expenses in connection with the transfer of Licensed Know-How
after the Transition Period.
Section 3.8. Transfer of Licensed Antibodies. Surface will deliver, at Surface’s cost and expense, research grade
Licensed Antibodies as described in the Transition Plan (the “Licensed Antibody Materials”) EXW (Incoterms 2020)
to GSK pursuant to and within the timeframes set forth in the Transition Plan. Title and risk of loss of such Licensed
Antibody Materials will transfer upon delivery as defined in the Transition Plan. GSK will only use the Licensed
Antibody Materials for the Development performed by or on behalf of GSK for the Licensed Antibodies and Licensed
Products; provided that, GSK will not use such Licensed Antibody Materials in research testing involving human
subjects. The Licensed Antibody Materials are experimental in nature and are provided “AS IS,” without any
warranties as to merchantability or fitness for a particular purpose. GSK further acknowledges that the Licensed
Antibody Materials’ properties or characteristics are not known, and GSK agrees that GSK will use such Licensed
Antibody Materials with reasonable care and will assume responsibility for any losses or injuries incurred by it or its
Affiliates or its or their Sublicensees through use of such Licensed Antibody Materials.
ARTICLE IV
DEVELOPMENT
Section 4.1. Development Diligence; Development Responsibilities.
(a) Development Diligence. GSK (directly, or through its Affiliates, its or their Sublicensees and subcontractors) will
use Commercially Reasonable Efforts to Develop, including obtain and maintain Regulatory Approval of Licensed
Products in the Field in the Territory.
(b) Development Responsibilities and Compliance. Subject to the terms and conditions of this Agreement, GSK will
be solely responsible, at its own expense, for managing and conducting all activities relating to the Development of the
Licensed Antibody and Licensed Product for the purpose of obtaining Regulatory Approval in the Field and in the
Territory. GSK will conduct its Development activities in good scientific manner and in compliance with applicable
Law, including Laws regarding environmental, safety and industrial hygiene, and GLP, GCP, current standards for
pharmacovigilance practice, and all applicable requirements relating to the protection of human subjects, as well as
GSK’s applicable internal policies and codes of practice.
Section 4.2. Development Reporting. No later than [***] during the Term for so long as GSK is conducting the
Development, GSK will provide Surface, via the Alliance Managers pursuant to Section 6.1(f), with reasonably
detailed written reports summarizing the material Development activities it has performed, or caused to be performed,
since the preceding report, its material Development activities in process, and the future material Development
activities it expects to initiate prior to the next report. GSK will respond to the reasonable questions or requests of the
JDC or Surface, as applicable, for additional information relating to such activities in a timely manner. In addition,
upon Surface’s request, no more than [***] per [***], GSK’s senior executives responsible for the Development and
related Manufacturing activities with respect to the Licensed Products will meet with Surface’s senior executives to
discuss GSK’s or its Affiliates’ or its or their Sublicensees’ Development and related Manufacturing activities for such
Licensed Product.
Section 4.3. Regulatory Submissions and Approvals.
(a) Regulatory Responsibilities.
(i) GSK will be responsible, at its sole cost and expense, for exercising Commercially Reasonable Efforts to seek and
attempt to obtain Regulatory Approvals for the Licensed Products in the Field in the Territory. GSK will be responsible
for and have the exclusive right to seek and attempt to obtain Pricing and Reimbursement Approvals for the Licensed
Products in the Field in the Territory.
(ii) During the Transition Period, to the extent set forth in the Transition Plan, Surface shall be responsible for the
preparation of the Chemistry, Manufacturing and Control (CMC) section of the IND application for the Licensed
Product, which section shall be in form and substance reasonably satisfactory to GSK. Surface shall deliver such CMC
section to GSK in accordance with the Transition Plan. Following the end of the Transition Period, Surface shall
cooperate and support GSK, [***] as may be reasonably requested by GSK during the Term, in preparing and
submitting Regulatory Materials and otherwise with respect to the CMC section of the IND applications.
(b) Ownership of Regulatory Approvals. GSK will own all Regulatory Materials, including all submissions and
applications for Regulatory Approvals, and Regulatory Approvals, for the Licensed Products in the Field in the
Territory.
(c) Regulatory Cooperation. GSK will keep Surface reasonably informed with regard to any material Regulatory
Approval or Pricing and Reimbursement Approval proceedings for the Licensed Products in the Field in the Territory
in accordance with its reporting obligation set forth in Section 4.2. At Surface’s reasonable request, [***]. Surface
shall cooperate and support GSK [***], as may be reasonably necessary in preparing and submitting Regulatory
Materials and otherwise with respect to obtaining Regulatory Approvals for the Licensed Product and in the activities
in support thereof, to the extent Surface has control over or the right to obtain documents or other materials that are
necessary or useful for GSK or any of its Affiliates or its or their Sublicensees to obtain Regulatory Approvals for the
Licensed Product.
(d) Regulatory Audits. The Parties will cooperate in good faith with respect to Regulatory Authority inspections of any
site or facility of the Existing CMO where Manufacturing of Licensed Products in the Field are conducted pursuant to
this Agreement (each an “Audited Site”). Subject to applicable Law, GSK will be given a reasonable opportunity to
attend any inspection by any Regulatory Authority of the Audited Sites, and the summary, or wrap-up, meeting with a
Regulatory Authority at the conclusion of such inspection. If such attendance would result in the disclosure to GSK of
Confidential Information unrelated to the subject matter of this Agreement, the Parties will enter into a confidentiality
agreement covering such unrelated subject matter. In the event that any Audited Site is found to be non-
compliant with one or more GMP standards, Surface will submit to GSK a proposed recovery plan or Corrective and
Preventative Actions (“CAPA”) as soon as reasonably practicable after Surface, its Affiliate or its permitted
subcontractor receives notification of such non-compliance from the relevant Regulatory Authority and Surface will
use reasonable efforts, at Surface’s cost, to implement such recovery plan or CAPA promptly after submission. Surface
agrees, to the maximum extent reasonably possible, to include in any contract or other written arrangement with its
permitted subcontractors, a clause permitting GSK to exercise its rights under this Section 4.3(d). Surface’s obligations
under this Section 4.3(d) will end at the time Surface is no longer performing the activities set forth in Section 5.1(a).
ARTICLE V
MANUFACTURE, SUPPLY AND COMMERCIALIZATION
Section 5.1. Manufacturing and Supply.
(a) Surface Obligations. Surface, its Affiliates, or its or their Sublicensees or subcontractors (including the Existing
CMO) will be solely responsible, at GSK’s cost and expense, for Manufacturing and supplying the worldwide
requirements for Licensed Antibodies and Licensed Products in the Territory (i) as part of the Technical Transition
Services, and (ii) through to the date of IND Acceptance.
(b) GSK Obligations. Subject to the preceding sentence, GSK, its Affiliates, its or their Sublicensees or subcontractors
will be solely responsible, at its sole cost and expense, for Manufacturing and supplying the worldwide requirements
for the Development and Commercialization of the Licensed Antibodies and the Licensed Products in the Territory,
except for such Manufacturing activities performed by Surface as part of the Technical Transition Services.
(c) Product Warranties. Surface shall Manufacture and supply Licensed Antibodies and Licensed Products in
accordance with the Product Warranties set forth in Section 10.2(k), to the extent such warranties exist in Surface’s
agreement with the Existing CMO.
(d) Delivery. The Parties will cooperate to ensure that the production schedule for Licensed Antibody or Licensed
Product will meet the delivery dates or timelines in the Transition Plan. Surface shall further ensure that for any supply
to be delivered to GSK, its Manufacturing subcontractors deliver each shipment of the Licensed Antibody and the
Licensed Product, as the case may be, on time and to the location designated by GSK, subject to the terms and
conditions of Surface’s agreement with the Existing CMO.
(e) Quality. As between GSK and Surface, Surface shall be responsible to manage all quality aspects of Manufacturing
and supply performed by its subcontractors, provided that GSK shall be permitted to have a consultancy role as set
forth in this Section 5.1(e), subject to the terms and conditions of Surface’s agreement with the Existing CMO. GSK’s
consultancy role shall include, but not be limited to: [***]. In any event, Surface will notify GSK as soon as it
becomes aware of any issue (foreseen or unforeseen) which may result in Surface being unable to provide the required
quantities of Licensed Antibody or Licensed Product, and the Parties shall promptly meet to discuss in good faith what
actions are required (if any) to resolve such issue.
Section 5.2. Commercialization.
(a) Commercialization Diligence. Upon receipt of the Regulatory Approval for a Licensed Product in the Field in a
given country in the Territory, GSK (directly, or through its Affiliates, its or their Sublicensees or subcontractors) will
use Commercially Reasonable Efforts to Commercialize such Licensed Product in the Field in such country in the
Territory. GSK will be solely responsible for, at its expense, and will have sole discretion with respect to,
Commercializing the Licensed Product in the Field in the Territory.
(b) Reporting Obligations. GSK will provide Surface with written notice of the First Commercial Sale of each
Licensed Product in the Field in [***] as soon as reasonably practicable after such event.
(c) Trademarks. GSK will have the right to brand the Licensed Products in the Field in the Territory using GSK related
Trademarks and any other Trademarks and trade names it determines appropriate for the Licensed Products, which
branding may vary by country. GSK will own all rights in such Trademarks and register and maintain such Trademarks
in the countries within the Territory, where and how it determines appropriate.
ARTICLE VI
GOVERNANCE; JOINT DEVELOPMENT COMMITTEE; JOINT PATENT COMMITTEE
Section 6.1. Joint Development Committee.
(a) Formation; Purposes and Principles. Within [***] after the Effective Date, Surface and GSK will form a joint
development committee (the “JDC”) to facilitate information sharing between the Parties with respect to the
Development of the Licensed Products as more fully described in Section 3.3, Section 4.2 and Section 6.1(b).
(b) Specific Responsibilities. In addition to its overall responsibility to facilitate information sharing between the
Parties with respect to the Development activities under this Agreement, the JDC will:
(i) review and discuss proposed amendments or revisions to the Transition Plan (for clarity, GSK shall have the final
decision making authority to approve the Transition Plan as described in Section 3.2; provided that any amendment or
revision to add additional material obligations that are not set forth in the Transition Plan will require Surface’s
consent);
(ii) exchange information with respect to the Technical Transition Services, and review and discuss Surface’s activities
and progress under the Transition Plan; and
(iii) perform such other functions as are assigned to it in this Agreement or as appropriate to further the purposes of
this Agreement to the extent agreed to in writing by the Parties.
(c) Membership. The JDC will be composed of a total of [***] representatives of each Party, which will be appointed
by each of Surface and GSK, respectively. Each individual appointed by a Party as a representative to the JDC will be
an employee of such Party with sufficient seniority within the applicable Party to provide meaningful input and make
decisions arising within the scope of the JDC’s responsibilities, and have knowledge and expertise in the Development
of compounds and products similar to the Licensed Antibody and Licensed Products under this Agreement. The JDC
may change its size from time to time by consent of its members, provided that the JDC will consist at all times of an
equal number of representatives of each Party, unless otherwise agreed by the Parties in writing. Each Party may
replace any of its JDC representatives at any time upon written notice to the other Party, which notice may be given by
e-mail, sent to the other Party. The JDC will be chaired by one designated representative of GSK. The chairperson will
be responsible, with support from the Alliance Manager, for calling and
conducting meetings and preparing and circulating an agenda in advance of each meeting; provided, however, that the
chairperson will include any agenda items proposed by either Party on such agenda. The minutes of each JDC meeting
that reflect the material decisions made and action items identified at such meetings will be prepared and reviewed in
accordance with the procedures established by the JDC. If a representative, within such time period, does not notify the
responsible Alliance Manager that he/she does not approve of the minutes, the minutes will be deemed to have been
approved by such representative. Each JDC representative and the Alliance Manager will be subject to confidentiality
obligations no less stringent than those in ARTICLE IX.
(d) Meetings. The JDC will hold [***] meetings for so long as the JDC exists, unless the Parties mutually agree in
writing to a different frequency. No later than [***] prior to any meeting of the JDC (or such shorter time period as the
Parties may agree), the chairperson (or an Alliance Manager) will prepare and circulate an agenda for such meeting.
Either Party may also call a special meeting of the JDC by providing at least [***] prior written notice to the other
Party if such Party reasonably believes that a significant matter must be addressed prior to the next scheduled meeting,
in which event the Alliance Managers will work with the chairperson of the JDC to provide the members of the JDC
no later than [***] prior to the special meeting with an agenda for the meeting and materials reasonably adequate to
enable an informed decision on the matters to be considered. The JDC may meet in person or by audio or video
conference as its representatives may mutually agree. Other representatives of the Parties, their Affiliates and Third
Parties involved in the Development of Licensed Products may be invited by the members of the JDC to attend
meetings as observers or to facilitate discussions outside of meetings; provided, however, that such representatives are
subject to confidentiality obligations no less stringent than those set forth in ARTICLE IX. Each Party will be
responsible for its costs to attend each meeting of the JDC.
(e) JDC Decisions. Other than as set forth herein, in order to make any decision required of it hereunder with respect to
any approval, the JDC must have present (in person, by videoconference or telephonically) at least one member of
each Party. The Parties will endeavor to make decisions of the JDC by consensus; provided that GSK will have the tie-
breaking vote in the event of any dispute; provided, further, that no decision by GSK may be in conflict with any of the
terms of this Agreement (including by amending or increasing any obligations on Surface or any of its Affiliates (other
than those set forth in the Transition Plan, which is subject to Surface’s right to consent under Section 6.1(b)(i)) or by
granting any licenses or other rights to GSK or any of its Affiliates that, in each case, are not expressly set forth in this
Agreement).
(f) Disbanding of JDC. Unless otherwise agreed by the Parties, the JDC will have no further responsibilities and will
disband at the end of the Transition Period.
(g) Limitations on Authority of the JDC. Except as otherwise provided in this Agreement, the JDC will have solely the
roles and responsibilities assigned to it in this ARTICLE VI. The JDC will have no authority to amend, modify or
waive compliance with this Agreement or make any decision other that those specifically assigned under this
Agreement to be made by the JDC. The JDC shall not have the authority to alter, or waive compliance by a Party with,
a Party’s obligations under this Agreement.
Section 6.2. Joint Patent Committee.
(a) Formation; Purposes and Principles. Within [***] after the Effective Date, Surface and GSK will form a joint
patent committee (the “JPC”) to (i) facilitate information sharing between the Parties with respect to the Prosecution of
the Licensed Patents, and the Joint Patents, (ii) review and comment on filings or responses with respect to the
Licensed Patents and Joint Patents as and if required under this Agreement, and (iii) any other matters for which the
Parties are obligated to cooperate, keep each other informed or otherwise communicate under Article VIII; provided
that GSK shall have the final decision making authority.
(b) JPC Decisions. Other than as set forth herein, in order to make any decision required of it hereunder, the JPC must
have present (in person, by videoconference or telephonically) at least one member of each Party. The Parties will
endeavor to make decisions of the JPC by consensus; provided that GSK will have the tie-breaking vote in the event of
any dispute; provided, further, that no decision by GSK may be in conflict with any of the terms of this Agreement
(including by amending or increasing any obligations on Surface or any of its Affiliates or by granting any licenses or
other rights to GSK or any of its Affiliates that, in each case, are not expressly set forth in this Agreement).
(c) Disbanding of JPC. Unless otherwise agreed by the Parties, the JPC will have no further responsibilities and will
disband at the end of the Term.
(d) Limitations on Authority of the JPC. Except as otherwise provided in this Agreement, the JPC will have solely the
roles and responsibilities assigned to it in this ARTICLE VI. The JPC will have no authority to amend, modify or
waive compliance with this Agreement or make any decision other that those specifically assigned under this
Agreement to be made by the JPC. The JPC shall not have the authority to alter, or waive compliance by a Party with,
a Party’s obligations under this Agreement.
Section 6.3. Alliance Managers. Promptly after the Effective Date, each Party shall appoint an individual to act as
alliance manager for such Party (each, an “Alliance Manager”). Each Alliance Manager shall attend meetings of the
JDC as a non-voting observer. The Alliance Managers shall be the primary point of contact for the Parties regarding
communications contemplated by this Agreement, whether formal reporting obligations or otherwise, including after
disbanding of the JDC. The Alliance Managers shall also be responsible for assisting the JDC in performing its
responsibilities such as scheduling meetings, circulating agendas as necessary and preparing and finalizing the minutes
from meetings of the JDC. Each Party may replace its Alliance Manager, in its sole discretion, from time to time, upon
notification to the other Party, which notice may be given by e-mail, sent to the other Party.
ARTICLE VII
FINANCIAL PROVISIONS
Section 7.1. Upfront Payment; Milestone Payments.
(a) Upfront Payment. Subject to the terms and conditions of this Agreement, and in partial consideration for the rights
granted to GSK under this Agreement, GSK will pay Surface a non-refundable, non-creditable payment in the amount
of Eighty-Five Million U.S. Dollars (US$ 85,000,000), which upfront payment will be due and payable to Surface
within [***] Business Days following receipt of an invoice from Surface for such payment on or after the Effective
Date.
(b) Development Milestone Payment. During the Term, GSK will notify Surface in writing of the achievement by or
on behalf of GSK, its Affiliates or its or their Sublicensees of any milestone event set forth in this Section 7.1(b) (each,
a “Development Milestone Event”) within [***] after the occurrence thereof. After receipt of such notice, Surface will
submit an invoice to GSK for the corresponding non-refundable, non-creditable milestone payment set forth in the
tables below (each, a “Development Milestone Payment”). GSK will make the corresponding Development Milestone
Payment by [***] from GSK’s receipt of an invoice, in accordance with GSK’s standard payment terms. Each of the
Development Milestone Payments set forth in this Section 7.1(b) is payable only one time upon the first achievement
of the corresponding Development Milestone Event by the first Licensed Product to achieve such Development
Milestone Event and no amounts shall be due for subsequent or repeated achievements of such Development
Milestone Event, whether for the same or a different Licensed Product.
Development Milestone Event
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
6. [***]
7. [***]
8. [***]
9. [***]
Total
Development
Milestone
Payment
(in Dollars)
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
$ 245,000,000
Notwithstanding anything to the contrary set forth herein, [***]. The maximum aggregate amount of Development
Milestone Payments payable by GSK pursuant to this Section 7.1(b) is Two Hundred Forty-Five Million U.S. Dollars
($245,000,000).
(c) Sales Milestone Payments. During the Term, GSK will notify Surface in writing of the achievement by or on behalf
of GSK, its Affiliates or its or their Sublicensees of any milestone event set forth in this Section 7.1(c) (each, a “Sales
Milestone Event” and the corresponding payment, a “Sales Milestone Payment”) within [***] after becoming aware of
the occurrence thereof. Each of the Sales Milestone Payments set forth in this Section 7.1(c) is payable only upon the
first achievement of such Sales Milestone Event and none of the Sales Milestone Payments will be payable more than
once and no amounts shall be due for subsequent or repeated achievements of such Sales Milestone Event, whether for
the same or a different Licensed Product. For clarity, but subject to the following sentence, the Sales Milestone
Payments will be additive such that if all [***] Sales Milestone Events set forth below are achieved in the same
Calendar Year, GSK will pay to Surface a payment of Four Hundred Eighty-Five Million Dollars ($485,000,000), and
the maximum aggregate amount of Sales Milestone Payments payable by GSK pursuant to this Section 7.1(c) is Four
Hundred Eighty-Five Million Dollars ($485,000,000). [***]. After receipt of any notice under this Section 7.1(c)
regarding achievement of a Sales Milestone Event [***], Surface will submit an invoice to GSK for the corresponding
non-refundable, non-creditable Sales Milestone Payment [***]. GSK will make the corresponding Sales Milestone
Payment [***] by [***] from GSK’s receipt of an invoice, in accordance with GSK’s standard payment terms.
Sales Milestone Event
1. Aggregate annual Net Sales of all Licensed Products
in the Territory in a Calendar Year greater than [***]
2. Aggregate annual Net Sales of all Licensed Products
in the Territory in a Calendar Year greater than [***]
3. Aggregate annual Net Sales of all Licensed Products
in the Territory in a Calendar Year greater than [***]
4. Aggregate annual Net Sales of all Licensed Products
in the Territory in a Calendar Year greater than [***]
Total
Sales Milestone
Payment
(in Dollars)
[***]
[***]
[***]
[***]
$ 485,000,000
Section 7.2. Royalties.
(a) Royalty Rate. Subject to the terms and conditions of this Agreement, and in partial consideration for the rights
granted to GSK under this Agreement, during the Royalty Term, GSK will pay to Surface non-refundable, non-
creditable royalties (except in the case of an overpayment as set forth in Section 7.5(b)) at the graduated royalty rates
specified in the following table with respect to the aggregate annual worldwide Net Sales of all Licensed Products
across all indications in the Territory in a given Calendar Year:
Aggregate Annual Worldwide Net Sales of All Licensed
Products in a Calendar Year
Portion of aggregate annual worldwide Net Sales up
to and including [***]
Portion of aggregate annual worldwide Net Sales
greater than [***] up to and including [***]
Portion of aggregate annual worldwide Net Sales
greater than [***] up to and including [***]
Portion of aggregate annual worldwide Net Sales
greater than [***]
Royalty
Rate
[***]
percent
([***]%)
[***]
percent
([***]%)
[***]
percent
([***]%)
[***]
percent
([***]%)
(b) Royalty Term. Royalties will be due under this Section 7.2 with respect to a given Licensed Product in a given
country in the Territory during the period commencing upon the First Commercial Sale of such Licensed Product in
such country and ending upon the later of (i) the expiration of the last-to-expire Valid Claim that Covers the
composition of matter or approved method of use of such Licensed Product or the Licensed Antibody contained in
such Licensed Product in such country, (ii) the expiration of the Regulatory Exclusivity Period with respect to such
Licensed Product in such country, or (iii) the tenth (10th) anniversary of the First Commercial Sale of such Licensed
Product in such country (such period, the “Royalty Term”). For clarity, once the Royalty Term has expired in a given
country in the Territory, Net Sales in such country will not be included in the calculation of the aggregate annual
worldwide Net Sales used to determine the royalty rate.
Section 7.3. Royalty Payments and Reports. Within [***] after the end of each Calendar Quarter, commencing with the
Calendar Quarter during which the First Commercial Sale of a Licensed Product is made anywhere in the Territory,
GSK will provide to Surface a report setting forth on a Licensed Product–by–Licensed Product and country-by-country
basis (a) the Net Sales; and (b) the calculation of the royalties payable under this Agreement on account of those Net
Sales. Each royalty report along with the royalties shown to have accrued on that report are due and payable to Surface
within [***] following the end of such Calendar Quarter. All payments due under this Section 7.3 shall be made by
bank wire transfer in immediately available funds to an account designated by Surface.
Section 7.4. Royalty Payment Reductions. The royalties payable under Section 7.2 will be subject to the following:
(a) Third Party Licenses. If GSK enters into a license agreement after the Effective Date with a Third Party for the
right to use or Commercialize a Licensed Product under intellectual property controlled by such Third Party, pursuant
to which GSK pays a royalty to such Third Party for the right to use or Commercialize such Licensed Product under
such Patent Rights, then, subject to Section 7.4(e), GSK may deduct [***] of all upfront payment, milestone payments,
and royalty payments paid to such Third Party to the extent attributable to the use or Commercialization of such
Licensed Product against the royalties due under Section 7.2; provided that GSK shall have the right to carry forward
for application against royalties payable to Surface with respect to Net Sales of such Licensed Product in future
periods any amount that is not so credited due to the limitation in Section 7.4(e).
(b) [***].
(c) Lack of Patent Protection. Subject to Section 7.4(e) the royalties payable to Surface with respect to Net Sales of
Licensed Products shall be reduced, on a Licensed Product–by–Licensed Product and country-by-country basis, to
[***] of the amounts otherwise payable pursuant to Section 7.2 during any portion of the Royalty Term upon
expiration of the last-to-expire Valid Patent Claim Covering the composition of matter or method of use of the
applicable Licensed Product in that country.
(d) Biosimilar Competition. If, on a Licensed Product-by-Licensed Product and country-by-country basis, at least one
Biosimilar Product is commercially available with respect to such Licensed Product in such country and the combined
market share for all such Biosimilar Products [***]. Unit volume sales will be identified and calculated based on
relevant information published by IQVIA, any successor to IQVIA, or any other similar industry-standard Third Party
source used by GSK.
(e) Cumulative Deductions. Notwithstanding the foregoing, in no event will the deductions set forth in Section 7.4(a)
through Section 7.4(d) reduce the royalties otherwise payable to Surface as specified in Section 7.2(a) by more than
[***].
Section 7.5. Financial Audits.
(a) Record Keeping. GSK and its Affiliates will, and will cause their respective Sublicensees to, keep complete, true
and accurate books and records in accordance with its Accounting Standards of the items underlying (i) Net Sales, (ii)
royalty payments under this Agreement and (iii) [***]. GSK and its Affiliates will, and will cause their respective
Sublicensees to keep, such books and records for at least [***] following the Calendar Quarter to which they pertain.
Surface [***] will have the right annually, at its own expense, to have an internationally-recognized independent,
certified public accountant, selected by Surface [***] and reasonably acceptable to GSK (the “Auditor”), review any
such records of GSK in the location(s) where such records are customarily maintained by GSK upon at least [***]
prior written notice, during regular business hours and under obligations of confidentiality,
except to the extent necessary to enforce Surface’s rights under this Agreement [***] or if disclosure is required by
applicable Law, for the sole purpose of verifying the basis and accuracy of payments made under this Agreement and
the content of the reports described in Section 7.3, within the prior [***] period after receipt of such report. The
Auditor will have the right to disclose to Surface ([***] its conclusions regarding any payment owed under this
Agreement. The records for any Calendar Year may be audited no more than once with respect to records covering any
specific period of time.
(b) Audit Report. The report prepared by the Auditor, a copy of which will be sent or otherwise provided to each Party
by such Auditor at the same time before such report is considered final, will contain the conclusions of such Auditor
regarding the audit and will specify that the amounts paid pursuant thereto were correct or, if incorrect, the amount of
any underpayment or overpayment, and the specific details regarding any discrepancies. No other information will be
provided to Surface without the prior consent of GSK unless disclosure is required by applicable Laws, and if so
determined by Surface in consultation with GSK, it will, if permitted, give GSK prior notice thereof to the extent
possible for GSK to seek a protective order against or limiting such disclosure. If such report shows any
underpayment, then GSK will remit to Surface, within [***] after receipt of such report, (i) the amount of such
underpayment and (ii) if such underpayment exceeds [***] of the total amount owed for the period then being audited,
the actual costs incurred by Surface in conducting such review. For the avoidance of doubt, payment of the
underpayment will be considered a late payment, subject to Section 7.9. If such report shows any overpayment, then at
Surface’s election, either GSK will deduct the overpaid amount for application against future payments owed to
Surface or Surface will reimburse GSK the amount of such overpayment. The Parties mutually agree that all
information subject to review under this Section 7.5 is Confidential Information of both Parties and that the receiving
Party will retain and cause the Auditor to retain all such information in confidence in accordance with confidentiality
and non-use obligations no less stringent than those contained in ARTICLE IX.
Section 7.6. Tax Withholding. Any tax paid or required to be withheld by GSK under applicable Laws in effect at the
time of payment for the benefit of Surface on account of any royalties or other payments payable to Surface under this
Agreement shall be deducted from the amount of royalties or other payments otherwise due. The Parties shall
reasonably cooperate with one another to reduce or minimize any such deduction or withholding required by
applicable Laws, including by providing any forms or other certifications necessary to reduce the amount of such
withholding (i.e. including duly completed IRS Form W-9 or applicable IRS Form W-8). If, in accordance with the
foregoing, GSK withholds any amount, then it will pay to Surface the balance when due, timely remit to the proper
taxing authority the withheld amount, and send Surface proof of such remittance within [***] following Surface’s
request for such proof of remittance. Notwithstanding the foregoing, GSK shall assume the responsibility for, and
increase the amount payable hereunder such that Surface receives the amount it would have received but for, any
Incremental Withholding (as defined below) in the event that such Incremental Withholding arises as a result of any
Withholding Action by or on behalf of GSK. For purposes of this Section, “Withholding Action” by or on behalf of
GSK means any action taken by GSK that would directly result in any additional withholding or reduction from
payments made hereunder (any such amount withheld or deducted, an “Incremental Withholding”, which would not
have resulted absent GSK taking, or causing to be taken, such action).
Section 7.7. VAT and Indirect Taxes. All amounts payable under or in connection with this Agreement are exclusive of
VAT & Indirect Taxes. Any VAT & Indirect Taxes payable on the consideration shall be paid at the same time as the
payment or provision of the consideration to which it relates, subject to the production of a VAT invoice. GSK will
provide to Surface within [***] after the earlier of the Effective Date and receipt of any consideration or a valid VAT
invoice, if appropriate. If such amounts of VAT & Indirect Taxes are refunded subsequently by the fiscal authorities to
GSK, GSK will refund these monies to Surface within [***] of receipt.
Section 7.8. Currency of Payments. All amounts payable and calculations under this Agreement will be in Dollars. As
applicable, Net Sales and any royalty reductions will be calculated using GSK’s standard conversion method consistent
with its applicable Accounting Standards in a manner consistent with GSK’s customary and usual conversion
procedures used in preparing its financial statements applied on a consistent basis, provided that such procedures use a
widely accepted source of published exchange rates, which as of the Effective Date is
Reuters/Bloomberg. All payments under this Agreement will be paid in Dollars by wire transfer to an account
designated by the receiving Party (which account the receiving Party may update from time to time in writing).
Section 7.9. Late Payments. Without limiting any other rights or remedies available to Surface hereunder, any
undisputed late payment or portion thereof by GSK will bear interest, to the extent permitted by Laws, at an annual
rate of [***] above the applicable daily rate published in the Wall Street Journal (or any other qualified source that is
acceptable to both Parties) on the date payment was due or the highest rate permitted by law (whichever is lower),
computed from the date such payment was due until the date GSK makes the payment. Where the late payment is
caused by Surface, including for reasons such as failure to communicate in a timely manner changes to bank details, or
failure to respond to communications from GSK regarding the interpretation or dispute of the terms of such payment,
then no interest will be payable by GSK.
Section 7.10. Invoices. To the extent an invoice is required to be submitted to GSK under this Agreement, such invoice
shall include the information set forth on Schedule 7.10.
Section 7.11. [***].
Section 8.1. Ownership.
ARTICLE VIII
INTELLECTUAL PROPERTY OWNERSHIP,
PROTECTION AND RELATED MATTERS
(a) Subject only to the rights expressly granted to GSK under this Agreement, Surface will retain all rights, title and
interests in and to the Licensed Patents and Licensed Know-How.
(b) As between the Parties, each Party will own all inventions and Know-How conceived, discovered, developed or
otherwise made, as necessary to establish authorship (in case of publication and other copyrightable work),
inventorship (in case of inventions, whether patentable or not) or ownership under applicable Law, solely by or on
behalf of such Party (or its Affiliates, its or their subcontractors or sublicensees (including Sublicensees) or its or their
respective directors, officers, employees or agents) in the course of conducting such Party’s activities or exercising
such Party’s rights under this Agreement, and any and all Patent Rights and other intellectual property rights thereto
(collectively, “Sole Inventions” and with respect to GSK, “GSK Sole Inventions” and with respect to Surface, “Surface
Sole Inventions”). All Patent Rights claiming patentable GSK Sole Inventions will be referred to herein as “GSK
Patents.” All Patent Rights claiming patentable Surface Sole Inventions will be considered Licensed Patents.
(c) As between the Parties, each Party will own an equal, undivided interest in all inventions and Know-How that are
conceived, discovered, developed or otherwise made, as necessary to establish authorship (in case of publication and
other copyrightable work), inventorship (in case of inventions, whether patentable or not) or ownership under
applicable Law, jointly by or on behalf of each Party (or their respective Affiliates, subcontractors or sublicensees
(including Sublicensees) or its or their respective directors, officers, employees or agents) in the course of performing
activities or exercising rights
under this Agreement, whether or not patentable (collectively, “Joint Inventions”), and any and all Joint Patents and
other intellectual property rights thereto. Each Party will have full rights to license, assign and exploit such Party’s
interest in such Joint Inventions (and any Joint Patents arising therefrom) anywhere in the world, without any
requirement of gaining the consent of, or accounting to, the other Party, subject to the licenses granted herein and
subject to any other intellectual property held by such other Party. Each Party will promptly disclose to the other via
the JPC all Joint Inventions, in each case, including all invention disclosures or other similar documents submitted to
such Party by its, or its Affiliates’ subcontractors or sublicensees (including Sublicensees’) or its or their directors,
officers, employees or agents, describing such Joint Inventions.
(d) Assignment Obligation. Each Party will assign its rights, and cause all employees of such Party who perform
activities for such Party under this Agreement to be under an obligation to assign their rights, in any Patent Rights
and Know-How, whether or not patentable, resulting therefrom to such Party to effectuate the terms and conditions set
forth in this Section 8.1. With respect to any activities of a Party under this Agreement that are subcontracted to a
Person that is not an employee, the Party retaining such subcontractor will include in the applicable subcontract an
assignment to such Party of all rights in Patent Rights and Know-How made by such subcontractor resulting from such
activities, and in any event will include in the applicable subcontract a license to such Party that is sublicensable to the
other Party under this Agreement, of any Patent Rights and Know-How made by such subcontractor resulting from
such activities.
(e) Inventorship. Inventorship for inventions made during the course of the performance of this Agreement will be
determined in accordance with United States patent laws for determining inventorship.
Section 8.2. Prosecution and Maintenance of the Licensed Patents.
(a) Prosecution by GSK. As between the Parties, GSK will have the first right, and will use diligent, good faith efforts
to Prosecute the Licensed Patents and Joint Patents in the Field in the Territory to the extent relating to the Licensed
Antibodies or Licensed Products, at GSK’s sole cost and expense through patent counsel or agents of its choice. In
addition, GSK shall have the first right to pursue the European Opposition Proceeding, including to submit arguments
relating to the European Opposition Proceeding on behalf of Surface to the European Patent Office, at GSK’s sole cost
and expense through patent counsel or agents of its choice. GSK will keep Surface reasonably informed via the JPC of
all steps with regard to and the status of such Prosecution of such Licensed Patents and Joint Patents and the activities
in the European Opposition Proceeding, including by providing Surface with (i) copies of all correspondence and
material communications it sends to or receives from any patent office or agency in the Territory relating to such
Licensed Patents, Joint Patents and European Opposition Proceeding, (ii) a draft copy of all applications and other
documents relating to such Licensed Patents, Joint Patents and European Opposition Proceeding sufficiently in
advance of filing to permit reasonable review and comment by Surface and giving due consideration to such
comments, and (iii) a copy of applications and other documents as filed, together with notice of its filing date and
serial number, relating to such Licensed Patents, Joint Patents and European Opposition Proceeding. Before GSK
submits any material filing relating to such Licensed Patents or Joint Patents (including a new patent application) or
the European Opposition Proceeding, or a response to such patent authorities with respect to such Licensed Patents,
Joint Patents or the European Opposition Proceeding, GSK will provide Surface with a reasonable opportunity to
review and comment on such filing or response and will take into account and consider in good faith Surface’s
reasonable and timely requests and suggestions regarding the Prosecution of such Licensed Patents and Joint Patents
and the activities in the European Opposition Proceeding under this Section 8.2(a). In addition, GSK will provide
Surface with copies of all final material filings and responses made to any patent office with respect to the Licensed
Patents, the Joint Patents and the European Opposition Proceeding in a timely manner following submission thereof.
(b) Step-In Right. If GSK elects not to continue to (i) Prosecute a given Patent Right within the Licensed Patents or
Joint Patents in the Field in the Territory pursuant to Section 8.2(a) or (ii) pursue the European Opposition Proceeding,
then in each case GSK will give Surface notice thereof within a reasonable period (but not less than [***]) prior to
allowing such Patent Rights to lapse or become abandoned or unenforceable or prior to any material deadline in the
European Opposition Proceeding, and Surface will have the right to Prosecute such Patent Right within the Licensed
Patents or Joint Patents, as applicable or pursue the European Opposition Proceeding. Surface will have the right, but
not the obligation, to assume responsibility for continuing the Prosecution of such Patent Right in the Field in such
country or pursuing the European Opposition Proceeding and paying any required fees, all at Surface’s sole expense,
through patent counsel or agents of its choice. Upon transfer of GSK’s responsibility for Prosecuting any of the Patent
Rights within the Licensed Patents or Joint Patents to Surface under this Section 8.2(b), (i) solely with respect to any
Patent Right within the Joint Patents, GSK will assign to Surface all of GSK’s rights, title, and interests in and to such
Patent Right; (ii) such Patent Right will cease to be Licensed Patents or Joint Patents licensed to GSK under this
Agreement; (iii) Surface may, in its sole discretion, Prosecute or abandon such Patent Right; and (iv) GSK will
promptly deliver to Surface copies of all necessary files related to the Patent Rights with respect to which
responsibility has been transferred and will take all actions and execute all documents reasonably necessary for
Surface to assume such Prosecution and defense. Upon transfer of GSK’s responsibility for pursuing the European
Opposition Proceeding under this Section 8.2(b), (i) Surface may, in its sole discretion, pursue or abandon efforts
related to the European Opposition Proceeding; and (ii) GSK will promptly deliver to Surface copies of all necessary
files related to the European Opposition Proceeding with respect to which
responsibility has been transferred and will take all actions and execute all documents reasonably necessary for
Surface to assume activities relating to the European Opposition Proceeding.
(c) Cooperation in Support of Assignment. In the event that Surface exercises its right to be assigned GSK’s interest in
a Joint Patent pursuant to Section 8.2(b), then upon Surface’s request, GSK will provide all further cooperation that
Surface reasonably determines is necessary to give effect to such assignment and to ensure Surface the full and quiet
enjoyment of such assigned Patent Rights, including executing and delivering further assignments, consents, releases,
and other commercially reasonable documentation, and providing good faith testimony by affidavit, declaration,
deposition, in person or other proper means, and otherwise assisting Surface in support of any effort by Surface to
establish, perfect, defend, or enforce its rights in such assigned Patent Rights.
(d) Cooperation in Prosecution and the European Opposition Proceeding. Each Party will, and will cause its Affiliates
to, reasonably cooperate, with the other Party with respect to the Prosecution of Licensed Patents and Joint Patents and
activities relating to the European Opposition Proceeding pursuant to this Section 8.2, including providing any
necessary powers of attorney, complying with any applicable duty of candor or disclosure with a patent office and
executing any other required documents or instruments for such Prosecution.
(e) Prosecution of GSK Patents. GSK will control and be responsible, at its own expense, for the Prosecution of all
GSK Patents.
(f) Patent Extensions; Data Exclusivity and Purple Book and Patent Register Listings; Biosimilar Applications.
(i) Patent Term Extension. If elections with respect to obtaining patent term extension or supplemental protection
certificates or their equivalents in any country with respect to any Licensed Product becomes available, upon
Regulatory Approval or otherwise, the Parties will mutually agree on which issued patent to extend, and in any event,
the Parties understand and agree that a Licensed Patent or Joint Patent will be extended (including in the U.S. upon
Regulatory Approval thereof), if possible, in lieu of any other Patent Right only if such Licensed Patent or Joint Patent
would extend longer than such other Patent Right.
(ii) Data Exclusivity, Purple Book and Patent Register Listings. With respect to data exclusivity periods (such as those
periods listed in the Purple Book (including any available pediatric extensions) or periods under national
implementations of Article 10.1(a)(iii) of Directive 2001/EC/83, and all equivalents in any country), GSK, in
consultation with Surface, will seek and maintain all such data exclusivity periods that may be available for any of the
Licensed Products. GSK will determine which Licensed Patents and Joint Patents, if any, will be listed with the
applicable Regulatory Authorities for any Licensed Product, including all so-called “Patent Register” listings required
by certain Governmental Authorities, and all similar listings in any other relevant countries.
(iii) Biosimilar Applications. If either Party receives a copy of an application submitted to the FDA under subsection
(k) of Section 351 of the PHSA (a “Biosimilar Application”) naming a Licensed Product as a reference product or
otherwise becomes aware that such a Biosimilar Application has been filed (including by the receipt of information
disclosed pursuant to Section 351(l)(2) of the PHSA, or in an instance described in Section 351(l)(9)(C) of the PHSA),
either Party will, within [***], notify the other Party so that the other Party may seek permission to view the
application and related confidential information from the filer of the Biosimilar Application under Section 351(l)(1)(B)
(iii) of the PHSA. If either Party receives any equivalent or similar certification, information or notice in any other
jurisdiction in the Territory naming a Licensed Product, either Party will, within [***], notify and provide the other
Party with copies of such communication. Regardless of the Party that is the “reference product sponsor” for purposes
of such Biosimilar Application, (A) GSK will have the first right, after consulting with Surface, to designate pursuant
to Section 351(l)(1)(B)(ii) of the PHSA the outside counsel and in-house counsel who will receive confidential access
to the Biosimilar Application, (B) GSK will have the first right, after consulting with Surface, to (1) list any Licensed
Patents, and any other Patent Rights, as required pursuant to Section 351(l)(3)(A), Section 351(l)(5)(b)(i)(II), or
Section 351(l)(7) of the PHSA, (2) respond to any communications with respect to such lists from the filer of the
Biosimilar Application, and (3) negotiate with the filer of the Biosimilar Application as to whether to utilize a different
mechanism for information exchange than that specified in Section 351(l) of the PHSA; and (C) GSK will have the
first right, after consulting with Surface, to identify Licensed Patents and any other Patent Rights, and to respond to
communications under any equivalent or similar listing in any other jurisdiction in the Territory. If GSK does not
defend a given Patent Right within the Licensed Patents or Joint Patents under this Section 8.2(f)(iii) within [***] (or
such shorter period of time before the time limit, if any, set forth in the appropriate Laws in the United States or any
other country in the Territory to not waive any statutory
rights), or elects not to continue any such defense (in which case it will promptly provide notice thereof to Surface),
then Surface will have the right (but not the obligation), at its sole discretion, to defend any such Patent Right.
Section 8.3. Third Party Infringement.
(a) Notice. Each Party will promptly notify the other in writing of any (i) apparent, threatened or actual infringement
by a Third Party of any Licensed Patent or Joint Patent, or (ii) unauthorized use or misappropriation of any Licensed
Know-How by a Third Party of which it becomes aware, and, in each case, will provide the other Party with all
evidence in such Party’s possession or control supporting such infringement or unauthorized use or misappropriation
(each, an “Infringement”).
(b) GSK Sole Right. As between the Parties, GSK will have the sole right, but not the obligation, using counsel of its
choosing and at its sole expense, to institute any Action alleging Infringement of the Licensed Patents or Joint Patents
by a Third Party conducting the manufacture, use, marketing or sale of a product falling within the scope of the
exclusive license granted to GSK in Section 2.1 (any such Action, an “Infringement Action”). GSK will notify and
keep Surface apprised in writing of any such Infringement Action and will consider Surface’s reasonable interests and
requests regarding such Infringement Action.
(c) Cooperation. In any Infringement Action brought under the Licensed Patents or Joint Patents pursuant to Section
8.3(b), Surface will, and will cause its Affiliates to, reasonably cooperate with GSK, in good faith, relative to GSK’s
efforts to protect the Licensed Patents and Joint Patents and will join such suit as a party, if requested by GSK.
Furthermore, GSK will consider in good faith all reasonable and timely comments from Surface on any proposed
arguments asserted or to be asserted in litigation related to the enforcement or defense of any such Patent Rights. GSK
will have the right to settle any patent infringement litigation with respect to any Licensed Patent under this Section
8.3 in a manner that diminishes the rights or interests of Surface without the consent of Surface (which will not be
unreasonably withheld).
(d) Expenses. Subject to Section 8.3(e), GSK will be solely responsible for all expenses arising from a suit or Action
against an Infringement Action. For the avoidance of doubt, GSK will not be responsible for Surface’s internal
expenses (e.g., FTEs) incurred as a result of Surface’s cooperation with the enforcement Action as provided in this
Section 8.3. Surface will be entitled to separate representation in such matter by counsel of its own choice and at its
own expense, but Surface will at all times cooperate fully with GSK.
(e) Allocation of Recoveries. Any settlements, damages or monetary awards recovered by either Party pursuant to any
Infringement Action with respect to the Licensed Patents or Joint Patents will, after reimbursing the Parties for their
reasonable expenses in making such recovery (which amounts will be allocated pro rata if insufficient to cover the
totality of such expenses), be retained by the Party that has exercised its right to bring the enforcement action;
provided, however, that to the extent that any award or settlement (whether by judgment or otherwise) with respect to a
Licensed Patent or Joint Patent is attributable to loss of sales or profits with respect to a Licensed Product, such
amount shall be paid to or retained by GSK and treated as “Net Sales” in the Calendar Year in which the money is
actually received and any royalties pursuant to Section 7.2 shall be payable by GSK to Surface with respect thereto.
Section 8.4. Claimed Infringement. Each Party will promptly notify the other Party if a Third Party brings any Action
alleging patent infringement by GSK or Surface or any of their respective Affiliates or sublicensees with respect to the
Development, Manufacture or Commercialization of any Licensed Product (any such Action, an “Infringement
Claim”) in the Territory. GSK will have the right, but not the obligation, to control the defense and response to any
such Infringement Claim in the Territory, at GSK’s sole cost and expense, and Surface will have the right, at its own
expense, to be represented in any such Infringement Claim in the Territory by counsel of its own choice. Upon the
request of GSK, Surface will reasonably cooperate with GSK in the reasonable defense of such Infringement Claim.
Surface will have the right to consult with GSK concerning any Infringement Claim and to participate in and be
represented by independent counsel in any associated litigation. GSK will (a) consult with Surface as to the strategy
for the prosecution of such defense, (b) consider in good faith any comments from Surface with respect thereto and (c)
keep Surface reasonably informed of any material steps taken and provide copies of all material documents filed, in
connection with such defense. GSK will have the right to settle such Infringement Claim on terms deemed reasonably
appropriate by it, provided, that, unless any such settlement includes a full and
unconditional release from all liability of Surface and does not adversely affect the rights of Surface, any such
settlement will be subject to Surface’s prior written consent.
Section 8.5. Common Interest. All information exchanged between the Parties regarding the Prosecution of Licensed
Patents and Joint Patents under this ARTICLE VIII will be deemed Confidential Information of the disclosing Party.
The Parties agree and acknowledge that they have not waived, and nothing in this Agreement constitutes a waiver of,
any legal privilege concerning the Licensed Patents, the Joint Patents and the European Opposition Proceeding under
this ARTICLE VIII, including privilege under the common interest doctrine and similar or related doctrines.
Notwithstanding anything to the contrary contained herein, to the extent a Party has a good faith belief that any
information required to be disclosed by such Party to the other Party under this ARTICLE VIII is protected by
attorney-client privilege or any other applicable legal privilege or immunity, such Party will not be required to disclose
such information, and the Parties will in good faith cooperate to agree upon a procedure (including entering into a
specific common interest agreement, disclosing such information on a “for counsel eyes only” basis or similar
procedure) under which such information may be disclosed without waiving or breaching such privilege or immunity.
ARTICLE IX
CONFIDENTIALITY AND PUBLICITY
Section 9.1. Confidential Information.
(a) Confidentiality Obligation. During the Term and for a period of [***] after any termination or expiration of this
Agreement, each Party agrees to, and will cause its Affiliates, its and their sublicensees and subcontractors to, keep in
confidence and not to disclose to any Third Party, or use for any purpose, except to exercise its rights or perform its
obligations under this Agreement, any Confidential Information of the other Party, without the prior written consent of
such disclosing Party. The existence and terms of this Agreement are the Confidential Information of each Party.
(b) Permitted Disclosures. Each Party agrees that it and its Affiliates will provide or permit access to the other Party’s
Confidential Information only to the receiving Party’s employees, consultants, subcontractors, advisors and
sublicensees, and to the employees, consultants, subcontractors, advisors and sublicensees of the receiving Party’s
Affiliates, in each case on a need to know basis who are subject to obligations of confidentiality and non-use with
respect to such Confidential Information no less stringent than the obligations of confidentiality and non-use of the
receiving Party pursuant to this Section 9.1; provided, however, that each Party will remain responsible for any failure
by its Affiliates and its and their sublicensees, and its and its Affiliates’ respective employees, consultants,
subcontractors and advisors, to treat such Confidential Information as required under this Section 9.1 as if such
Affiliates, employees, consultants, subcontractors, advisors and sublicensees were parties directly bound to the
requirements of this Section 9.1.
(c) Confidentiality Limitation. Notwithstanding anything to the contrary herein, each Party may use and disclose the
other Party’s Confidential Information as follows: (i) to its Affiliates, bona fide potential or actual collaborators,
licensors, Sublicensees, sublicensees, or strategic partners and to employees, directors, agents, consultants, and
advisers of such Third Parties, financial advisors, attorneys and accountants, bona fide actual or potential acquisition
partners, financing sources or investors and underwriters in all cases on a need to know basis, and under appropriate
confidentiality and non-use obligations (which may include professional ethical obligations) no less stringent than
those in this Agreement (but of duration customary in confidentiality agreements entered into for a similar purpose);
provided, however, that each Party will remain responsible for any failure by any of the foregoing recipients to treat
such Confidential Information as required under Section 9.1 as if such recipients were parties directly bound to the
requirements of this Section 9.1, (ii) as required by any court governmental body or other Governmental Authority as
otherwise required by applicable Laws (including any such disclosures as are required by a Regulatory Authority in
connection with seeking Regulatory Approval, Pricing and Reimbursement Approval, import authorization for any
Licensed Product in the Territory, or the rules or regulations of the United States Securities and Exchange Commission
or similar Regulatory Authority in a country other than the United States or of any stock exchange or listing entity);
provided, that, notice is promptly given to the other Party and the disclosing Party cooperates with reasonable requests
from the other Party to seek a protective order or other appropriate remedy to protect the
Confidential Information, or (iii) to a patent authority as may be reasonably necessary or useful for purposes of
obtaining Patent Rights as permitted by this Agreement; provided that reasonable measures shall be taken to assure
confidential treatment of such information, to the extent such protection is available. Notwithstanding anything to the
contrary contained in this ARTICLE IX, Confidential Information that is permitted or required to be disclosed will
remain otherwise subject to the confidentiality and non-use provisions of Section 9.1(b) and this Section 9.1(c). If
either Party concludes that a copy of this Agreement must be filed with the United States Securities and Exchange
Commission or similar Regulatory Authority in a country other than the United States, then such Party will, within a
reasonable time (and in no event less than [***]) prior to any such filing, provide the other Party with a copy of this
Agreement showing any provisions hereof as to which the Party proposes to request confidential treatment and will
provide the other Party with an opportunity to comment on any such proposed redactions and to suggest additional
redactions. The Party filing the Agreement will take the other Party’s reasonable comments into consideration before
filing such agreement and use reasonable efforts to have terms identified by such other Party afforded confidential
treatment by the applicable Regulatory Authority.
(d) When transferring Confidential Information, all communications between GSK and Surface will use encryption
methods agreed to by the Parties. Upon discovering any suspected or actual unauthorized disclosure, loss or theft of
Confidential Information (a “Data Security Breach”) Surface will send an e-mail to [***] notifying GSK, and upon
discovering any suspected or actual Data Security Breach, GSK will send an e-mail to [***], notifying Surface. The
Parties shall work with each other in good faith to identify a root cause and remediate the Data Security Breach.
Section 9.2. Publicity and Press Release. The Parties acknowledge the importance of supporting each other’s efforts to
publicly disclose results and significant Developments regarding Licensed Products in the Field in the Territory, and
each Party may make such disclosures from time to time, subject to the terms and conditions of this Agreement,
including this Section 9.2. Such disclosures may include achievement of milestones, significant events in the
Development process with respect to Licensed Products, or Commercialization activities with respect to Licensed
Products.
(a) The Parties have agreed upon the content of a press release which shall be issued by Surface substantially in the
form attached hereto as Schedule 9.2, promptly after the Effective Date. Except for disclosures permitted in
accordance with Section 9.1(b), Surface shall not issue any other public announcement, press release or other public
disclosure regarding this Agreement, its subject matter or any amendment hereto without GSK’s prior written consent,
except for any such disclosure that (i) repeats any information regarding this Agreement, its subject matter or any
amendment hereto that has already been publicly disclosed by either Party in accordance with this Section 9.2,
provided that such information remains accurate as of such time and provided the frequency and form of such
disclosure are reasonable, or (ii) is, in the opinion of Surface’s counsel, required by applicable Laws or the rules of a
stock exchange on which the securities of Surface are listed (or to which an application for listing has been submitted),
provided, that disclosure under this clause (ii) shall include the minimum amount of Confidential Information required
by such applicable Laws, and Surface will use reasonable efforts to seek confidential treatment of Confidential
Information to be included in such disclosures. In the event Surface is, in the opinion of its counsel, required by
applicable Laws or the rules of a stock exchange on which its securities are listed (or to which an application for listing
has been submitted) to make such a public disclosure, Surface shall submit the proposed disclosure in writing to GSK
as far in advance as reasonably practicable (and in no event less than [***] prior to the anticipated date of disclosure)
so as to provide a reasonable opportunity to comment thereon. For clarity, GSK and its Affiliates and its and their
Sublicensees shall have the right to publicly disclose research, development and commercial information (including
with respect to regulatory matters) regarding the Licensed Antibody and Licensed Product; provided such disclosure is
subject to the provisions of Section 9.1 with respect to Surface’s Confidential Information.
(b) The principles to be observed in such disclosures will include accuracy, compliance with applicable Laws and
regulatory guidance documents and the need to keep investors informed regarding the business of the Party making
such public disclosure. Nothing in this Section 9.2 will restrict a Party from making a disclosure required by Laws as
reasonably determined by such Party’s counsel, including disclosures required by any Laws relating to the public sale
of securities; provided, however, that such disclosure will include the minimum amount of Confidential Information
required by such applicable Laws, and the Parties will use reasonable efforts to seek confidential treatment of
Confidential Information to be included in such disclosures.
Section 9.3. Scientific Publications.
(a) As between the Parties, GSK shall control all scientific publications relating to all activities undertaken under this
Agreement for the relevant Licensed Antibodies and Licensed Products, which publications shall not require the prior
written approval of Surface. If GSK or its employees or consultants (such as clinical investigators) wish to publish or
publicly present any information about a Licensed Product or the results of any activities relating to the research or
development of Licensed Antibodies, which publication contains any of Surface’s Confidential Information, it shall
deliver to Surface a copy of the proposed written publication or an outline of an oral disclosure at least [***] ([***] in
the case of abstracts) prior to submission for publication or presentation. Surface will respond in writing promptly and
in no event later than [***] ([***] in the case of abstracts) after receipt of the proposed material and shall have the
right to propose modifications to the publication or presentation for confidentiality reasons, or request a reasonable
delay in publication or presentation in order to protect patentable information. In the event that Surface identifies
patentable subject matter in the proposed material, GSK agrees not to submit such publication or to make such
presentation that contains such information for a period of up to [***] in order to seek patent protection for any
material in such publication or presentation. If Surface reasonably requests modifications to the publication or
presentation to prevent disclosure of Surface’s Confidential Information, GSK shall edit such publication to prevent
the disclosure of such Confidential Information prior to submission of the publication or presentation.
(b) All publications made by GSK relating to any Licensed Antibody or Licensed Product will be prepared, presented,
and published in accordance with pharmaceutical industry accepted guidelines.
(c) In addition to the foregoing, subject to this Section 9.3, GSK shall have the right at any time during and after the
Term to (a) publish the results or summaries of results of all Clinical Studies, observational studies and other studies
such a meta analyses, conducted with respect to any and all Licensed Antibodies and Licensed Products in any clinical
trial register maintained by GSK or its Affiliates and the protocols of such Clinical Studies on www.clinicaltrials.gov
or in each case publish the results, summaries or protocols of such Clinical Studies or other studies on such other
websites or repositories or at scientific congresses and in peer-reviewed journals within such timescales as required by
applicable Laws or GSK’s or its Affiliate’s internal policies and procedures, irrespective of the outcome of such
Clinical Studies; (b) make information from Clinical Studies or other studies conducted by or on behalf of GSK with
respect to Licensed Antibodies or Licensed Products available under its Data Sharing Initiative; and (c) make any other
public disclosures of Clinical Data that become required of GSK due to its internal policies and procedures or
applicable Laws.
(d) Each publication made in accordance with this Section 9.3 shall not be a breach of the confidentiality provisions set
forth in Section 9.1.
Section 9.4. Equitable Relief. Given the nature of the Confidential Information and the competitive damage that could
result to a Party upon unauthorized disclosure, use or transfer of its Confidential Information to any Third Party, the
Parties agree that monetary damages will not be a sufficient remedy for any breach of this ARTICLE IX. In addition to
all other remedies, and notwithstanding the provisions of ARTICLE XIV, a Party will be entitled to seek specific
performance and injunctive and other equitable relief as a remedy for any breach or threatened breach of this
ARTICLE IX.
ARTICLE X
REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS
Section 10.1. Mutual Representations and Warranties. Each Party represents and warrants to the other Party that, as of
the Effective Date:
(a) Organization. It is a corporation duly organized, validly existing, and in good standing under the Laws of the
jurisdiction of its organization, and has all requisite power and authority, corporate or otherwise, to execute, deliver,
and perform this Agreement.
(b) Authority. It has the right to grant to the other the licenses and sublicenses granted pursuant to this Agreement, and
this Agreement and the performance by such Party of this Agreement do not violate such Party’s charter documents,
bylaws or other organizational documents.
(c) Consents. Except for any Regulatory Approvals, manufacturing approvals or similar approvals necessary for the
Development, Manufacture or Commercialization of Licensed Products, all necessary consents, approvals and
authorizations of all Governmental Authorities and other Persons required to be obtained by it in connection with the
execution, delivery and performance of this Agreement have been obtained.
(d) No Conflict. It is not under any obligation, contractual or otherwise, to any Person that would materially affect the
performance of obligations under this Agreement and the execution and delivery of this Agreement by such Party, and
the performance of such Party’s obligations under this Agreement (as contemplated as of the Effective Date) and the
licenses and sublicenses to be granted by such Party pursuant to this Agreement (i) do not conflict with or violate any
requirement of Laws applicable to such Party, (ii) do not conflict with or violate any order, writ, judgment, injunction,
decree, determination, or award of any court or governmental agency presently in effect applicable to such Party, and
(iii) do not conflict with, violate, breach or constitute a default under, or give rise to any right of termination,
cancellation or acceleration of, any contractual obligations of such Party or any of its Affiliates.
(e) Enforceability. It has taken all necessary action on its part required to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder and this Agreement is a legal and valid obligation binding
upon it and is enforceable against it in accordance with its terms, subject to the general principles of equity and subject
to bankruptcy, insolvency, moratorium, judicial principles affecting the availability of specific performance and other
similar Laws affecting the enforcement of creditors’ rights generally.
(f) Compliance with Law. Each Party shall comply, and ensure that its Affiliates, its and their sublicensees and
subcontractors comply, in all material respects with all applicable Laws in the performance of its obligations and
exercise of its rights under this Agreement to the extent in each case that such applicable Laws cover the performance
of the relevant obligations or exercise of rights.
Section 10.2. Additional Representations, Warranties and Covenants of Surface. Surface represents and warrants as of
the Effective Date, and covenants to GSK (as applicable) that:
(a) Licensed Patents. All Licensed Patents as of the Effective Date are listed in Exhibit B. Surface is the sole and
exclusive owner of the Licensed Patents, all of which are free and clear of any claims, liens, charges or encumbrances.
All Licensed Patents have been Prosecuted in good faith in the patent offices in accordance with applicable Laws.
(b) Third Party Challenges. There are no claims, judgments, or settlements against, or amounts with respect thereto,
made against Surface or any of its Affiliates relating to the Licensed Patents or the Licensed Know-How. No claim or
litigation has been received by Surface or its Affiliates or, to Surface’s knowledge, threatened by any Person (i)
alleging that the Licensed Patents are invalid or unenforceable, (ii) challenging Surface’s Control of the Licensed
Technology (i.e., alleging that a Third Party has a right or interest in or to the Licensed Technology) or (iii) alleging
misappropriation of the Know-How of any Third Party used in the Development, Manufacture or Commercialization
of Licensed Antibodies or Licensed Products by or on behalf of Surface prior to the Effective Date.
(c) Non-Infringement of Third Party IP. Except as set forth on Schedule 10.2(c), to Surface’s knowledge, the
Development or Manufacture of the Licensed Product, as conducted by Surface, its Affiliates or its sublicensees, or its
subcontractors prior to the Effective Date, and the Commercialization thereof if Surface were Commercializing the
Licensed Product as of the Effective Date, did not or would not infringe any issued Patent Right or misappropriate or
otherwise violate or misappropriate any Know-How of any Person. No claim of Infringement of the Licensed Patents
or misappropriation of the Licensed Know-How of any Third Party has been brought or asserted, or to Surface’s
knowledge, threatened, against Surface or any of its Affiliates with respect to the Development, Manufacture or
Commercialization of Licensed Products.
(d) Third Party Infringement. To Surface’s knowledge, (i) no Person is infringing or threatening to infringe or
misappropriating or threatening to misappropriate any Licensed Patents or Licensed Know-How and (ii) there are no
activities by Third Parties that would constitute infringement or misappropriation of the Licensed Patents or Licensed
Know-How.
(e) Absence of Litigation. There are no judgments or settlements against or owed by Surface, its Affiliates or its or
their sublicensees, or, to Surface’s knowledge, pending litigation against Surface, its Affiliates, or its or their
sublicensees, or litigation threatened against Surface, its Affiliates, or its or their sublicensees, in each case related to
Licensed Products, including any such litigation relating to any Regulatory Materials Controlled by Surface, its
Affiliates or its sublicensees as of the Effective Date.
(f) Inventors. Each Person who has or has had any ownership rights in or to any Licensed Patents purported to be
owned solely by Surface, has assigned and has executed an agreement assigning its entire right, title, and interest in
and to such Licensed Patents to Surface.
(g) Accuracy of Data. All information and data provided by or on behalf of Surface to GSK on or before the Effective
Date in contemplation of this Agreement was and is true and accurate in all materials respects.
(h) Employment Practices. As relevant to this Agreement: (a) Surface did not and will not employ child labor, forced
labor, or cruel or abusive disciplinary practices in the workplace; (b) Surface did not and will not discriminate against
any workers on any ground in violation of applicable Law (including race, religion, disability, gender, sexual
orientation or gender identity); and (c) Surface paid and will pay each employee at least the minimum wage, provided
and will provide each employee with all legally mandated benefits, and has complied and will comply with all
applicable Laws on working hours and employment rights in the countries in which it operates.
(i) [***].
(j) Assignment Obligations. All employees, subcontractors or consultants of Surface that will be involved in the
performance of the Technical Transition Services shall be subject to a written obligation to assign to Surface all rights
in the Patent Rights and Know-How invented or created by them in the course of providing the Technical Transition
Services during the Transition Period.
(k) Products Warranties. All Licensed Antibodies and License Product Manufactured and supplied by Surface, with
respect to each batch of such Licensed Antibodies and Licensed Products, shall have been Manufactured: (i) in
accordance with and shall conform to the specifications existing as of the time of out of freeze for Licensed Antibodies
and start of Manufacturing for Licensed Product; (ii) in accordance with the Manufacturing process; (iii) in compliance
with applicable GMP requirements; (iv) in compliance with all Laws; and (v) in accordance with the quality or
technical agreement(s) between Surface and any of its Manufacturing subcontractors (clauses (i) through (v)
collectively, the “Products Warranties”).
(l) Existing CMO Agreements. Surface has not and shall not amend or modify the Products Warranties, delivery terms
or quality-related terms under the Existing CMO Agreements that would in any way have an adverse effect on or
otherwise limit or reduce the remedies available to Surface for breach of Product Warranties by the Existing CMO
under such Existing CMO Agreements, or otherwise adversely affect the delivery or quality of the Licensed
Antibodies or Licensed Products manufactured thereunder.
(m) Human Biological Samples. The Human Biological Samples transferred to GSK by Surface in the course of the
Technical Transition Services have been obtained and will be stored, transferred, used and disposed of in accordance
with all applicable Laws and any generally accepted ethical guidelines regarding the collection, use, transport and
disposal of human tissue. All the relevant ethics committee approvals and informed consents have been obtained to
enable the use of the Human Biological Samples obtained from patients or human subject volunteers or other donors in
the Development or Manufacture of Licensed Antibodies. No human embryonic or fetal derived material (including
cell lines) have been or will be used in connection with the Technical Transition Services or other Development or
Manufacture of Licensed Antibodies, without the express prior written approval of GSK.
Section 10.3. Additional Representations, Warranties and Covenants of GSK. GSK represents and warrants as of the
Effective Date and covenants to Surface (as applicable) that:
(a) Compliance with Law. Without limiting the generality of Section 10.1(f), GSK will conduct its Development and
Commercialization activities relating to the Licensed Antibody or Licensed Product(s) in accordance with applicable
Laws (including data privacy Laws, current international regulatory standards, including, as applicable, GMP, GLP,
GCP, and other rules, regulations and requirements), and will cause all permitted subcontractors and Sublicensees
hereunder to comply with such applicable Laws.
(b) GSK Solvency. GSK is solvent and has the ability to pay and perform, or cause its Affiliates to pay and perform,
all of its obligations as and when such obligations become due, including payment and other obligations under this
Agreement.
Section 10.4. Anti-Corruption. The Parties will comply with all applicable Laws concerning bribery, money
laundering, or corrupt practices or which in any manner prohibit the giving of anything of value to any official, agent,
or employee of any government, political party, or public international organization, candidate for public office, health
care professional, or to any officer, director, employee, or representative of any other organization, for the purpose of
influencing, inducing or rewarding any act, omission or decision to secure an improper advantage, or improperly
assisting either Party in obtaining or retaining business, specifically including the U.S. Foreign Corrupt Practices Act,
and the UK Bribery Act, in each case, in connection with the activities conducted pursuant to this Agreement. Each
Party will require any contractors, subcontractors, sublicensees, or other Persons that provide services to it in
connection with this Agreement to comply with such Party’s obligations under this Section 10.4. For the avoidance of
doubt the foregoing prohibited payments include facilitating payments, which are unofficial, improper, small payments
or gifts offered or made to a Government Official to secure or expedite a routine or necessary action to which a Party is
legally entitled.
Section 10.5. No Debarment. Each Party represents and warrants that neither it nor any of its or its Affiliates’
employees or agents performing under this Agreement has ever been, or is currently: (a) debarred under 21 U.S.C. §
335a or by any Regulatory Authority; (b) excluded, debarred, suspended, or otherwise ineligible to participate in
federal health care programs or in federal procurement or non-procurement programs; (c) listed on the FDA’s
Disqualified and Restricted Lists for clinical investigators; or (d) convicted of a criminal offense that falls within the
scope of 42 U.S.C. § 1320a-7(a), but has not yet been excluded, debarred, suspended, or otherwise declared ineligible.
Each Party further covenants that if, during the Term of this Agreement, it becomes aware that it or any of its or its
Affiliates’ employees or agents performing under this Agreement is the subject of any investigation or proceeding that
could lead to that Party becoming a debarred entity or individual, an excluded entity or individual or a convicted entity
or individual, such Party will promptly notify the other Party.
Section 10.6. No Other Warranties. EACH OF SURFACE AND GSK SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY THAT THE RESEARCH, DEVELOPMENT OR COMMERCIALIZATION
OF LICENSED ANTIBODIES OR LICENSED PRODUCTS WILL BE SUCCESSFUL IN WHOLE OR IN PART.
EXCEPT AS EXPRESSLY STATED IN THIS ARTICLE X, NEITHER PARTY MAKES ANY
REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF TITLE, NON-INFRINGEMENT OR NON-
MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY WITH RESPECT TO THE LICENSED
PRODUCT, VALIDITY, ENFORCEABILITY, MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
ARTICLE XI
INDEMNIFICATION; DAMAGES
Section 11.1. Indemnification by Surface. Surface will defend, indemnify and hold harmless GSK, its Affiliates and
their respective directors, officers, employees and agents (each, a “GSK Indemnified Party”), from, against and in
respect of any and all Third Party Losses incurred or suffered by any GSK Indemnified Party to the extent resulting
from: (a) any breach of any representation or warranty made by Surface in this Agreement, or any breach by Surface of
any obligation, covenant or agreement in this Agreement; (b) the gross negligence or willful misconduct of, or
violation of Laws by, Surface or any of its Affiliates, sublicensees, or subcontractors, or any of their respective
directors, officers, employees and agents, in performing Surface’s obligations or exercising Surface’s rights under this
Agreement; (c) the Development, Manufacture, labeling, handling or storage, or use of, or exposure to, the Licensed
Antibody or any Licensed Products by or for Surface or any of its Affiliates, its or their sublicensees, subcontractors,
agents and consultants or contractors, to the extent relating to the Technical Transition Services; or (d) Surface’s (or its
Affiliates’ and sublicensees’) use or practice of the Licensed Technology, to the extent relating to the Technical
Transition Services; provided, however, that Surface’s obligations pursuant to this Section 11.1 will not apply to the
extent such Third Party Losses result from Third Party Losses for which GSK has an obligation to indemnify Surface
pursuant to Section 11.2.
Section 11.2. Indemnification by GSK. GSK will defend, indemnify and hold harmless Surface, its Affiliates and their
respective directors, officers, employees and agents (each, a “Surface Indemnified Party”) from, against and in respect
of any and all Third Party Losses incurred or suffered by any Surface Indemnified Party to the extent resulting from:
(a) any breach of any representation or warranty made by GSK in this Agreement, or any breach by GSK of any
obligation, covenant or agreement in this Agreement, (b) the gross negligence or willful misconduct of, or violation of
Laws by, GSK, any of its Affiliates, its or their Sublicensees or subcontractors, or any of their respective directors,
officers, employees and agents, in performing GSK’s obligations or exercising GSK’s rights under this Agreement, (c)
the Development, Commercialization (including promotion, advertising, offering for sale, sale or other disposition),
transfer, importation or exportation, Manufacture, labeling, handling or storage, or use of, or exposure to, the Licensed
Antibody or any Licensed Products by or for GSK or any of its Affiliates, its or their Sublicensees, subcontractors,
agents and consultants or contractors; or (d) GSK’s (or its Affiliates’ and Sublicensees’) use or practice of the Licensed
Technology; provided, however, that GSK’s obligations pursuant to this Section 11.2 will not apply to the extent such
Third Party Losses result from Third Party Losses for which Surface has an obligation to indemnify GSK pursuant to
Section 11.1.
Section 11.3. Claims for Indemnification.
(a) Notice. An Indemnified Party entitled to indemnification under Section 11.1 or Section 11.2 will give prompt
written notification to the Indemnifying Party of the commencement of any Action by a Third Party for which
indemnification may be sought (a “Third Party Claim”) or, if earlier, upon the assertion of such Third Party Claim by a
Third Party; provided, however, that failure by an Indemnified Party to give notice of a Third Party Claim as provided
in this Section 11.3(a) will not relieve the Indemnifying Party of its indemnification obligation under this Agreement,
except and only to the extent that such Indemnifying Party is materially prejudiced as a result of such failure to give
notice.
(b) Defense. Within [***] after delivery of a notice of any Third Party Claim in accordance with Section 11.3(a), the
Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of such
Third Party Claim with counsel reasonably satisfactory to the Indemnified Party. If the Indemnifying Party does not
assume control of such defense, the Indemnified Party may control such defense (with counsel reasonably selected by
the Indemnified Party and approved by the Indemnifying Party, such approval not to be unreasonably withheld). The
Party not controlling such defense may participate therein at its own expense.
(c) Cooperation. The Party controlling the defense of any Third Party Claim will keep the other Party advised of the
status and material developments of such Third Party Claim and the defense thereof and will reasonably consider
recommendations made by the other Party with respect thereto. The other Party will reasonably cooperate, at its
expense, with the Party controlling such defense and its Affiliates and agents in defense of the Third Party Claim.
(d) Settlement. The Indemnified Party will not agree to any settlement of such Third Party Claim without the prior
written consent of the Indemnifying Party, which consent will not be unreasonably withheld. The Indemnifying Party
will not agree, without the prior written consent of the Indemnified Party, which will not be unreasonably withheld, to
any settlement of such Third Party Claim or consent to any judgment in respect thereof that does not include a
complete and unconditional release of the Indemnified Party from all liability with respect thereto or that imposes any
liability or obligation on the Indemnified Party (other than a monetary obligation on the Indemnifying Party). In no
event will the Indemnifying Party agree to any settlement or compromise that involves (i) any admission of legal
wrongdoing by the Indemnified Party, (ii) any payment by the Indemnified Party that is not indemnified under this
Agreement, or (iii) the imposition of any equitable relief against the Indemnified Party without the prior written
consent of the Indemnified Party, which may be withheld in its sole discretion.
(e) Mitigation of Loss. Each Indemnified Party will take and will procure that its Affiliates take all such reasonable
steps and actions as are necessary or as the Indemnifying Party may reasonably require in order to mitigate any Third
Party Claims (or potential losses or damages) under this ARTICLE XI. Nothing in this Agreement will or will be
deemed to relieve any Party of any common law or other duty to mitigate any losses incurred by it.
Section 11.4. Insurance. GSK shall maintain, at its cost, insurance or self-insurance with respect to liabilities and other
risks associated with its activities and obligations under this Agreement, including its indemnification obligations
herein, in such amounts and on such terms as are customary for prudent practices for large companies in the
pharmaceutical industry for the activities to be conducted by GSK under this Agreement. GSK shall furnish to Surface
evidence of such insurance or self-insurance, upon reasonable request.
ARTICLE XII
LIMITATION OF LIABILITY
Section 12.1. No Consequential or Punitive Damages. EXCEPT AS SET FORTH IN SECTION 12.2, NEITHER
PARTY NOR ANY OF ITS AFFILIATES WILL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL,
SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES ARISING OUT OF THIS AGREEMENT OR THE
EXERCISE OF ITS RIGHTS OR THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER, INCLUDING
ANY LOST PROFITS ARISING OUT OF THIS AGREEMENT, IN EACH CASE HOWEVER CAUSED AND ON
ANY THEORY OF LIABILITY, WHETHER IN CONTRACT, TORT, NEGLIGENCE, BREACH OF STATUTORY
DUTY OR OTHERWISE, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES.
Section 12.2. EXCLUSION FROM LIABILITY LIMITATION. THE LIMITATIONS AND DISCLAIMER SET
FORTH IN SECTION 12.1 WILL NOT APPLY TO A CLAIM: (A) FOR GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT; (B) FOR A BREACH OF ARTICLE IX; OR (C) FOR INDEMNIFIABLE LOSSES PURSUANT
TO SECTION 11.1 OR 11.2.
ARTICLE XIII
TERM AND TERMINATION
Section 13.1. Term. Unless terminated earlier in accordance with this ARTICLE XIII, this Agreement will become
effective as of the Effective Date and will continue in full force and effect until the last to expire Royalty Term in all
countries in the Territory for all Licensed Products (the “Term”).
Section 13.2. Paid-Up License Upon End of Royalty Term. Upon the expiration of the Royalty Term for a given
Licensed Product in a given country in the Territory, the license granted to GSK pursuant to Section 2.1 under the
Licensed Know-How will become perpetual, irrevocable, fully paid-up, and royalty free with respect to such Licensed
Product in such country, and upon expiration of all Royalty Terms in all countries in the Territory, the license granted
to GSK pursuant to Section 2.1 under the Licensed Know-How will become perpetual, irrevocable, fully paid-up, and
royalty free with respect to all Licensed Products in all countries in the Territory.
Section 13.3. Early Termination.
(a) Termination for Material Breach. Upon (i) any material breach of this Agreement by Surface or (ii) any material
breach of this Agreement by GSK (the Party so allegedly breaching being the “Breaching Party”), the other Party (the
“Non-Breaching Party”) will have the right, but not the obligation, to terminate this Agreement in its entirety by
providing [***] written notice to the Breaching Party with respect to any breach of any payment obligation under this
Agreement and [***] written notice to the Breaching Party with respect to any other breach, which notice will, in each
case (A) expressly reference this Section 13.3(a), (B) reasonably describe the alleged breach which is the basis of such
termination, and (C) clearly state the Non-Breaching Party’s intent to terminate this Agreement if the alleged breach is
not cured within the applicable cure period. The termination will become effective at the end of the notice period
unless the Breaching Party cures such breach during such notice period; provided, that if there is a good faith dispute
with respect to the existence of a material breach or whether such material breach has been cured, and if such alleged
breach or failure to cure is contested in good faith by the Breaching Party in writing within [***] of the delivery of the
breach notice, then the dispute resolution procedure pursuant to ARTICLE XIV, may be initiated by either Party to
determine whether a material breach or a failure to cure has actually occurred. If either Party so initiates the dispute
resolution procedure, then the applicable cure period (and the corresponding termination of this Agreement, in whole
or in part), shall be tolled until such time as the dispute is resolved pursuant to ARTICLE XIV. Notwithstanding the
foregoing, if the breach and failure to cure contemplated by this Section 13.3(a) is with respect to GSK’s breach of its
diligence obligations set forth in Sections 4.1 and 5.2 with respect to one or more (but not all) of the countries in the
Territory, Surface shall not have the right to terminate this Agreement in its entirely, but shall have the right to
terminate this Agreement solely with respect to the country(ies) to which such breach and failure to cure applies.
(b) Termination by GSK for Convenience. GSK will have the right to terminate this Agreement in its entirety for
convenience, without cause, and for any or no reason (a) on not less than [***] prior written notice to Surface if such
notice is provided prior to GSK’s receipt of the first Regulatory Approval for a Licensed Product, and (b) on not less
than [***] prior written notice to Surface if such notice is provided following GSK’s receipt of the first Regulatory
Approval for a Licensed Product.
(c) Termination for Bankruptcy. This Agreement may be terminated immediately, to the extent permitted by applicable
Laws, by either Party upon the filing or institution of bankruptcy, reorganization, liquidation or receivership
proceedings, or upon an assignment of a substantial portion of the assets for the benefit of creditors by the other Party;
provided, however, that in the case of any involuntary bankruptcy, reorganization, liquidation or receivership
proceeding such right to terminate will only become effective if the Party subject to such proceeding consents to the
involuntary bankruptcy or such proceeding is not dismissed within [***] after the filing thereof.
(d) Patent Challenge.
(i) Except to the extent that this Section 13.3(d) is unenforceable under the Law of the applicable jurisdiction where
the applicable Licensed Patents are pending or issued, Surface has the right to terminate this Agreement upon written
notice to GSK in the event that GSK or any of its Affiliates or its or their Sublicensees directly or indirectly challenges
in a legal or administrative proceeding the patentability, enforceability or validity of any Licensed Patents (a “Patent
Challenge”); provided that (A) this Section 13.3(d) will not apply to any such Patent Challenge that is first made by
GSK or any of its Affiliates or its or their Sublicensees in defense of a claim of patent infringement brought by Surface
under the applicable Licensed Patents, (B) with respect to any Affiliate or Sublicensee, Surface will not have the right
to terminate this Agreement under this Section 13.3(d) if GSK (1) causes such Patent Challenge to be terminated or
dismissed (or in the case of ex-parte proceedings, multi-party proceedings, or other Patent Challenges in which the
challenging party does not have the power to unilaterally cause the Patent Challenge to be withdrawn, causes such
Affiliate or Sublicensee to withdraw as a party from such Patent Challenge and to cease actively assisting any other
party to such Patent Challenge), or (2) terminates such Sublicensee’s sublicense to the Licensed Patents being
challenged by the Affiliate or Sublicensee, in each case, within [***] of Surface’s notice to GSK under this Section
13.3(d).
(ii) In lieu of exercising its rights to terminate under this Section 13.3(d), Surface may elect upon written notice [***],
which election will be effective retroactively to the date of the commencement of the Patent Challenge.
(iii) GSK acknowledges and agrees that this Section 13.3(d) is reasonable, valid and necessary for the adequate
protection of Surface’s interest in and to the Licensed Patents, and that Surface would not have granted to GSK the
licenses under those Licensed Patents, without this Section 13.3(d). Surface will have the right, at any time in its sole
discretion, to strike this Section 13.3(d) (or any portion thereof) from this Agreement, and Surface will have no
liability whatsoever as a result of the presence or absence of this Section 13.3(d) (or any struck portion thereof).
(e) Termination for Cessation of Development. Without prejudice to any other remedies available to it at law or in
equity (including for any breach of the terms hereof), if (i) GSK does not conduct, or cause to be conducted, or
otherwise ceases or abandons, material Development activities with respect to Licensed Antibodies and Licensed
Products for a period of [***] at any time during the Term or (ii) GSK has not commenced any material Development
activities with respect to any Licensed Antibody or Licensed Product on or after the date that is the [***] anniversary
of the Effective Date (each, a “Cessation of Development”), then, in each case ((i) and (ii)), Surface will have the right
to terminate this Agreement in its entirety with [***] written notice to GSK, unless GSK cures such Cessation of
Development during such notice period; provided, that if there is a good faith dispute with respect to the existence of a
Cessation of Development or whether such Cessation of Development has been cured, and if such alleged Cessation of
Development or failure to cure is contested in good faith by GSK in writing within [***] of the delivery of the notice
thereof, then the dispute resolution procedure pursuant to ARTICLE XIV, may be initiated by either Party to determine
whether a Cessation of Development or a failure to cure has actually occurred. If either Party so initiates the dispute
resolution procedure, then the applicable cure period (and the corresponding termination of this Agreement, in whole
or in part), shall be tolled until such time as the dispute is resolved pursuant to ARTICLE XIV. Notwithstanding the
foregoing, the abandonment or cessation of material Development activities by GSK with respect to Licensed
Antibodies and Licensed Product as described in clauses (i) and (ii) shall not be deemed a Cessation of Development
to the extent any such abandonment or cessation is the result of [***].
(f) Rights in Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by GSK or Surface are
and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code or any analogous
provisions in any other country or jurisdiction, licenses of right to “intellectual property” as defined under Section 101
of the U.S. Bankruptcy Code. The Parties agree that the Parties, as licensees of such rights under this Agreement, shall
retain and may fully exercise all of their rights and elections under the U.S. Bankruptcy Code or any analogous
provisions in any other country or jurisdiction. The Parties further agree that, in the event of the commencement of a
bankruptcy proceeding by or against either Party under the U.S. Bankruptcy Code or any analogous provisions in any
other country or jurisdiction, the Party hereto that is not a Party to such proceeding shall be entitled to a complete
duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such
intellectual property, which, if not already in the non-subject Party’s possession, shall be promptly delivered to it (i)
upon any such commencement of a bankruptcy proceeding upon the non-subject Party’s written request therefor,
unless the Party subject to such proceeding elects to continue to perform all of its obligations under this Agreement or
(ii) if not delivered under clause (i) above, following the rejection of this Agreement by or on behalf of the Party
subject to such proceeding upon written request therefor by the non-subject Party. The Parties acknowledge and agree
that payments made under Section 7.1 shall not (x) constitute royalties within the meaning of Section 365(n) of the
U.S. Bankruptcy Code or any analogous provisions in any other country or jurisdiction or (y) relate to licenses of
intellectual property hereunder.
Section 13.4. Effects of Termination. All of the following effects of termination (but not expiration) are in addition to
the other rights and remedies that may be available to either of the Parties under this Agreement and will not be
construed to limit any such rights or remedies.
(a) Effects of Termination Generally. Upon termination of this Agreement in its entirety pursuant to Section 13.3, the
Parties’ rights, licenses, including any Sublicenses, and obligations under this Agreement will terminate and neither
Party will have any further rights or obligations under this Agreement from and after the effective date of termination,
except as set forth in this Section 13.4.
(b) Reversion of Rights. All Licensed Antibodies and Licensed Products and all rights related thereto will revert to
Surface, including all rights under the Licensed Technology and Surface will have the right, in its sole discretion, to
Develop, Manufacture and Commercialize the Licensed Antibodies and Licensed Products.
(c) Transitioning Activities. If there are any on-going Clinical Studies at termination or expiration of this Agreement,
the Parties will negotiate in good faith to establish an appropriate course of action, which may include transitioning
activities from GSK to Surface or its designee, with due regard for patient safety and the rights of any subjects that are
participants in any Clinical Studies of the Licensed Products, and take any actions it deems reasonably necessary or
appropriate to avoid any human health or safety problems and in compliance with all applicable Laws.
(d) Right of Reference to Regulatory Materials. GSK will and hereby does, and will cause its Affiliates and its and
their Sublicensees to, (i) effective as of the effective date of termination, assign to Surface all of its rights, title, and
interests in and to all Regulatory Materials, filings for Pricing and Reimbursement Approval, Regulatory Approvals,
Clinical Data and other material documentation, to the extent allowed under applicable Law and solely related to the
Licensed Antibodies or Licensed Products that are then held by or owned or controlled by GSK or any of its Affiliates
or Sublicensees and (ii) to the extent assignment pursuant to clause (i) is not permitted by applicable Law or not solely
related to the Licensed Antibodies or Licensed Products that are then held by or owned or controlled by GSK or any of
its Affiliates or Sublicensees, GSK will and hereby does grant to Surface an exclusive right of reference to such
Regulatory Materials, filings for Pricing and Reimbursement Approval, Regulatory Approvals, Clinical Data and other
material documentation, to the extent allowed under applicable Laws, for the Licensed Antibodies or the Licensed
Products that are then held by or owned or controlled by GSK or any of its Affiliates or its or their Sublicensees for the
continued Development and Commercialization thereof by Surface.
(e) License of Patent Rights related to Licensed Antibodies. GSK will and hereby does grant, effective as of the
effective date of termination (without any further action required on the part of GSK), an exclusive, [***] license grant
from GSK to Surface, with the right to sublicense (through multiple tiers) under the Patent Rights and Know-How
Controlled by GSK or its Affiliates claiming or relating to the Development, Manufacture and Commercialization of
the Licensed Antibody, that are necessary or were actually used by GSK or its Affiliates in the Development,
Manufacture or Commercialization of the Licensed Product on or before the effective date of the termination, for
Surface to Develop, Manufacture, or Commercialize the Licensed Antibody or the Licensed Product in the Field in the
Territory. [***].
(f) Inventory. Upon termination of this Agreement, Surface will have the right to purchase all of GSK and its
Affiliates’ then-current remaining inventory of non-GMP drug substance, non-GMP drug substance, and Master or
Working cell banks. If Surface makes such purchase, GSK will provide primary drug substance reference standard,
record of analysis, and a summary report describing it characterization. No raw materials (including chromatography
resins, filters, or consumables) will be transferred to Surface. Surface will have the right to purchase such remaining
non-GMP inventory at a price equal to [***].
(g) Trademarks. Effective as of the date of termination, GSK will assign (or, if applicable, will cause its Affiliates or its
or their Sublicensees to assign) to Surface all of GSK’s (and such Affiliates’ or its or their Sublicensees’) worldwide
right, title and interest in and to any Trademarks that is specific to and solely used for any Licensed Products (it being
understood that the foregoing will not include any Trademarks that contain the corporate or business name(s) of GSK
or any of its Affiliates or its or their Sublicensees).
(h) Transition Plan. The parties shall negotiate in good faith to agree a plan acceptable to both Parties for the transition
of Development and Manufacture to Surface. GSK will provide any other assistance or take any other actions, in each
case reasonably requested by Surface, as necessary to transfer to Surface the Development or Manufacture of the
Licensed Antibodies and Licensed Products, and will execute all documents as may be reasonably requested by
Surface in order to give effect to this Section 13.4.
(i) Patent Information. GSK, if requested in writing by Surface, will provide any (i) material correspondence with the
relevant patent offices pertaining to GSK’s Prosecution of the Licensed Patents, the Joint Patents and the European
Opposition Proceeding to the extent not previously provided to Surface during the course of the Agreement and (ii) a
report detailing the status of all Licensed Patents, Joint Patents and the European Opposition Proceeding at the time of
termination.
(j) Return of Confidential Information. Within [***] after the effective date of termination (but not expiration) of this
Agreement in its entirety, each Party will, and cause its Affiliates to (i) destroy all tangible items solely comprising,
bearing or containing any Confidential Information of the other Party that are in such first Party’s or its Affiliates’
possession or control, and provide written certification of such destruction, or (ii) prepare such tangible items of the
other Party’s Confidential Information for shipment to such other Party, as such other Party may direct, at the first
Party’s expense; provided, however, that, in any event, (A) each Party may retain copies of the Confidential
Information of the other Party to the extent necessary to perform its obligations or exercise its rights that survive
termination of this Agreement; and (B) each Party may retain one copy of the Confidential Information of the other
Party for its legal archives.
(k) Cooperation. Each Party will use reasonable efforts to cause its Affiliates, its and their sublicensees and
subcontractors to comply with the obligations in this Section 13.4.
(l) Accrued Obligations. Termination of this Agreement for any reason will not release either Party from any
obligation or liability which, on the effective date of such termination, has already accrued to the other Party or which
is attributable to a period prior to such termination.
(m) Survival. The provisions set forth in the following Sections, as well as, to the extent applicable, any other Sections
or defined terms referred to in such Sections or Articles or necessary to give them effect, will survive the expiration or
termination of this Agreement in its entirety: ARTICLE VII (but only with respect to payments accrued thereunder
prior to termination), ARTICLE VIII (with respect to the provisions regarding Joint Patents), ARTICLE XI, ARTICLE
XII, ARTICLE XIV, ARTICLE XV, Section 2.5, Section 8.1, Section 8.5, Section 9.1, Section 9.3, Section 9.4,
Section 10.6, Section 13.2, and this Section 13.4. Furthermore, any other provisions required to interpret the Parties’
rights and obligations under this Agreement, including applicable definitions in ARTICLE I, will survive to the extent
required. Except as otherwise expressly provided in this Agreement, including this Section 13.4, all rights and
obligations of the Parties under this Agreement and any licenses granted under this Agreement, will terminate upon the
expiration or termination of this Agreement in its entirety for any reason.
ARTICLE XIV
DISPUTE RESOLUTION
Section 14.1. Dispute Resolution; Escalation. The Parties recognize that disputes as to certain matters arising out of or
in connection with this Agreement may arise from time to time. It is the objective of the Parties to establish procedures
to facilitate the resolution of disputes arising out of or in connection with this Agreement in an expedited manner by
mutual cooperation. To accomplish this objective, any and all disputes between the Parties arising out of or in
connection with this Agreement will first be referred to the Senior Officers for resolution and the Senior Officers will
attempt to resolve the matter in good faith.
Section 14.2. Mediation. If the Parties’ Senior Officers are unable for any reason to resolve a dispute within [***] of
referral of the dispute to them, then the Parties agree that they shall try in good faith to resolve the dispute by referring
it for confidential mediation under the CPR Mediation Procedure in effect at the start of mediation, before resorting to
arbitration as set forth in Section 14.3. If the Parties cannot agree on a mediator within [***] after the dispute was
referred to mediation, the mediator shall, upon request by either Party, be appointed by CPR pursuant to CPR
Mediation Procedure. The cost of mediator shall be borne equally by the Parties.
Section 14.3. Arbitration. Except as set forth in this Section 14.3, each dispute, difference, controversy or claim arising
in connection with or related or incidental to, or question occurring under, this Agreement or the subject matter hereof
that cannot be resolved pursuant to Section 14.1 and Section 14.2 will be referred to and finally resolved by arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the “Rules”).
Arbitration proceedings may be commenced by either Party by notice to the other Party. Within [***] after the
institution of the arbitration proceedings, each Party will appoint one (1) arbitrator with the third arbitrator to be
selected by mutual agreement of the two (2) arbitrators appointed by the Parties, and each arbitrator will have
significant experience in the biopharmaceutical industry. If the two initial arbitrators are unable to select a third
arbitrator within [***], the third arbitrator will be appointed in accordance with the Rules. Unless otherwise agreed by
the Parties, all such arbitration proceedings will be held in New York, New York; provided, however, that proceedings
may be conducted by videoconference or telephone conference call with the consent of the Parties and the arbitrator(s).
All arbitration proceedings will be conducted in the English language. The arbitrators will consider grants of equitable
relief and orders for specific performance as co-equal remedies along with awards of monetary damages. The
arbitrators will have no authority to award punitive damages. The allocation of expenses of the arbitration, including
reasonable attorney’s fees, will be determined by the arbitrators, or, in the absence of such determination, each Party
will pay its own expenses. The Parties hereby agree that the arbitrators have authority to issue rulings and orders
regarding all procedural and evidentiary matters that the arbitrators deem reasonable and necessary with or without
petition therefore by the Parties as well as the final ruling and judgment. All rulings by the arbitrators will be final.
Notwithstanding any contrary provision of this Agreement, any Party may seek equitable measures of protection in the
form of attachment of assets or injunctive relief (including specific performance and injunctive relief) in any matter
relating to the proprietary rights and interests of either Party from any court of competent jurisdiction, pending a
decision by the arbitral tribunal in accordance with this Section 14.3). The Parties hereby exclude any right of appeal
to any court on the merits of such matter. The provisions of this Section 14.3 may be enforced and judgment on the
award (including equitable remedies) granted in any arbitration hereunder may be entered in any court having
jurisdiction over the award or any of the Parties or any of their respective assets. Except to the extent necessary to
confirm an award or as may be required by Laws, neither a Party nor an arbitrator may disclose the existence, content,
or results of an arbitration without the prior written consent of both Parties as if any of the foregoing was the
Confidential Information of each Party. The Parties agree that, in the event of a dispute over the nature or quality of
performance under this Agreement, neither Party may terminate this Agreement until final resolution of the dispute
through arbitration or other judicial determination. Nothing in this Section 14.3 will preclude either Party from seeking
interim or provisional relief from a court of competent jurisdiction, including a temporary restraining order,
preliminary injunction or other interim equitable relief, concerning a dispute either prior to or during any arbitration if
necessary to protect the interests of such Party or to preserve the status quo pending the arbitration proceeding.
Section 14.4. Notwithstanding the Parties’ agreement to arbitrate, unless the Parties agree in writing in any particular
case, claims and disputes between the Parties relating to or arising out of, or for which resolution depends in whole or
in part on a determination of the interpretation, scope, validity, enforceability or infringement of, Patent Rights or of
any Trademark rights relating to any Licensed Products will not be subject to arbitration under this Agreement, and the
Parties may pursue whatever rights and remedies may be available to them under law or equity, including litigation in
a court of competent jurisdiction, with respect to such claims and disputes. All questions concerning (a) inventorship
of Patent Rights under this Agreement will be determined in accordance with Section 8.1 and (b) the
construction or effect of Patent Rights or with respect to Trademarks, will be determined in accordance with the Laws
of the country or other jurisdiction in which the particular patent within such Patent Rights or the Trademark has been
filed or granted, as the case may be.
Section 14.5. Jury Waiver. EACH PARTY, TO THE EXTENT PERMITTED BY LAW, KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
OTHER LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS IT CONTEMPLATES TO ARBITRATE AS SET FORTH IN Section 14.3. THIS WAIVER
APPLIES TO ANY ACTION OR LEGAL PROCEEDING, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE.
ARTICLE XV
MISCELLANEOUS
Section 15.1. Assignment; Successors.
(a) Assignment. This Agreement and the rights and obligations of each Party under this Agreement will not be
assignable, delegable, transferable, pledged or otherwise disposed of by either Party without the prior written consent
of the other Party; provided, however, that either Party may assign or transfer this Agreement together with all of its
rights and obligations hereunder, without such consent (but with written notice to the other Party), (A) to an Affiliate
or (B) to a successor in interest in connection with the transfer or sale of all or substantially all of its business or assets
to which this Agreement relates, or in the event of its merger or consolidation, reorganization or similar transaction,
subject to the assignee agreeing in writing to be bound by the terms and conditions of this Agreement. Any assignment
in violation of this Section 15.1(a) will be null and void.
(b) Successors. Any permitted assignment of the rights and obligations of a Party under this Agreement will be binding
on, and inure to the benefit of and be enforceable by and against, the successors and permitted assigns of the assigning
Party. The permitted assignee or transferee will assume all obligations of its assignor or transferor under this
Agreement. Any assignment or attempted assignment by either Party in violation of the terms of this Section 15.1(b)
will be null, void and of no legal effect.
(c) Change of Control of Surface. Notwithstanding anything in this Agreement to the contrary, a Party or its Affiliates
will be deemed to not Control any Know-How, Patent Right, Regulatory Material, Regulatory Approval or other
property right that is owned or controlled by a Third Party described in the definition of “Change of Control,” or such
Third Party’s Affiliates (other than an Affiliate of such Party prior to the Change of Control), (a) [***], except to the
extent that any such Know-How, Patent Right, Regulatory Material, Regulatory Approval or other property right [***]
Affiliate’s Know-How, Patent Right, Regulatory Material, Regulatory Approval or other property right, or (b) [***] to
the extent that such Know-How, Patent Right, Regulatory Material, Regulatory Approval or other property right [***]
Affiliate’s Know-How, Patent Right, Regulatory Material, Regulatory Approval or other property right. No assets of
Surface or any of its Affiliates not owned or in-licensed by Surface or any of its Affiliates before a Change of Control
will be subject to Section 2.8(a).
Section 15.2. Choice of Laws. This Agreement will be governed by and interpreted under the Laws of The State of
New York, without regard to the conflicts of law principles thereof. The Parties agree to exclude the application to this
Agreement of the United Nations Conventions on Contracts for the International Sale of Goods (1980).
Section 15.3. Notices. Any notice or report required or permitted to be given or made under this Agreement by one
Party to the other will be in writing and will be deemed to have been delivered (a) upon personal delivery (upon
written confirmation of receipt), (b) when received by the addressee, if sent by a reputable internationally recognized
overnight courier that maintains records of delivery, or registered or certified mail, postage prepaid, return receipt
requested and (c) in the case of notices provided by telecopy (which notice will be followed immediately by an
additional notice pursuant to clause (a) or (b) above if the notice is of a default under this Agreement), upon
completion of transmission, with transmission confirmed, to the addressee’s facsimile machine, as follows (or at such
other addresses or facsimile numbers as may have been furnished in writing by a Party to the
other as provided in this Section 15.3). This Section 15.3 is not intended to govern the day-to-day business
communications necessary between the Parties in performing their obligations under the terms of this Agreement.
If to Surface:
Surface Oncology, Inc.
50 Hampshire Street
Cambridge, MA 02139
Attention: Chief Legal Officer
With copies to:
If to GSK:
Goodwin Procter LLP
100 Northern Avenue
Boston, MA 02210
Attention: [***]
GlaxoSmithKline
259 E Grand Ave Fifth Floor, Suite 1
S. San Francisco, CA 94080
Attn: SVP & Head R&D Business Development
With copies to (which shall not
constitute notice to):
GlaxoSmithKline
980 Great West Road
Brentford, Middlesex TW8 9GS
United Kingdom
Attn: VP & Head of Legal Business Development & Corporate
With copies to (which shall not
constitute notice to):
Covington & Burling LLP
One CityCenter
850 Tenth Street, NW
Washington, DC 20001
Attn: [***]
Section 15.4. Severability. In the event that one or more provisions of this Agreement is held invalid, illegal or
unenforceable in any respect, then such provision will not render any other provision of this Agreement invalid or
unenforceable, and all other provisions will remain in full force and effect and will be enforceable, unless the
provisions that have been found to be invalid or unenforceable will substantially affect the remaining rights or
obligations granted or undertaken by either Party. The Parties agree to attempt to substitute for any invalid or
unenforceable provision a provision which achieves to the greatest extent possible the objectives of the invalid or
unenforceable provision.
Section 15.5. Integration. This Agreement, together with all schedules and exhibits attached hereto, constitutes the
entire agreement between the Parties with respect to the subject matter of this Agreement and supersedes all previous
arrangements between the Parties with respect to the subject matter hereof, whether written or oral, including, effective
as of the Effective Date, the Prior CDA (provided that all information disclosed or exchanged under such agreement
will be treated as Confidential Information hereunder). In the event of a conflict between any schedules or attachments
to this Agreement, on the one hand, and this Agreement, on the other hand, the terms of this Agreement will govern.
Each Party confirms that it is not relying on any representations or warranties of the other Party except as specifically
set forth in this Agreement.
Section 15.6. Waivers and Amendments. The failure of any Party to assert a right under this Agreement or to insist
upon compliance with any term or condition of this Agreement will not constitute a waiver of that right or excuse a
similar subsequent failure to perform any such term or condition by the other Party. The exercise by any Party of any
right or election under the terms or covenants herein will not preclude or prejudice any Party from exercising the same
or any other right it may have under this Agreement, irrespective of any previous action or proceeding taken by the
Parties hereunder. Notwithstanding the authority granted to the JDC under this Agreement, (a) no waiver will be
effective unless it has been given in writing and signed by the Party giving such waiver, and (b) no provision of this
Agreement may be amended or modified other than by a written document signed by authorized representatives of
each Party.
Section 15.7. Independent Contractors; No Agency. Neither Party will have any responsibility for the hiring, firing or
compensation of the other Party’s or such other Party’s Affiliates’ employees or for any employee benefits with respect
thereto. No employee or representative of a Party or its Affiliates will have any authority to bind or obligate the other
Party for any sum or in any manner whatsoever, or to create or impose any contractual or other liability on such other
Party, without such other Party’s written approval. For all purposes, and notwithstanding any other provision of this
Agreement to the contrary, each Party’s legal relationship under this Agreement to the other Party will be that of
independent contractor, and the relationship between the two Parties will not constitute a partnership, joint venture, or
agency, including for all tax purposes, except as otherwise required by applicable Law.
Section 15.8. Affiliates, Sublicensees, and subcontractors. To the extent that this Agreement imposes obligations on
Affiliates, Sublicensees or subcontractors of a Party, such Party will cause its Affiliates and its and their sublicensees
and subcontractors to perform such obligations, as applicable. Either Party may use one or more of its Affiliates, its or
their sublicensees or subcontractors to perform its obligations and duties or exercise its rights under this Agreement,
solely to the extent permitted and as specified in this Agreement; provided, however, that (a) each such Affiliate,
Sublicensee or subcontractor will perform any such obligations delegated to it in compliance with the applicable terms
and conditions of this Agreement as if such Affiliate, Sublicensee or subcontractor were a party hereto, (b) the
performance of any obligations of a Party’s by its Affiliates, its or their sublicensees or subcontractors will not
diminish, reduce or eliminate any obligation of such Party under this Agreement, (c) the Party using such contractor
will terminate promptly any subcontractor, and will give the other Party notice of such termination, in the case of any
material breach of this Agreement by such subcontractor and (d) subject to such Party’s assignment to an Affiliate
pursuant to Section 15.1, such Party will remain liable under this Agreement for the prompt payment and performance
of all of its obligations under this Agreement. Subject to this Section 15.8, if a Party exercises its rights and performs
its obligations under this Agreement through one or more of its Affiliates, “Surface” will be interpreted to mean
“Surface or its Affiliates” and “GSK” will be interpreted to mean “GSK or its Affiliates” where necessary to give each
Party’s Affiliates the benefit of the rights provided to such Party in this Agreement and the ability to perform its
obligations under this Agreement.
Section 15.9. No Third Party Beneficiary Rights. The representations, warranties, covenants and agreements set forth
in this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and they will not be
construed as conferring any rights on any other Third Party. This Agreement is not intended to and will not be
construed to give any Third Party any interest or rights (including any Third Party beneficiary rights) with respect to or
in connection with any agreement or provision contained herein or contemplated hereby, other than, to the extent
provided in ARTICLE XI, the Indemnified Parties.
Section 15.10. Non-exclusive Remedy. Except as expressly provided herein, the rights and remedies provided herein
are cumulative and each Party retains all remedies at law or in equity, including the Parties’ ability to receive legal
damages or equitable relief, with respect to any breach of this Agreement. Neither Party will be required (but, for
clarity, will have the right as specified in this Agreement) to terminate this Agreement due to a breach of this
Agreement by the other Party.
Section 15.11. Interpretation. The Article and Section headings used herein are for reference and convenience only,
and will not enter into the interpretation of this Agreement. Except as otherwise explicitly specified to the contrary, (a)
references to an Article, Section or Exhibit means an Article or Section of, or a Schedule or Exhibit to this Agreement
and all subsections thereof, unless another agreement is specified; (b) references in any Section to any clause are
references to such clause of such Section; (c) references to any agreement, instrument, or other document in this
Agreement refer to such agreement, instrument, or other document as originally executed or, if subsequently amended,
replaced, or supplemented from time to time, as so amended, replaced, or supplemented and in effect at the relevant
time of reference thereto; (d) references to a particular “Laws” mean such Laws as in effect as of the relevant time,
including all rules and regulations thereunder and any successor Laws in effect as of the relevant time, and including
the then-current amendments thereto; (e) words in the singular or plural form include the plural and singular form,
respectively; (f) unless the context requires a different interpretation, the word “or” has the inclusive meaning that is
typically associated with the phrase “and/or”; (g) the terms “including,” “include(s),” “such as,” “e.g.” and “for
example” mean including the generality of any description preceding such term and will be deemed to be followed by
“without limitation”; (h) whenever this Agreement refers to a number of days, such number will refer to calendar days
unless Business Days are specified, and if a period of time is specified and dates from a given day or Business Day, or
the day or Business Day of an act or event, it is to be calculated exclusive of that day or
Business Day; (i) “monthly” means on a calendar month basis, (j) “quarter” or “quarterly” means on a Calendar
Quarter basis; (k) “annual” or “annually” means on a Calendar Year basis; (l) “year” means a 365 day period unless
Calendar Year is specified; (m) references to a particular Person include such Person’s successors and assigns to the
extent not prohibited by this Agreement; (n) the use of any gender herein will be deemed to encompass references to
either or both genders, and the use of the singular will be deemed to include the plural (and vice versa); (o) a
capitalized term not defined herein but reflecting a different part of speech than a capitalized term which is defined
herein will be interpreted in a correlative manner; (p) any definition of or reference to any agreement, instrument or
other document herein will be construed as referring to such agreement, instrument or other document as from time to
time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or
modifications set forth herein); (q) the words “hereof,” “herein,” “hereby” and derivative or similar words refer to this
Agreement (including any Exhibits or Schedules); (r) neither Party or its Affiliates will be deemed to be acting “on
behalf of” the other Party under this Agreement, except to the extent expressly otherwise provided; (s) provisions that
require that a Party, or the JDC hereunder “agree”, “consent” or “approve” or the like will be deemed to require that
such agreement, consent or approval be specific and in writing in a written agreement, letter or approved minutes, but,
except as expressly provided herein, excluding e-mail and instant messaging; and (t) the word “shall” will be construed
to have the same meaning and effect as the word “will”.
Section 15.12. Further Assurances. Each Party will duly execute and deliver, or cause to be duly executed and
delivered, such further instruments and do and cause to be done such further acts and things, including the filing of
such assignments, agreements, documents, and instruments, as may be necessary or as the other Party may reasonably
request in connection with this Agreement or to carry out more effectively the provisions and purposes hereof, or to
better assure and confirm unto such other Party its rights and remedies under this Agreement (including working
collaboratively to correct and clerical, typographical, or other similar errors in this Agreement).
Section 15.13. Ambiguities; No Presumption. Each of the Parties acknowledges and agrees that this Agreement has
been diligently reviewed by and negotiated by and between them, that in such negotiations each of them has been
represented by competent counsel and that the final agreement contained herein, including the language whereby it has
been expressed, represents the joint efforts of the Parties hereto and their counsel. Accordingly, in interpreting this
Agreement or any provision hereof, no presumption will apply against any Party as being responsible for the wording
or drafting of this Agreement or any such provision, and ambiguities, if any, in this Agreement will not be construed
against any Party under the rule of construction, irrespective of which Party may be deemed to have authored the
ambiguous provision.
Section 15.14. Execution in Counterparts; PDF Signatures. This Agreement may be executed in counterparts, each of
which counterparts, when so executed and delivered, will be deemed to be an original, and all of which counterparts,
taken together, will constitute one and the same instrument even if both Parties have not executed the same
counterpart. Signatures provided in Adobe™ Portable Document Format (PDF) sent by electronic mail will be deemed
to be original signatures.
Section 15.15. Export Control. This Agreement is made subject to any restrictions required by applicable Laws
concerning the export of products or technical information from the U.S. or other countries which may be imposed
upon or related to the Parties from time to time. Each Party agrees that it will not export, directly or indirectly, any
technology licensed to it or other technical information acquired from the other Party under this Agreement or any
products using such technical information to a location or in a manner that at the time of export requires an export
license or other governmental approval, except in compliance with U.S. export Laws and regulations.
[Remainder of this page intentionally blank.]
53
IN WITNESS WHEREOF, each Party has caused this Agreement to be duly executed by its authorized representative
on the Effective Date.
SURFACE ONCOLOGY, INC.
/s/ J. Jeffrey Goater
Name: J. Jeffrey Goater
Title: Chief Executive Officer
GLAXOSMITHKLINE INTELLECTUAL
PROPERTY NO. 4 LIMITED
/s/ [***]
Name: [***]
Title: [***]
[Signature Page to License Agreement]
Exhibit A
LICENSED ANTIBODIES
[***]
[***]
Exhibit A
Exhibit B
LICENSED PATENTS
[***]
Exhibit B
Exhibit C
TRANSITION PLAN
Exhibit C
Exhibit D
[***]
[See attached.]
Exhibit D
[***]
[***]
Schedule 9.2
Form of Press Release
[See Attached]
[***]
CERTAIN IDENTIFIED INFORMATION CONTAINED IN THIS EXHIBIT, MARKED BY “[***]”, HAS BEEN
EXCLUDED BECAUSE IT IS BOTH (i) NOT MATERIAL AND (ii) THE TYPE THAT SURFACE ONCOLOGY,
INC. TREATS AS PRIVATE OR CONFIDENTIAL.
Exhibit 10.35
AMENDMENT NO. 1 TO LICENSE
AGREEMENT
This Amendment No. 1 (“Amendment No. 1”) to the License Agreement dated
December 20, 2020 between GlaxoSmithKline Intellectual Property (No. 4) Limited, having a
principal place of business at 980 Great West Road, Brentford, Middlesex TW8 9GS United
Kingdom (“GSK”) and Surface Oncology, Inc., having a place of business at 50 Hampshire
Street, Cambridge MA 02139 (“Surface”) is effective as of August 11, 2021 (“Amendment
Effective Date”). Each of GSK and Surface may be referred to herein as a “Party” and
together, the “Parties”.
RECITALS
WHEREAS, GSK and Surface desire to amend the Transition Plan as set forth on Exhibit C
hereto, in accordance with Section 15.6.
NOW THEREFORE, in consideration of the premises and the mutual promises and
conditions hereinafter set forth, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, do
hereby agree as follows:
1.Definitions. Capitalized terms used but not defined herein shall have the meaning set
forth in the Agreement.
2.Transition Plan. The Parties agree to amend the Transition Plan as attached hereto as
Exhibit C in order to permit Surface to order [***] of Licensed Product from the
Existing CMO for transfer to GSK, as described in more detail in the Transition
Plan. The Transition Plan sets forth the additional Transition Costs to be
reimbursed to Surface by GSK in connection with the Manufacture of [***] of
Licensed Product in accordance with Section 3.4 of the Agreement. Further, the
Parties acknowledge and agree that [***] in accordance with the Transition Plan.
IN WITNESS WHEREOF, each Party has caused this Amendment No. 1 to be duly executed
by its authorized representative on the Amendment Effective Date.
SURFACE ONCOLOGY, INC.
/s/ Robert Ross
Name: Robert Ross, MD
Title: President and CEO
/s/ Jessica Fees
Name: Jessica Fees
Title: Chief Financial Officer
DATE: 18TH AUGUST 2021
GLAXOSMITHKLINE
PROPERTY NO. 4 LIMITED
/s/ John Sadler
NAME: JOHN SADLER
INTELLECTUAL
AUTHORISED SIGNATORY
FOR AND ON BEHALF OF
THE WELLCOME FOUNDATION LIMITED
CORPORATE DIRECTOR
/s/ Claire MacLeod
NAME: CLAIRE MACLEOD
AUTHORISED SIGNATORY
FOR AND ON BEHALF OF
EDINBURGH PHARMACEUTICAL INDUSTRIES LIMITED
CORPORATE DIRECTOR
EXHIBIT
C
TRANSITION
PLAN
[***]
EXHIBIT 10.36
[***] Certain information in this exhibit has been omitted because it is permitted to be omitted by
applicable regulatory guidance.
SIXTH AMENDMENT
THIS SIXTH AMENDMENT (this “Amendment”) is made and entered into as of October 24, 2023,
by and between HUDSON 333 TWIN DOLPHIN PLAZA, LLC, a Delaware limited liability company
(“Landlord”), and COHERUS BIOSCIENCES, INC., a Delaware corporation (“Tenant”).
RECITALS
A.
B.
C.
Landlord and Tenant are parties to that certain lease dated July 6, 2015, as previously amended by that
certain First Amendment dated August 10, 2015, as confirmed by that certain Confirmation Letter
dated December 22, 2015, as further amended by that certain Second Amendment dated September 21,
2016 (“Second Amendment”), that certain Third Amendment dated May 24, 2019, that certain Fourth
Amendment dated September 4, 2019 (“Fourth Amendment”), that certain Notice of Lease Term
Dates dated October 16, 2019, and that certain Fifth Amendment dated December 6, 2019 (as
amended, the “Lease”). Pursuant to the Lease, Landlord has leased to Tenant space currently
containing approximately 47,789 rentable square feet (the “Currently Existing Premises”) at the
building commonly known as 333 Twin Dolphin located at 333 Twin Dolphin Drive, Redwood City
(the “Building”) and described as (i) Suite 425 (“Suite 425”) consisting of approximately 7,448
rentable square feet on the fourth floor of the Building, (ii) Suite 450 (“Suite 450”) consisting of
approximately 12,809 rentable square feet on the fourth floor of the Building; and (iii) Suite 600
(“Suite 600” or “Remaining Premises”) consisting of approximately 27,532 rentable square feet on
the sixth floor of the Building.
The Lease will expire by its terms on September 30, 2024 (the “Extended Expiration Date”). Except
as provided in Recital C below, the parties wish to extend the term of the Lease on the following terms
and conditions.
With respect to each of Suite 425 and Suite 450 (both as more particularly shown on Exhibit A
attached hereto, the “Reduction Space”), the parties wish to accelerate the Extended Expiration Date,
on the following terms and conditions.
NOW, THEREFORE, in consideration of the above recitals which by this reference are
incorporated herein, the mutual covenants and conditions contained herein and other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:
1.
Extension. Except as provided in Section 2 below, the term of the Lease is hereby extended through
September 30, 2027 (the “Second Extended Expiration Date”). The portion of the term of the Lease
beginning on the date immediately following the Extended Expiration Date (the “Second Extension
Date”) and ending on the Second Extended Expiration Date shall be referred to herein as the “Second
Extended Term”.
2.
Reduction.
2.1.
Reduction Space Expiration Date. Subject to the terms hereof, the term of the Lease shall
expire, with respect to the Reduction Space only, on December 31, 2023 (the “Reduction
Space Expiration Date”) with the same force and effect as if such term were, by the
provisions of the Lease, fixed to expire with respect to the Reduction Space on the Reduction
Space Expiration Date (the “Reduction”). Without limiting the foregoing: (a) from and after
the date immediately following the Reduction Space Expiration Date (the “Reduction
Effective Date”), the Premises shall consist solely of the Remaining Premises and shall be
deemed to contain 27,532 rentable square feet, (b) Tenant shall surrender the Reduction Space
to Landlord in accordance with the terms of the Lease (as amended by Section 2.2 below) on
or before the Reduction Space Expiration Date, (c) Tenant shall remain liable for all Rent and
other amounts payable under the Lease with respect to the Reduction Space for the period up
to and including the Reduction Space Expiration Date, even though billings for such amounts
may occur after the Reduction Space Expiration Date, (d) Tenant’s restoration obligations with
respect to the Reduction Space shall be as set forth in the Lease (as amended by Section 2.2
below), and (e) if Tenant fails to surrender any portion of the Reduction Space on or before the
Reduction Space Expiration Date, Tenant’s tenancy with respect to the Reduction Space shall
be subject to Section 16 of the Lease.
2.2.
Landlord Waiver. Notwithstanding Section 8 of the Lease (entitled, Landlord’s Property),
Section 15 of the Lease (entitled, Surrender) and/or any other similar provision of the Lease,
Tenant shall not be required to remove (nor pay for the removal of) any Tenant-Insured
Improvement (as defined in Section 10.2.2 of the Lease) existing in the Reduction Space on
the date of mutual execution and delivery of this Amendment.
3.
Base Rent.
3.1.
Remaining Premises During Second Extended Term. With respect to the Remaining
Premises during the Second Extended Term, the schedule of Base Rent shall be as follows:
Period of Second
Extended Term
October 1, 2024 –
September 30, 2025
October 1, 2025 –
September 30, 2026
October 1, 2026 –
September 30, 2027
Annual Rate Per
Square Foot (rounded
to the nearest 100th of
a dollar)
$64.20
$66.13
$68.11
Monthly Base Rent
$147,296.20
$151,715.09
$156,266.54
All such Base Rent shall be payable by Tenant in accordance with the terms of the Lease.
3.2.
Remaining Premises During Period Beginning on Reduction Effective Date and Ending
on Extended Expiration Date. With respect to the Remaining Premises during the period
beginning on the Reduction Effective Date and ending on the Extended Expiration Date, the
schedule of Base Rent shall be as follows:
Annual Rate Per
Square Foot (rounded
to the nearest 100th of
a dollar)
$72.92
Monthly Base Rent
$167,311.97
Period
Reduction Effective
Date through
Extended Expiration
Date
All such Base Rent shall be payable by Tenant in accordance with the terms of the Lease.
Notwithstanding the foregoing, Base Rent for the Remaining Premises shall be abated, (i)
in the amount of $167,311.97 with respect to the month of July, 2024 and (ii) in the amount
of $85,766.03 with respect to the month of August, 2024.
4.
5.
6.
Additional Security Deposit. The parties acknowledge and agree that Landlord is holding
$342,773.00 as the Security Deposit under the Lease. Effective as of the date hereof the amount of the
Security Deposit shall be reduced to $156,266.54; and, within 30 days hereof, Landlord shall return to
Tenant any then unapplied portion of the Security Deposit exceeding such reduced amount.
Tenant’s Share For Remaining Premises. With respect to the Remaining Premises during the
Second Extended Term (and any period beginning on the Reduction Effective Date and ending on the
Extended Expiration Date), Tenant’s Share shall be 15.0622%.
Expenses and Taxes For Remaining Premises. With respect to the Remaining Premises during the
Second Extended Term (and any period beginning on the Reduction Effective Date and ending on the
Extended Expiration Date), Tenant shall pay for Tenant’s Share of Expenses and Taxes in accordance
with the terms of the Lease; provided, however, that, with respect to the Remaining Premises during
the Second Extended Term, the Base Year for Expenses and Taxes shall be calendar year 2024.
7.
Improvements to Remaining Premises.
7.1.
Configuration and Condition of Remaining Premises. Tenant acknowledges that it is in
possession of the Remaining Premises and agrees to accept them “as is” without any
representation by Landlord regarding their configuration or condition and without any
obligation on the part of Landlord to perform or pay for any alteration or improvement, except
as may be otherwise expressly provided in this Amendment.
7.2.
Responsibility for Improvements to Remaining Premises. Any improvements to the
Remaining Premises performed by Tenant shall be paid for by Tenant and performed in
accordance with the terms of the Lease.
8.
9.
Representations. Tenant represents and warrants that, as of the date hereof and the Reduction Space
Expiration Date: (a) Tenant is the rightful owner of all of the Tenant’s interest in the Lease; (b) Tenant
has not subleased the Reduction Space or made any disposition, assignment or conveyance of the
Lease or Tenant’s interest therein; (c) Tenant has no knowledge of any fact or circumstance which
would give rise to any claim, demand, obligation, liability, action or cause of action arising out of or in
connection with Tenant’s occupancy of the Reduction Space; (d) no other person or entity has an
interest in the Lease, collateral or otherwise; and (e) there are no outstanding contracts for the supply of
labor or material and no work has been done or is being done in, to or about the Reduction Space
which has not been fully paid for and for which appropriate waivers of mechanic’s liens have not been
obtained.
Other Pertinent Provisions. Landlord and Tenant agree that, effective as of the date of this
Amendment (unless different effective date(s) is/are specifically referenced in this Section), the Lease
shall be amended in the following additional respects:
9.1.
Energy Usage. If Tenant (or any party claiming by, through or under Tenant) pays directly to
the provider for any energy consumed at the Project, Tenant, promptly upon request, shall
deliver to Landlord (or, at Landlord’s option, execute and deliver to Landlord an instrument
enabling Landlord to obtain from such provider) any data about such consumption that
Landlord, in its reasonable judgment, is required for benchmarking purposes or to disclose to a
prospective buyer, tenant or mortgage lender under any applicable law.
9.2.
California Civil Code Section 1938. Pursuant to California Civil Code § 1938, Landlord
hereby states that the Currently Existing Premises have not undergone inspection by a
Certified Access Specialist (CASp) (defined in California Civil Code § 55.52).
Accordingly, pursuant to California Civil Code § 1938(e), Landlord hereby further states as
follows: “A Certified Access Specialist (CASp) can inspect the subject premises and
determine whether the subject premises comply with all of the applicable construction-related
accessibility standards under state law. Although state law does not require a CASp
inspection of the subject premises, the commercial property owner or lessor may not prohibit
the lessee or tenant from obtaining a CASp inspection of the subject premises for the
occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant.
The parties shall mutually agree on the arrangements for the time and manner of the CASp
inspection, the payment of the fee for the CASp inspection, and the cost of making any
repairs necessary to correct violations of construction-related accessibility standards within
the premises”.
In accordance with the foregoing, Landlord and Tenant agree that if Tenant requests a CASp
inspection of the Currently Existing Premises, then Tenant shall pay (i) the fee for such
inspection, and (ii) except as may be otherwise expressly provided in this Amendment, the
cost of making any repairs necessary to correct violations of construction-related accessibility
standards within the Currently Existing Premises.
9.3
Parking. Effective as of the Reduction Effective Date, Section 1.9 of the Lease (as amended
prior to the date hereof) is hereby amended and restated as the following:
“1.9 Parking:
86 unreserved parking spaces, at the rate of $0.00 per space
per month, as such rate may be adjusted from time to time
to reflect Landlord’s then current rates.
Five (5) reserved parking space, as shown on Exhibit G to
the Fourth Amendment, at the rate of $0.00 per space per
month, as such rate may be adjusted from time to time to
reflect Landlord’s then current rates.”
9.4
Deletions. Section 8 of the Second Amendment (entitled, Right of First Offer), as amended
prior to the date hereof, is hereby deleted from the Lease and is of no further force or effect.
Section 9 of the Fourth Amendment (entitled, Second Extension Option), as amended prior to
the date hereof, is hereby deleted from the Lease and is of no further force or effect.
9.5
Address of Landlord. The address of Landlord set forth in Section 1.11 of the Lease (as
amended prior to the date hereof) is hereby amended and restated as follows:
“Hudson 333 Twin Dolphin Plaza, LLC
c/o Hudson Pacific Properties
555 Twin Dolphin Drive, Suite 180
Redwood City, California 94065
Attn: Building manager
with copies to:
Hudson 333 Twin Dolphin Plaza, LLC
c/o Hudson Pacific Properties
333 Twin Dolphin Drive, Suite 100
Redwood City, California 94065
Attn: Managing Counsel
and:
Hudson 333 Twin Dolphin Plaza, LLC
c/o Hudson Pacific Properties
11601 Wilshire Boulevard, Suite 900
Los Angeles, California 90025
Attn: Lease Administration”
10.
Miscellaneous.
10.1.
This Amendment and the attached exhibits, which are hereby incorporated into and made a
part of this Amendment, set forth the entire agreement between the parties with respect to the
matters set forth herein. There have been no additional oral or written representations or
agreements. Tenant shall not be entitled, in connection with entering into this Amendment, to
any free rent, allowance, alteration, improvement or similar economic incentive to which
Tenant may have been entitled in connection with entering into the Lease, except as may be
otherwise expressly provided in this Amendment.
10.2.
Except as herein modified or amended, the provisions, conditions and terms of the Lease shall
remain unchanged and in full force and effect.
10.3.
In the case of any inconsistency between the provisions of the Lease and this Amendment, the
provisions of this Amendment shall govern and control.
10.4.
10.5.
Submission of this Amendment by Landlord is not an offer to enter into this Amendment but
rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this
Amendment until Landlord has executed and delivered it to Tenant.
Each party hereto, and their respective successors and assigns shall be authorized to rely upon
the signatures of all of the parties hereto which are delivered by facsimile, PDF or DocuSign
(or the like) as constituting a duly authorized, irrevocable, actual, current delivery hereof with
original ink signatures of each person and entity. This Amendment may be executed in
counterparts, each of which shall be deemed an original part and all of which together shall
constitute a single agreement.
10.6. Capitalized terms used but not defined in this Amendment shall have the meanings given in
the Lease.
10.7.
Tenant shall indemnify and hold Landlord, its trustees, members, principals, beneficiaries,
partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals
and members of any such agents harmless from all claims of any brokers (other than
Newmark) claiming to have represented Tenant in connection with this Amendment. Landlord
shall indemnify and hold Tenant, its trustees, members, principals, beneficiaries, partners,
officers, directors, employees, and agents, and the respective principals and members of any
such agents harmless from all claims of any brokers claiming to have represented Landlord in
connection with this Amendment. Tenant acknowledges that any assistance rendered by any
agent or employee of any affiliate of Landlord in connection with this Amendment has been
made as an accommodation to Tenant solely in furtherance of consummating the transaction
on behalf of Landlord, and not as agent for Tenant.
[SIGNATURES ARE ON FOLLOWING PAGE]
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Amendment as of the day
and year first above written.
LANDLORD:
HUDSON 333 TWIN DOLPHIN PLAZA, LLC, a Delaware
limited liability company
By:
Hudson Pacific Properties, L.P.,
a Maryland limited partnership,
its sole member
By:
Hudson Pacific Properties, Inc.,
a Maryland corporation,
its general partner
__/s/ Arther X. Suaso__________
By:
Name: Arthur X. Suaso
Title: Executive Vice President, Leasing
TENANT:
COHERUS BIOSCIENCES, INC., a Delaware corporation
By:
Name:
Title:
_____/s/ Dennis M. Lanfear__________
Dennis M. Lanfear
Chief Executive Officer
EXHIBIT A
OUTLINE AND LOCATION OF REDUCTION SPACE
[***]
[***] C
.
EXHIBIT 10.37
A W E L C A
This Amendment to and Waiver under the Exclusive License and Commercializa on Agreement (this
“Amendment”) is made and entered into as of October 25, 2023, by and between Shanghai Junshi
Biosciences Co., Ltd. (“Junshi”) and Coherus BioSciences, Inc. (“Coherus”). Each of Junshi and Coherus is
some mes referred to herein, individually, as a “Party” and, collec vely as the “Par es.”
W , [***];
W , [***]; and,
W , Coherus desires to amend the due date for a milestone payment and [***].
N , , in considera on of the foregoing and such other good and valuable
considera on, the receipt and sufficiency of which is hereby acknowledged, the Par es agree as follows:
1.
Incorpora on of the Agreement: To the extent any terms and provisions of the Agreement are
inconsistent with the amendments set forth in paragraphs 2 and 3 below, such terms and
provisions shall be deemed superseded hereby. Except as specifically set forth herein, the
Agreement shall remain in full force and effect and its provisions shall be binding on the Par es.
2. Amendment of the Agreement: The ming for the due date of Milestone Event No. 2 set forth in
Table 8.3(a) of the Agreement – Regulatory and Sales Milestones for the PD1 Program is hereby
amended by adding the following new material to the end of the text of clause (a) of Sec on 8.3
of the Agreement immediately preceding such table (with new material added underlined):
“For the PD1 Program. Coherus will make the one- me milestone payments set
forth in Table 8.3(a) of the Agreement upon the first achievement by Coherus or
its Affiliates or Sublicensees of the corresponding milestone event by the first
Licensed Product that contains a Licensed An body described in clause (a) of the
defini on of Licensed An body, provided that such payment for Milestone Event
No. 2 will be payable upon the later of (i) actual receipt of such first Regulatory
Approval from FDA and (ii) [***], and in case of (i) or (ii), such payment would
become due on [***], assuming such first Regulatory Approval from the FDA is
obtained by [***].”
3.
[***]
4. Effectua on: The amendment to and waiver under the Agreement contemplated by this
Amendment shall be deemed effec ve as of the date first wri en above upon the full execu on
and delivery of this Amendment and without any further ac on required by the Par es.
5. Counterparts: This Amendment may be executed in two counterparts, each of which shall be
deemed to be an original, and all of which together shall cons tute one and the same
instrument. One or more counterparts of this Amendment may be delivered by facsimile or
electronic mail, with the inten on that delivery by such means shall have the same effect as
delivery of an original counterpart thereof.
[signature page follows]
I W W , the Par es have executed this Amendment by their duly authorized
representa ves.
S J B C ., L .
C B , I .
By: ____/s/ Dr. Ning Li_________________
By: _/s/ McDavid S lwell_________________
Name: Dr. Ning Li
Name: McDavid S lwell
Title: CEO
Title: Chief Financial Officer
EXHIBIT 10.38
COHERUS BIOSCIENCES, INC.
INSIDER TRADING COMPLIANCE POLICY AND PROCEDURES
Effective February 27, 2023
I.
SUMMARY
Federal and state laws prohibit trading in the securities of a company while in possession of
material non-public information and in breach of a duty of trust or confidence. These laws also
prohibit anyone who is aware of material non-public information from providing this information
to others who may trade. Violating such laws can undermine investor trust, harm the reputation
and integrity of Coherus BioSciences, Inc. (together with its subsidiaries, the “Company”), and
result in dismissal from the Company or even serious criminal and civil charges against the
individual and the Company. The Company reserves the right to take whatever disciplinary or
other measure(s) it determines in its sole discretion to be appropriate in any particular situation,
including disclosure of wrongdoing to governmental authorities.
This Insider Trading Compliance Policy and Procedures (this “Policy”) applies to all
officers, directors and employees of the Company. For purposes of this Policy, “officers” refer to
those individuals who meet the definition of “officer” under Section 16 of the Securities Exchange
Act of 1934 (as amended, the “Exchange Act”). Individuals subject to this Policy are responsible
for ensuring that members of their household comply with this Policy. This Policy also applies to
any entities controlled by individuals subject to the Policy, including any corporations, limited
liability companies, partnerships or trusts, and transactions by these entities should be treated for
the purposes of this Policy as if they were for the individual’s own account. The Company may
determine that this Policy applies to additional persons with access to material non-public
information, such as contractors or consultants. Officers, directors and employees, together with
any other person designated as being subject to this Policy by the Chief Legal Officer or his or her
designee (the “Compliance Officer”), are referred to collectively as “Covered Persons.”
Questions regarding the Policy should be directed to the Compliance Officer, who is
responsible for the administration of this Policy.
II.
STATEMENT OF POLICIES PROHIBITING INSIDER TRADING
No Covered Person shall purchase or sell any type of security while in possession of
material non-public information relating to the security or the issuer of such security in breach of a
duty of trust or confidence, whether the issuer of such security is the Company or any other
company. In addition, if a Covered Person is in possession of material non-public information
about other publicly-traded companies, such as suppliers, customers, competitors or potential
acquisition targets, the Covered Person may not trade in such other companies’ securities until the
information becomes public or is no longer material. Further, no Covered Person shall purchase or
sell any security of any other company, including another company in the Company’s industry,
while in possession of material non-public information if such information is obtained in the
course of the Covered Person’s employment or service with the Company.
In addition, Covered Persons shall not directly or indirectly communicate material non-
public information to anyone outside the Company (except in accordance with the Company’s
policies regarding confidential information) or to anyone within the Company other than on a
“need-to-know” basis.
III.
EXPLANATION OF INSIDER TRADING
“Securities” includes stocks, bonds, notes, debentures, options, warrants, equity and other
convertible securities, as well as derivative instruments.
“Purchase” and “sale” are defined broadly under the federal securities law. “Purchase”
includes not only the actual purchase of a security, but any contract to purchase or otherwise
acquire a security. “Sale” includes not only the actual sale of a security, but any contract to sell or
otherwise dispose of a security. These definitions extend to a broad range of transactions, including
conventional cash-for-stock transactions, conversions, the exercise of stock options, transfers, gifts
and acquisitions and exercises of warrants or puts, calls, pledging and margin loans or other
derivative securities.
Information is considered “material” if there is a substantial likelihood that a reasonable
investor would consider it important in making a decision to buy, sell or hold a security, or if the
information is likely to have a significant effect on the market price of the security. Material
information can be positive or negative, and can relate to virtually any aspect of a company’s
business or to any type of security, debt, or equity. Also, information that something is likely to
happen in the future—or even just that it may happen—could be deemed material.
Examples of material information may include (but are not limited to) information about:
corporate earnings or earnings forecasts; dividends; possible mergers, acquisitions, tender offers or
dispositions; major new products or product developments; important business developments, such
as major contract awards or cancellations and developments regarding strategic collaborations;
management or control changes; significant borrowing or financing developments, including
pending public sales or offerings of debt or equity securities; defaults on borrowings;
bankruptcies; the results of clinical trials; U.S. Food and Drug Administration and foreign
regulatory approvals; cybersecurity or data security incidents; and significant litigation or
regulatory actions.
IV.
STATEMENT OF PROCEDURES PREVENTING INSIDER TRADING
The following procedures have been established, and will be maintained and enforced, by
the Company to prevent insider trading. Every officer, director and employee is required to follow
these procedures.
A.
Blackout Periods
No director, officer or employee listed on Schedule I, as amended from time to time, (as well
as any individual or entity covered by this Policy by virtue of their relationship to such director, officer
or employee) shall purchase or sell any security of the Company during the period beginning at 11:59
pm PT on the 22nd calendar day of the last month of any fiscal quarter of the Company and ending
after completion of the second full trading day after the public release of earnings data for
such fiscal quarter or during any other trading suspension period declared by the Company, such
period, a “blackout period.” A “trading day” is a day on which U.S. national stock exchanges are
open for trading. If, for example, the Company were to make an announcement on Monday prior to
9:30 a.m. Eastern Time, then the blackout period would terminate after the close of trading on
Tuesday. If an announcement were made on Monday after 9:30 a.m. Eastern Time, then the blackout
period would terminate after the close of trading on Wednesday. If you have any question as to
whether information is publicly available, please direct an inquiry to the Compliance Officer.
These prohibitions do not apply to:
● purchases of the Company’s securities from the Company, or sales of the
Company’s securities to the Company;
● exercises of stock options or other equity awards or the surrender of shares to the
Company in payment of the exercise price or in satisfaction of any tax withholding
obligations in a manner permitted by the applicable equity award agreement, or
vesting of equity-based awards, in each case, that do not involve a market sale of
the Company’s securities (the “cashless exercise” of a Company stock option or
other equity award through a broker does involve a market sale of the Company’s
securities, and therefore would not qualify under this exception);
● purchases of the Company’s common stock in accordance with the Company’s 2014
Employee Stock Purchase Plan and the applicable equity award agreement;
● bona fide gifts of the Company’s securities, unless the individual making the gift
knows, or is reckless in not knowing, the recipient intends to sell the securities
while the donor is in possession of material non-public information about the
Company; and
● purchases or sales of the Company’s securities made pursuant to a plan adopted to
comply with the Exchange Act Rule 10b5-1 (“Rule 10b5-1”).
Exceptions to the blackout period policy may be approved only by the Compliance Officer or
Chief Financial Officer or, in the case of exceptions for directors, the Board of Directors.
The Compliance Officer may recommend that directors, officers, employees or others suspend
trading in Company securities because of developments that have not yet been disclosed to the public.
Subject to the exceptions noted above, all of those individuals affected should not trade in the
Company’s securities while the suspension is in effect and should not disclose to others that the
Company has suspended trading.
B.
Preclearance of Trades by Directors, Officers and Employees
All transactions in the Company’s securities by directors, officers, and employees listed on
Schedule II (each, a “Preclearance Person”) must be precleared by the Compliance Officer or the
Chief Financial Officer for transactions by the Compliance Officer. Preclearance should not be
understood to represent legal advice by the company that a proposed transaction complies with the
law.
A request for preclearance must be in writing, should be made at least two business days in
advance of the proposed transaction, and should include the identity of the Preclearance Person, a
description of the proposed transaction, the proposed date of the transaction and the
number of shares or other securities involved. In addition, the Preclearance Person must execute a
certification that he or she is not aware of material non-public information about the Company. The
Compliance Officer, or the Chief Financial Officer for transactions by the Compliance Officer,
shall have sole discretion to decide whether to clear any contemplated transaction. All trades that
are precleared must be effected within five business days of receipt of the preclearance. A
precleared trade (or any portion of a precleared trade) that has not been effected during the five
business day period must be submitted for preclearance determination again prior to execution.
Notwithstanding receipt of preclearance, if the Preclearance Person becomes aware of material
non-public information, or becomes subject to a blackout period before the transaction is effected,
the transaction may not be completed. Transactions under a previously established Rule 10b5-1
Trading Plan that has been preapproved in accordance with this Policy are not subject to further
preclearance.
None of the Company, the Compliance Officer or the Company’s other employees will
have any liability for any delay in reviewing, or refusal of, a request for preclearance.
C.
Post-Termination Transactions
If an individual is in possession of material non-public information when the individual’s
service terminates, the individual may not trade in the Company’s securities until that information
has become public or is no longer material.
D.
Information Relating to the Company
Access to material non-public information about the Company, including the Company’s
business, earnings or prospects, should be limited to officers, directors and employees of the
Company on a need-to-know basis. In addition, such information should not be communicated to
anyone outside the Company under any circumstances (except in accordance with the Company’s
policies regarding the protection or authorized external disclosure of Company information) or to
anyone within the Company on an other than need-to-know basis.
In communicating material non-public information to employees of the Company, all
officers, directors and employees must take care to emphasize the need for confidential treatment
of such information and adherence to the Company’s policies with regard to confidential
information.
V.
PROHIBITED TRANSACTIONS
The Company has determined that there is a heightened legal risk and the appearance of
improper or inappropriate conduct if persons subject to this Policy engage in certain types of
transactions. Therefore, Covered Persons shall comply with the following policies with respect to
certain transactions in the Company’s securities:
A.
Short Sales
Short sales of the Company’s securities are prohibited by this Policy. Short sales of the
Company’s securities, or sales of shares that the insider does not own at the time of sale, or sales of
shares against which the insider does not deliver the shares within 20 days after the sale, evidence
an expectation on the part of the seller that the securities will decline in value, and, therefore,
signal to the market that the seller has no confidence in the Company or its short-term
prospects. In addition, Section 16(c) of the Exchange Act prohibits Section 16 reporting persons
(i.e., directors, officers and the Company’s 10% stockholders) from making short sales of the
Company’s equity securities.
B.
Options
Transactions in puts, calls or other derivative securities involving the Company’s equity
securities, on an exchange, on an over-the-counter market or in any other organized market, are
prohibited by this Policy. A transaction in options is, in effect, a bet on the short-term movement of
the Company’s stock and, therefore, creates the appearance that a Covered Person is trading based on
material non-public information. Transactions in options, whether traded on an exchange, on an over-
the-counter market or any other organized market, also may focus a Covered Person’s attention on
short-term performance at the expense of the Company’s long-term objectives.
C.
Hedging Transactions
Hedging transactions involving the Company’s securities, such as prepaid variable forward
contracts, equity swaps, collars and exchange funds, or other transactions that hedge or offset, or are
designed to hedge or offset, any decrease in the market value of the Company’s equity securities, are
prohibited by this Policy. Such transactions allow the Covered Person to continue to own the covered
securities but without the full risks and rewards of ownership. When that occurs, the Covered Person
may no longer have the same objectives as the Company’s other stockholders.
D.
Margin Accounts and Pledging
Individuals are prohibited from pledging Company securities as collateral for a loan,
purchasing Company securities on margin (i.e., borrowing money to purchase the securities) or
placing Company securities in a margin account. This prohibition does not apply to cashless
exercises of stock options under the Company’s equity plans, nor to situations approved in advance
by the Compliance Officer.
E.
Partnership Distributions
Nothing in this Policy is intended to limit the ability of an investment fund, venture capital
partnership or other similar entity with which a director is affiliated to distribute Company
securities to its partners, members or other similar persons. It is the responsibility of each affected
director and the affiliated entity, in consultation with their own counsel (as appropriate), to
determine the timing of any distributions, based on all relevant facts and circumstances, and
applicable securities laws.
VI.
RULE 10b5-1 TRADING PLANS
The trading restrictions set forth in this Policy, other than those transactions described
under “V. Prohibited Transactions,” do not apply to transactions under a previously established
contract, plan or instruction to trade in the Company’s securities entered into in accordance with
Rule 10b5-1 (a “Trading Plan”) that:
●
●
has been submitted to and preapproved by the Compliance Officer;
includes a “Cooling Off Period” for:
o
o
Section 16 reporting persons that extends to the later of 90 days after
adoption or modification of a Trading Plan or two business days after filing
the Form 10-K or Form 10-Q covering the fiscal quarter in which the
Trading Plan was adopted, up to a maximum of 120 days; and
employees and any other persons, other than the Company, that extends 30
days after adoption or modification of a Trading Plan;
●
●
●
for Section 16 reporting persons, includes a representation in the Trading Plan that
the Section 16 reporting person is (1) not aware of any material non-public
information about the Company or its securities; and (2) adopting the Trading Plan
in good faith and not as part of a plan or scheme to evade Rule 10b-5;
has been entered into in good faith at a time when the individual was not in
possession of material non-public information about the Company and not
otherwise in a blackout period, and the person who entered into the Trading Plan has
acted in good faith with respect to the Trading Plan;
either (1) specifies the amounts, prices and dates of all transactions under the
Trading Plan; or (2) provides a written formula, algorithm or computer program for
determining the amount, price and date of the transactions, and (3) prohibits the
individual from exercising any subsequent influence over the transactions; and
●
complies with all other applicable requirements of Rule 10b5-1.
The Compliance Officer may impose such other conditions on the implementation and
operation of the Trading Plan as the Compliance Officer deems necessary or advisable. Individuals
may not adopt more than one Trading Plan at a time except under the limited circumstances
permitted by Rule 10b5-1 and subject to preapproval by the Compliance Officer.
An individual may only modify a Trading Plan outside of a blackout period and, in any
event, when the individual does not possess material non-public information. Modifications to and
terminations of a Trading Plan are subject to preapproval by the Compliance Officer, and
modifications of a Trading Plan that change the amount, price or timing of the purchase or sale of
the securities underlying a Trading Plan will trigger a new Cooling-Off Period.
The Company reserves the right to publicly disclose, announce, or respond to inquiries
from the media regarding the adoption, modification, or termination of a Trading Plan and non-
Rule 10b5-1 trading arrangements, or the execution of transactions made under a Trading Plan.
The Company also reserves the right from time to time to suspend, discontinue or otherwise
prohibit transactions under a Trading Plan if the Compliance Officer or the Board of Directors, in
its discretion, determines that such suspension, discontinuation or other prohibition is in the best
interests of the Company.
Compliance of a Trading Plan with the terms of Rule 10b5-1 and the execution of
transactions pursuant to the Trading Plan are the sole responsibility of the person initiating the
Trading Plan, and none of the Company, the Compliance Officer or the Company’s other
employees assumes any liability for any delay in reviewing and/or refusing to approve a Trading
Plan submitted for approval, nor the legality or consequences relating to a person entering into,
informing the Company of or trading under, a Trading Plan.
VII.
INTERPRETATION, AMENDMENT AND IMPLEMENTATION OF THIS POLICY The
Compliance Officer shall have the authority to interpret and update this Policy and all
related policies and procedures. In particular, such interpretations and updates of this Policy, as
authorized by the Compliance Officer, may include amendments to or departures from the terms of
this Policy, to the extent consistent with the general purpose of this Policy and applicable securities
laws.
Actions taken by the Company, the Compliance Officer or any other Company personnel do
not constitute legal advice, nor do they insulate you from the consequences of noncompliance with
this Policy or with securities laws.
VIII. CERTIFICATION OF COMPLIANCE
All directors, officers, employees and others subject to this Policy may be asked periodically to
certify their compliance with the terms and provisions of this Policy in the form attached hereto as
Attachment A.
SCHEDULE I
INDIVIDUALS SUBJECT TO QUARTERLY TRADING BLACKOUTS
●
●
●
●
All directors;
All Section 16 officers;
All employees; and
Consultants specified by the Company.
SCHEDULE II
INDIVIDUALS SUBJECT TO PRECLEARANCE REQUIREMENT
●
●
●
●
All directors;
All Section 16 officers;
Employees specified by the Company; and
Consultants specified by the Company.
ATTACHMENT A
CERTIFICATION OF COMPLIANCE
RETURN BY [
] [insert return deadline]
TO:
, Chief Legal Officer
FROM:
RE:
INSIDER TRADING COMPLIANCE POLICY AND PROCEDURES
OF COHERUS BIOSCIENCES, INC.
I have received, reviewed and understand the above-referenced Insider Trading
Compliance Policy and Procedures and undertake, as a condition to my present and continued
employment (or, if I am not an employee, affiliation) with Coherus BioSciences, Inc., to comply
fully with the policies and procedures contained therein.
I hereby certify, to the best of my knowledge, that during the calendar year
ending December 31, 20[ ], I have complied fully with all policies and procedures set forth in
the above-referenced Insider Trading Compliance Policy and Procedures.
SIGNATURE
DATE
TITLE
[***] Certain information in this exhibit has been omitted because it is permitted to be omitted by
applicable regulatory guidance.
EXHIBIT 10.39
December 7, 2023
McDavid Stilwell
[***]
[***]
Dear McDavid,
Your resignation from the position as Chief Financial Officer will be effective
December 31, 2023 (the “Separation Date”). This letter (the “Agreement”) provides information
regarding the mutual separation package agreement offered to you by Coherus Biosciences, Inc.
(the “Company”) should you agree to sign this Agreement.
On the eighth day following your signing of this Agreement (after December 31,
2023), and provided it is not revoked as provided herein, (the “Effective Date”), you will be entitled
to the severance detailed below, provided that you comply with the terms of the Agreement.
1.
Payment of Wages, Accrued Unused PTO, and Business Expenses.
Effective December 31, 2023, you will receive payment of wages through December 31,
2023, plus paid time off (“PTO”) accrued but unused through the Separation Date. You
may submit any business expenses incurred by you in accordance with the Company’s
normal travel and expense policies no later than January 31, 2024, and the Company will
promptly reimburse you for all documented and approved expenses. All items in this
Section 1 will be paid to you regardless of whether you elect to sign this Agreement.
2.
Severance Payments and Benefits. Provided you sign and do not revoke
this Agreement, within 8 days after you return the signed Agreement to the Company (after
December 31, 2023), you will be paid one year of additional pay, [***] in a lump sum
(gross) but less applicable taxes and authorized withholdings (“Severance Payment”).
Furthermore, if you timely elect to receive continuation of your healthcare benefits
pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”), the Company will pay for your COBRA premiums through December 31, 2024.
3.
Stock Options: The amount of stock options and restricted stock units that
you would have vested through December 31, 2024, will vest immediately on December
31, 2023, and your exercise window will begin on January 1, 2024.
333 Twin Dolphin Drive, Suite 600, Redwood City, CA 94065 Main: 650.649.3530 Page 1
4.
Mutual Release of Claims.
A. Your Release of Claims.
You agree not to sue, or otherwise file any claim against, the Company or any of its
directors, officers, managers, employees or agents for any reason whatsoever
based on anything that has occurred as of the date you sign this Agreement.
a)
On behalf of yourself and your executors, administrators, heirs and assigns,
you hereby release and forever discharge the “Releasees” hereunder,
consisting of the Company, and each of its owners, directors, officers,
managers, employees, representatives, agents, attorneys and insurers, and
all persons acting by, through, under or in concert with them, or any of
them, of and from any and all manner of action or actions, cause or causes
of action, in law or in equity, suits, debts, liens, contracts, agreements,
promises, liability, claims, demands, damages, loss, cost or expense, of any
nature whatsoever, known or unknown, fixed or contingent (hereinafter
called “Claims”), which you now have or may hereafter have against the
Releasees, or any of them, by reason of any matter, cause, or thing
whatsoever from the beginning of time through the Separation Date.
Without limiting the generality of the foregoing, you hereby release and
forever discharge the Releasees of and from any Claims arising directly or
indirectly out of, relating to, or in any other way involving in any manner
whatsoever your employment by the Company, including, but not limited to,
wage claims (base, bonus or commission), your termination of your position
and your employment separation, including without limitation any and all
claims arising under federal, state, or local laws relating to employment,
claims of any kind that may be brought in any court or administrative
agency, any claims arising under that Age Discrimination in Employment
Act (“ADEA”); Title VII of the Civil Rights Act of 1964, the Civil Rights Act of
1866; the Equal Pay Act; the Fair Labor Standards Act; the Employee
Retirement Income Security Act; the Family Medical Leave Act; the
California Fair Employment and Housing Act; the California Family Rights
Act; the California Labor Code; the California Occupational Safety and
Health Act; Section 17200 of the California Business and Professions
Code; Claims arising under any other local, state or federal laws governing
employment, including, but not limited to, the laws of California; Claims for
breach of contract; Claims arising in tort, including, without limitation,
Claims of wrongful dismissal or discharge, failure to pay wages (base,
bonus and commission), discrimination, harassment, retaliation, fraud,
infliction of emotional distress,
libel,
misrepresentation, defamation,
violation of public policy, and/or breach of the implied covenant of good faith
and fair dealing; and Claims for damages or other remedies of any sort,
including, without limitation, compensatory damages, punitive damages,
injunctive relief and attorney’s fees. Notwithstanding the generality of the
foregoing, you do not release any claims that cannot be released as a
matter of law, including, without limitation, claims for indemnity under
California Labor Code Section 2802 and any policy of insurance carried by
the Company, and your right to bring to the attention
333 Twin Dolphin Drive, Suite 600, Redwood City, CA 94065 Main: 650.649.3530 Page 2
of the Equal Employment Opportunity Commission or the California
Department of Fair Employment and Housing (or similar state agencies)
administrative Claims of harassment, discrimination or retaliation; provided,
however, that you release your right to secure damages as a remedy for
any such administrative Claims.
b)
Notwithstanding the generality of the foregoing in subsection a) above, you
do not release any claims that cannot be released as a matter of law,
including, without limitation, claims for indemnity under California Labor
Code Section 2802 and any policy of insurance carried by the Company,
and your right to bring to the attention of the Equal Employment Opportunity
Commission or the California Department of Fair Employment and Housing
(or similar state agency) administrative Claims of harassment,
discrimination or retaliation; provided, however, that you release your right
to secure damages as a remedy for any such administrative Claims.
c)
You have been advised of the following:
i)
ii)
You have the right to consult with an attorney before signing this
Agreement.
You have seven (7) days after signing this Agreement to revoke
your agreement to it, and the Agreement will not be effective, and
you will not receive any of the Severance Payments or benefits
outlined in Section 2 until that revocation period has expired. If you
wish to revoke your acceptance of this Release, you must deliver
such notice by email, to be received no later than 5:00 p.m. Pacific
Time on the 7th day following your signature to Rebecca Sunshine,
Chief Human Resources Officer, at [***].
B. The Company’s Release of Claims.
Except as provided in this Section 4(B), the Company agrees to release and not to
sue, or otherwise file, any claim against You based on anything that has occurred
as of the date You sign this Agreement. Notwithstanding the foregoing, the Parties
agree that the Company specifically reserves any claims for misappropriation of
trade secrets, embezzlement, clawbacks of compensation as required by law, the
Company's Clawback Policy or applicable stock exchange rules, or willful
misappropriation of Company funds.
C. YOU AND COMPANY ACKNOWLEDGE THAT YOU BOTH HAVE BEEN
ADVISED OF AND ARE FAMILIAR WITH THE PROVISIONS OF CALIFORNIA
CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR
AT THE TIME OF EXECUTING THE RELEASE, WHICH, IF KNOWN BY HIM OR
HER, MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR."
333 Twin Dolphin Drive, Suite 600, Redwood City, CA 94065 Main: 650.649.3530 Page 3
BEING AWARE OF SAID CODE SECTION, YOU HEREBY EXPRESSLY WAIVE
ANY RIGHTS YOU MAY HAVE THEREUNDER, AS WELL AS UNDER ANY
OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.
5.
Employee’s Representations. You represent and warrant that:
a)
b)
c)
d)
You have returned to the Company all Company property in your possession,
including all confidential information that you received while at the Company and/or
created for the purposes of your employment while at the Company.
You are not owed wages, commissions, bonuses or other compensation, other
than as set forth in Section 1-3, above.
During the course of your employment, you did not sustain any injuries for which
you might be entitled to compensation pursuant to worker’s compensation laws.
You have not initiated any adversarial proceedings of any kind against the
Company or against any other person or entity released herein, nor will you do so
in the future, except as specifically allowed by this Agreement.
6.
Non-disparagement; Neutral Reference. [***]
7.
Maintaining Confidential Information. You will abide by all of your
confidentiality obligations to the Company, including those outlined in your Proprietary
Information and Inventions Agreement (PIIA) that you entered at the start of your
employment with the Company, see, e.g., Sections 1, 2 (Proprietary Information,
Recognition of Company’s Rights; Nondisclosure), and Section 10 (Additional Activities).
You will not disclose any confidential information you acquired while an employee of the
Company to any other person or use such information in any manner. This includes any
confidential information that you created for purposes of your employment at the
Company. For the purposes of this Agreement, confidential information and proprietary
information, as defined in the PIIA, are interchangeable.
8.
Confidential Separation Information. Employee and Company agree that
the existence of the Agreement, the terms and conditions of this Agreement and any
discussions between employee and the Company that led to the terms and conditions of
this Agreement are confidential and will not be disclosed to any other person.
9.
Cooperation with the Company. You will cooperate fully with the
Company in its defense of or other participation in any administrative, judicial or other
proceeding arising from any charge, complaint or other action that has been or may be
filed.
10. Violation of Agreement. You understand that any violation of any of Your
obligations under this Agreement, will result in this Agreement being deemed null and void,
and may require you to repay to the Company any Severance Payments or other benefits
you received hereunder.
333 Twin Dolphin Drive, Suite 600, Redwood City, CA 94065 Main: 650.649.3530 Page 4
11.
Voluntary and Knowing Agreement. You represent that you have
thoroughly read and considered all aspects of this Agreement, that you understand all its
provisions and that you are voluntarily accepting its terms.
12.
Section 409A. To the extent that any reimbursements under this
Agreement are subject to the provisions of Section 409A of the Code, any such
reimbursements payable to you shall be paid to you no later than December 31 of the year
following the year in which the expense was incurred, the amount of expenses reimbursed
in one year shall not affect the amount eligible for reimbursement in any subsequent year,
and your right to reimbursement under this Agreement will not be subject to liquidation or
exchange for another benefit.
13.
Entire Agreement; Amendment. This Agreement sets forth the entire
agreement between you and the Company and supersedes any and all prior oral or written
agreements or understanding between you and the Company concerning the terms of your
separation. This Agreement may not be altered, amended or modified, except by a further
written document signed by you and the Company.
14.
Governing Law/Venue. To the greatest extent allowed by law, this
Agreement will be governed in all respects by the laws of the State of California without
giving effect to any choice of law rules that would dictate application of the laws of a
different jurisdiction. The parties agree that, to the greatest extent allowed by law, any
dispute between them related in any way to this Agreement will be brought in the state or
federal courts in San Mateo County. The parties specifically consent to the sole
jurisdiction of such courts.
Kindly sign where indicated below, and return this letter to Rebecca Sunshine, Chief
Human Resources Officer, by [***].
Sincerely,
/s/ Rebecca Sunshine
Rebecca Sunshine
Chief Human Resources Officer
Accepted and agreed to on this __11th_ day of ____December_____ 2023.
/s/ McDavid Stilwell
McDavid Stilwell
333 Twin Dolphin Drive, Suite 600, Redwood City, CA 94065 Main: 650.649.3530 Page 5
Exhibit 10.40
CERTAIN IDENTIFIED INFORMATION CONTAINED IN THIS EXHIBIT, MARKED BY “[***]”, HAS BEEN EXCLUDED
BECAUSE IT IS BOTH (i) NOT MATERIAL AND (ii) THE TYPE THAT SURFACE ONCOLOGY, INC. TREATS AS
PRIVATE OR CONFIDENTIAL.
Exclusive Product License Agreement
This Exclusive Product License Agreement (this “Agreement”) is made and entered into as
of this 23rd day of March, 2021 (the “Effective Date”) by and between Vaccinex, Inc., having
offices at 1895 Mt. Hope Avenue, Rochester NY 14620 USA (“Vaccinex”), and Surface Oncology,
Inc. having offices at 50 Hampshire St, 8th Floor, Cambridge, MA 02139 (“Surface”). Vaccinex
and Surface are sometimes referred to herein each individually as a “Party” and collectively as the
“Parties.”
RECITALS
WHEREAS, the Parties have entered into a Collaboration Agreement (defined below), pursuant to
which Vaccinex granted Surface the right to obtain a license to research, develop and
commercialize Licensed Products (defined below);
WHEREAS, pursuant to the Collaboration Agreement, Surface has exercised a Product Option (as
defined in the Collaboration Agreement) pursuant to which the Parties have agreed to enter into
this Agreement setting forth the terms and conditions of the licenses;
NOW, THEREFORE, the Parties hereby agree as follows:
Article 1.
DEFINITIONS
For purposes of this Agreement, the following words and phrases will have the following
meanings. All words and phrases not defined in this Article 1 (Definitions) will have the meanings
ascribed to them in this Agreement.
a..“Accounting Standards” means, GAAP, as generally and consistently applied throughout
the Party’s organization. Each Party shall promptly notify the other in the event that it changes the
Accounting Standards pursuant to which its records are maintained, provided, however that each
Party may only use internationally recognized accounting principles (e.g., IFRS, GAAP, etc.).
b..“Affiliate” means, with respect to a Party, any corporate or other entity that, directly or
indirectly, controls, is controlled by, or is under common control with such Party, where “control”
means the ownership of not less than fifty percent (50%) of the voting shares of
a corporation, or fifty percent (50%) of the decision-making authority as to such other
unincorporated entity.
c..“Challenge Action” has the meaning set forth in Section 6.2 (Surface’s Right to Enforce
and Defend Patent Rights).
d..“Collaboration Agreement” means
that certain Antibody Selection Research
Collaboration and License Option Agreement effective as of November 30, 2017 by and between
Vaccinex and Surface, as the same may be amended from time to time a copy of which is attached
hereto as Exhibit A.
e..“Combination Product” means a product or combination therapy that includes a Licensed
Product and at least one (1) additional non-Licensed Product comprised of active ingredient(s), that
is (are) either (i) co-formulated or administered through a single formulation, or (ii) administered
separately but approved (or being developed for approval) for use in combination with the
Licensed Product. Drug delivery vehicles, adjuvants and excipients will not be deemed “active
ingredients,” except in the case where (a) in the case of a drug delivery vehicle or excipient, such
delivery vehicle or excipient is recognized by the FDA as an active ingredient in accordance with
21 C.F.R. 210.3(b)(7), and if administered independently of the Licensed Product, would have a
material clinical benefit (as shown by reasonable scientific evidence), or (b) in the case of an
adjuvant, such adjuvant is (1) directly involved in the specific activation of any target affecting any
innate immune pathway (as shown by reasonable scientific evidence), and (2) which activation
itself produces a material clinical benefit (as shown by reasonable scientific evidence). For clarity,
adjuvants that qualify under clause (b) above could include but are not limited to STING
(stimulator of interferon genes) agonists and TLR (toll-like receptor) agonists administered alone
or in combination with a cancer antigen, and adjuvants that act generally on innate immunity.
f..“Commercially Reasonable Efforts” means [***].
g..“Confidential Information” has the meaning set forth in Section 10.1 (Non-Disclosure)
h..“Control” or “Controls” or “Controlled” means, with respect to any intellectual property
right (including any know-how, patent right or invention), the possession of (whether by ownership
or license, other than pursuant to this Agreement) the ability of a party or its Affiliates to grant
access to, or to grant a license or sublicense of, such right as provided for herein without violating
the terms of any agreement or other arrangement with any third party existing at the time such
party would be required hereunder to grant another person such access or license or sublicense.
i..“Cover” or “Covered” means with respect to a particular item or method, any patent
and/or know-how, that but for a license under or ownership right in such patent and/or know-how,
the manufacture, use, offer for sale, sale, importation, duplication, distribution or other exploitation
of such item (or any other item used in the manufacture, use, offer for sale, sale, importation,
duplication, distribution or other exploitation thereof) or the practice of such
method (or the use of any item in the practice of such method), would infringe any patent and/or
misappropriate any know-how (assuming, in the case of pending patent applications, that such
pending patent applications were issued patents) in any of the countries of manufacture, use, offer
for sale, sale, importation, duplication, distribution and/or other exploitation.
j..“Disclosing Party” has the meaning set forth in Section 10.1 (Non-Disclosure).
k..“Effective Date” has the meaning set forth in the preamble.
l..“Executive Officers” means, for Surface, its Chief Executive Officer, and for Vaccinex,
its Chief Executive Officer, provided that the foregoing individuals may designate the Chief
Financial Officer or the Chief Operating Officer as his/her designee. In the event that the position
of the Executive Officers identified in this Section 1.12 no longer exists due to a change of control,
corporate reorganization, corporate restructuring or the like that results in the elimination of the
identified position, the applicable Executive Officer will be replaced with another executive officer
with responsibilities and seniority comparable to the eliminated Executive Officer.
m..“FDA” means the United States Food and Drug Administration, or any successor
agency thereof.
n..“Field” means all human and animal prophylactic and therapeutic uses.
o..“First Commercial Sale” means, with respect to a Licensed Product in a country, the first
sale for end use or consumption of such Licensed Product in such country after all Regulatory
Approvals legally required for such sale have been granted by the regulatory authority of such
country.
p..“Indemnitee” has the meaning set forth in Section 8.3 (Indemnification Procedures).
q..“Indemnitor” has the meaning set forth in Section 8.3 (Indemnification Procedures).
r..“Infringement Action” has the meaning set forth in Section 6.2 (Surface’s Right to
Enforce and Defend Patent Rights).
s..“Infringing Product” has the meaning set forth in Section 6.2 (Surface’s Right to Enforce
and Defend Patent Rights).
t..“Licensed Product” means any product (including a bi-specific or multi-specific
antibody) that consists of or otherwise incorporates any Selected Antibody and/or any
modification, variant, fragment, or derivative thereof, in each case, that includes one or more
complementarity-determining regions of at least one variable region of such Selected Antibody
including (i) any functional fragment of, pegylated version of (whether or not including amino acid
changes) of a Selected Antibody and otherwise modified versions (including associated amino acid
substitutions) of, a Selected Antibody, or (ii) an antibody designed using, or derived
from, some or all of the binding portion of any Selected Antibody (or the sequence coding for it).
For the avoidance of doubt, a product that consists of a modified Selected Antibody that contains
the same sequences for all six complementarity-determining regions as such Selected Antibody
shall be considered the same Licensed Product for the purposes of this Agreement, except that a bi-
specific or multi-specific antibody or drug conjugate with such same sequences shall be considered
different Licensed Products.
u..“Net Sales” means [***].
v..“New License Agreement” has the meaning set forth in Section 9.4 (Effect of
Termination of Sublicensees).
w..“Other Vaccinex Intellectual Property Rights” means rights in or to all intellectual
property owned or Controlled by Vaccinex during the term of this Agreement, other than Vaccinex
Program IP, that is required or reasonably necessary for the registration, clinical development,
manufacture, use or sale of, or to otherwise exploit, the Selected Antibody, or any modification,
variant or fragment thereof contained in a Licensed Product.
x..“Party” and “Parties” have the meaning set forth in the preamble.
y..“Payments” has the meaning set forth in Section 4.7 (Withholding Taxes).
z..“Phase 1 Clinical Trial” means either (i) a clinical study of a Licensed Product in human
volunteers or patients with the primary objective of determining initial tolerance, safety and
pharmacokinetic information in a single doses, single ascending dose, multiple dose or multiple
ascending dose regimens as described in 21 C.F.R. § 312.21(a), or (ii) a comparable human clinical
trial of a Licensed Product prescribed by the relevant regulatory authority in any country that
would satisfy the requirements of 21 C.F.R. § 312.21(a), or its foreign equivalent.
aa..“Phase 2 Clinical Trial” means either (i) a clinical study of a Licensed Product in
patients with the primary objective of characterizing its activity in a specific disease state as well
as generating more detailed tolerance, safety and pharmacokinetic information as described in 21
C.F.R. § 312.21(b), or (ii) a comparable human clinical trial of a Licensed Product prescribed by
the relevant regulatory authority in any country that would satisfy the requirements of 21 C.F.R. §
312.21(b), or its foreign equivalent.
ab.. “Phase 3 Clinical Trial” means either (i) a clinical study of a Licensed Product in
patients, conducted in accordance with a protocol designed to confirm statistical significance of
efficacy and safety of a Licensed Product for the purpose of obtaining Regulatory Approval in any
country as described in 21 C.F.R. § 312.21(c), or (ii) a comparable human clinical trial of a
Licensed Product prescribed by the relevant regulatory authority in any country that would satisfy
the requirements of 21 C.F.R. § 312.21(c), or its foreign equivalent.
ac..“Prosecute” or “Prosecution” means the preparation, filing, prosecution, issuance and
maintenance of the Selected Antibody Patent Rights before the United States Patent and
Trademark Office and foreign patent offices in connection with the Selected Antibody Patent
Rights. Cognates of the word “Prosecution” have their correlative meanings.
ad..“Receiving Party” has the meaning set forth in Section 10.1 (Non-Disclosure).
ae..“Regulatory Approval” means, with respect to a particular Licensed Product, receipt of
all regulatory clearances, registrations, licenses, authorizations or approvals (which in the case of
the European Union may be through the centralized procedure) required in the jurisdiction in
question for the sale of the applicable Licensed Product or service in such jurisdiction, including
receipt of pricing approval, if any, legally required for such sale.
af..“Royalty Term” means, on a Licensed Product-by-Licensed Product and country-by-
country basis, the period beginning on the First Commercial Sale of such Licensed Product in such
country and ending upon the later of (a) the expiration of the last Valid Claim included within the
Vaccinex Program IP that Covers the composition of matter of such Licensed Product in the
Territory (if any) and (b) the 10th anniversary of the First Commercial Sale of such Licensed
Product in such country.
ag..“Selected Antibodies” means antibodies delivered by Vaccinex to Surface pursuant to
the Collaboration Agreement and described in Exhibit C hereof.
ah..“Selected Antibody Patent Rights” means (a) rights in or to all patents and patent
applications included within the Vaccinex Program IP, owned or Controlled by Vaccinex during the
Term that Cover the Selected Antibody, including those patents and patent applications listed in
Exhibit B; (b) all patents or patent applications filed in any country in the Territory that claim
priority to or the benefit of, or share common disclosure or common priority with, the patents and
patent applications described in the foregoing clause (a), including all provisional or priority patent
applications, divisionals, continuations, continuations-in-part (to the extent directed to the Selected
supplementary protection certificates,
Antibodies),
international applications and utility models, and foreign counterparts thereof; (c) all patents
granting from (a) and (b); (d) all extensions based on any of the foregoing; and (e) all rights
corresponding to any of the foregoing throughout the world (including the right to claim the
priority date of any of such patents and patent applications).
reexaminations,
renewals,
reissues,
ai..“Sublicense” means any agreement pursuant to which Surface or a Sublicensee grants a
Third Party a sublicense under the Vaccinex Program IP or Other Vaccinex Intellectual Property
Rights to make, have made, use, sell, offer to sell, import or otherwise exploit Licensed Products in
the Field.
aj..“Sublicensee” means any person or entity to whom Surface has granted a Sublicense
under this Agreement.
ak..“Surface” has the meaning set forth in the preamble.
al..“Taxes” has the meaning set forth in Section 4.7 (Withholding Taxes).
am..“Term” has the meaning set forth in Section 9.1 (Term).
an..“Territory” means worldwide.
ao..“Third Party” means any person or entity other than Surface, Vaccinex, or the Affiliates
of Surface or Vaccinex.
ap..“Vaccinex” has the meaning set forth in the preamble.
aq..“Vaccinex Patent Expenses” has
the meaning set
forth
in Section 5.1(a)
(Reimbursement).
ar..“Vaccinex Program IP” has the meaning set forth in the Collaboration Agreement.
as..“Valid Claim” means (a) a claim of an issued patent, which claim has not (i) expired,
lapsed, been canceled, dedicated to the public, disclaimed or become abandoned, (ii) been declared
unpatentable, invalid, unenforceable, revoked, or canceled by a decision or judgment of a court or
other appropriate body or authority of competent jurisdiction, or (iii) been admitted to be invalid or
unenforceable, or (b) any claim in a pending patent application that has been filed and is being
prosecuted in good faith and has not been cancelled, withdrawn from consideration, abandoned or
finally disallowed without the possibility of appeal or refiling of the application and that has not
been pending for more than seven (7) years from the earliest date from which the patent
application claims priority. If such patent application has been re-filed or is a divisional
application, the seven (7) year period mentioned above shall be calculated from the first
application filed in the series of applications.
Article 2.
GRANT
a..Grant of Rights. Subject to the terms and conditions of this Agreement, Vaccinex hereby
grants (and will cause its Affiliates to grant), and Surface hereby accepts (i) an exclusive,
irrevocable (subject to Section 9.3), license, with the right to grant Sublicenses (as provided in
Section 2.2 (Right to Sublicense) hereof), under the Vaccinex Program IP, to make, have made,
use, sell, offer to sell, have sold, import, export and otherwise exploit Licensed Products in the
Field in the Territory, and (ii) a fully-paid up, irrevocable (subject to Section 9.3), license, with the
right to grant Sublicenses (as provided in Section 2.2 (Right to Sublicense) hereof), under the
Other Vaccinex Intellectual Property Rights, to make, have made, use, sell, offer to sell, have sold,
import, export and otherwise exploit Licensed Products in the Field in the Territory.
b..Sublicenses.
(i)Right to Sublicense. Subject to this Section 2.2 (Sublicenses), Surface will have the
right to grant Sublicenses of any and all of the rights licensed to Surface
under this Agreement through multiple tiers to any Third Party. Surface will
be responsible for enforcing each Sublicensee’s obligations that relate to this
Agreement under each Sublicense that Surface executes and Surface shall
remain responsible for any such Sublicensee’s performance hereunder and
for all payments due to Vaccinex, including royalties or other payments due
on Net Sales of Licensed Products or milestones achieved by Sublicensee.
(ii)Sublicense Provisions. Each Sublicense will be subject to and consistent with the
relevant terms and conditions of this Agreement.
(iii)Copy of Sublicense. Surface will promptly notify Vaccinex of any Sublicense and
provide Vaccinex a true, correct and complete copy of the terms of each
Sublicense that Surface enters into with a Third Party and any amendment
thereto within [***] days following the execution of such Sublicense or
amendment; provided that Surface may redact from such copy any
confidential terms of such Sublicense that relate to financial information or
scientific or technical information specific to the Sublicensee’s compounds
or development plans, to the extent not reasonably necessary for Vaccinex to
monitor compliance by Surface or such Sublicensee with the terms and
conditions of this Agreement.
c..Rights of Affiliates. Surface may exercise its rights and perform its obligations under this
Agreement either directly or through one or more of its Affiliates. Surface’s Affiliates will have the
benefit of all rights (including all licenses) of Surface under this Agreement, subject to such
Affiliates’ compliance with the applicable obligations of Surface hereunder. Accordingly, in this
Agreement “Surface” will be interpreted to mean “Surface or its Affiliates” where necessary to
give Surface’s Affiliates the benefit of the rights provided to Surface in this Agreement; provided,
however, that in any event Surface will remain responsible for the acts and omissions, including
financial liabilities, of its Affiliates and for such Affiliates’ compliance with the applicable
obligations of Surface hereunder.
d..No Conflicting Agreements. Vaccinex will not grant licenses or other rights or interests
in or under the Vaccinex Program IP to any Third Party and will not enter into any agreement with
any Third Party that would conflict with or otherwise compromise the rights granted to Surface
hereunder.
e.. No Implied Rights. Each Party acknowledges that the rights and licenses granted under
this Agreement are limited to the scope expressly granted herein. Except for the rights expressly
granted under this Agreement, no rights, title, licenses, or other interests of any nature whatsoever
are granted whether by implication, estoppel, reliance, or otherwise, by either Party to the other
Party. Without limitation, none of the above licenses include the right to select antibodies other
than Selected Antibodies.
Article 3.
DUE DILIGENCE
a..General Obligation. Surface will use Commercially Reasonable Efforts to develop,
clinically test, achieve regulatory approval, manufacture, market and commercialize at
least one Licensed Product in the Field in the Territory during the Term of this Agreement. Such
diligence activities shall include, without way of limitation, Surface using Commercially
Reasonable Efforts to file an IND in the U.S., Canada, the U.K., a country in the E.U., Australia or
Japan (or requiring its Affiliates or Sublicensees to do so) within five (5) years of the Effective
Date.
b..Development Reports. Surface shall provide Vaccinex with (i) regular, and in any event
not less than every six months, written high-level summary reports describing Surface’s progress
on development of Licensed Products during the previous six months, and future development
plans for the next six months, and (ii) an annual detailed report on Surface’s progress in meeting its
obligations in Section 3.1, including but not limited to a summary of the evaluations of Licensed
Products performed, provided that such summary need not include results of such evaluations, and
a development plan of Licensed Products indicating development progress to date as well as the
projected timeline of expected achievement of milestones by Licensed Products. Vaccinex may
reasonably request additional related information in connection with the annual reports in order to
establish satisfaction by Surface of its obligations under this Section 3.
c..Reversion. If Surface materially breaches its obligations set forth in Section 3.1 (General
Obligations) and fails to cure such breach within [***] days after receiving written notice thereof
from Vaccinex, then Vaccinex shall have the right to terminate this Agreement pursuant to Section
9.2(d) (Diligence Failure).
Article 4.
LICENSE CONSIDERATION
a..Product License Fee. Within ten (10) days following the Effective Date, Surface will pay
to Vaccinex a fee of $850,000.
b..Annual Maintenance Fee. Commencing on the third (3rd) anniversary of the Effective
Date and each anniversary thereof occurring prior to the first dosing of the first human patient
pursuant to the protocol in the first Phase 1 Clinical Trial for a Licensed Product, Surface will pay
Vaccinex an annual maintenance fee according to the following schedule:
•Beginning with the third anniversary of the Effective Date, $[***];
•Beginning with the fourth anniversary of the Effective Date, $[***];
•Beginning with the fifth anniversary of the Effective Date, $[***];
•Beginning on the sixth anniversary of the Effective Date, and for each anniversary
thereafter, $[***].
Such fees will accrue on the applicable anniversary date, and Surface will pay the applicable
annual maintenance fee to Vaccinex within thirty (30) days following Surface’s receipt of
Vaccinex’s invoice therefor.
c..Milestone Payments. Surface will pay to Vaccinex the milestone payments set forth in
this Section 4.3 (Milestone Payments) with respect to the first achievement of the relevant
milestone event for each Licensed Product. Each milestone payment set forth in this Section 4.3
(Milestone Payments) is payable only once per Licensed Product, and the total payments payable
under this Section 4.3 (Development Milestone Payments) will in no event exceed $15,000,000 per
Licensed Product. The milestone payments will accrue upon the achievement of the applicable
milestone event, and Surface will promptly notify Vaccinex of such achievement, and pay the
associated milestone payment within thirty (30) days following achievement of each milestone
event described in this Section 4.3 (Milestone Payments).
Milestone Event
Milestone Payment
(i) Upon first patient dosed in the first Phase 1
Clinical Trial.
(ii) Upon first patient dosed in the first Phase
2 Clinical Trial.
$[***]
$[***]
(iii) Upon first patient dosed in the first Phase
3 Clinical Trial.
(iv) Upon filing of a BLA with US FDA.
(v) Upon approval of the BLA by the US
FDA.
(vi) Upon approval by the EMA.
$[***]
$[***]
$[***]
$[***]
For avoidance of doubt, a clinical trial that meets more than one definition of the type of clinical
trial (such as a clinical trial with an adaptive design, which morphs from a Phase 1 Clinical Trial to
a Phase 2 Clinical Trial), will be considered to be both of such clinical trials, and payment of all
milestones achieved as a result of such consideration, will be due and owing.
d..Royalties.
1.Royalty Payments. Subject to the provisions of this Agreement, Surface will pay to
Vaccinex, on a Licensed Product-by-Licensed Product basis during the
Royalty Term for such Licensed Product, a royalty of [***] of Net Sales on
Licensed Products sold in the Territory. Royalties will be due within [***]
days after the end of each calendar quarter during which the royalties
accrued.
2.Royalty Adjustments. If Surface or any of its Affiliates reasonably determines, in
consultation with Vaccinex, that a license under Third Party patent rights or know-
how is necessary to exploit the Vaccinex Program IP to make, have made, use, sell,
offer to sell, have sold, import, export and otherwise exploit Licensed Products in
the Field in the Territory, and Surface pays royalties to one or more Third Parties
for such license (collectively, “Third Party Royalties”), then Surface will have the
right to reduce the royalties otherwise due to Vaccinex
pursuant to Section 4.4(a) (Royalty Payments) hereof with respect to Net Sales of
such Licensed Product, which requires use of such Third Party license, by applying
a credit in an amount equal to [***] of the amount of such Third Party Royalties
applicable to such Licensed Product; provided that the reductions to royalties
provided in this Section 4.4(b) (Royalty Adjustments) will not reduce the royalties
payable with respect to Net Sales of such Licensed Product during any calendar
quarter of the applicable Royalty Term by more than [***] of the royalties
otherwise owed to Vaccinex pursuant to Section 4.4(a) (Royalty Payments) hereof.
Surface shall provide Vaccinex with documentation of its payment of Third Party
Royalties with the affected royalty report that shows such reduction being applied.
e..Payments. All payments pursuant to this Agreement will be paid in U.S. Dollars, without
deduction or exchange, collection or other charges and made by wire transfer to such account as
may be specified by Vaccinex to Surface in writing, and are non-refundable. When conversion of
payments from any foreign currency is required to be undertaken by Surface, payments shall be
converted into U.S. Dollars using the average of the daily exchange rates for such currency quoted
by Citibank, N.A. for each of the last [***] banking days of each calendar quarter which is the
reporting period. Any undisputed payments under this Agreement that are not made on or before
the applicable due date shall bear interest at the lower of (a) the maximum rate permitted by
applicable law and (b) the rate of [***] per annum above “Prime” as defined in The Wall Street
Journal on the payment due date or, if unavailable, on the latest date prior to the payment due date
on which such rate is available, calculated on a daily basis on the actual number of days elapsed
from the payment due date to the date of actual payment. Surface shall be solely responsible for the
payment of all royalties or other amounts, if any, which are payable to third parties arising out of
the manufacture, importation, use, offer to sell or sale of Licensed Products. Subject to Section
4.4(b), such amounts paid shall not be deducted from any payments due hereunder.
f..Invoices. All invoices to Surface under this Agreement will be sent by Vaccinex
electronically, via e-mail to [***], in PDF format, unless otherwise agreed by both Parties.
g..Withholding Taxes. Vaccinex will be liable for all income and other taxes (including
interest) (“Taxes”) imposed upon any payments made by Surface to Vaccinex under this
Agreement (“Payments”). If applicable laws, rules or regulations require the withholding of Taxes,
Surface will make such withholding payments and will subtract the amount thereof from the
Payments. Surface will submit to Vaccinex appropriate proof of payment of the withheld Taxes, as
well as the official receipts, within [***] days. Surface will provide Vaccinex reasonable assistance
in order to allow Vaccinex to obtain the benefit of any present or future treaty against double
taxation which may apply to the Payments.
h..Reports, Information, and Inspection.
1.Reports. Each payment shall be accompanied by a report showing the associated
facts that relate to the payment being made. Regarding Net Sales, the
information shall be presented for the calendar quarter with
respect to which the report is delivered, broken down by the identity of the
selling party or parties (Surface, its Affiliates, or any Sublicensee), on a
country-by-country/region-by-region (to the extent available to Surface) and
Licensed Product-by-Licensed Product basis, together with details of the
quantities of Licensed Products sold and, the country of manufacture, if
different (to the extent available to Surface), applicable offsets, withholding
taxes, whether in Combination Products, the royalty due to Vaccinex, and
other information as reasonably requested by Vaccinex and available to
Surface. All such reports will be treated as the Confidential Information of
Surface.
2.Notification of Marketing Approval. Surface agrees to notify Vaccinex in writing
within thirty (30) days after the date on which Surface, its Affiliates or
Sublicensees obtains marketing approval of each Licensed Product in each
country in the Territory and to promptly provide Vaccinex with a copy of
such notice.
3.Records and Audit. Surface agrees, and shall cause its Affiliates and Sublicensees,
to keep accurate and complete records for a period of at least [***] years
(or such longer period as may correspond to Surface's internal records
retention policy) showing the status of development efforts, status of patient
dosing, and the manufacturing, sales, use and other disposition of Licensed
Products in sufficient detail to evaluate the compliance of Surface and that
of its Affiliates and Sublicensees, with the obligations hereunder. Surface
will, and shall cause its Affiliates and Sublicensees, to permit all relevant
books and records to be audited by an independent accounting firm selected
by Vaccinex and reasonably satisfactory to Surface, or Surface’s Affiliate or
Sublicensee, as applicable, from time-to-time during regular business hours
at such place or places where such records are customarily kept to the extent
requested by Vaccinex, but not more than once a year, provided that before
beginning such audit, such independent accounting firm shall execute an
agreement acceptable to Surface by which such independent accounting firm
agrees to keep confidential all information reviewed during the audit.
Vaccinex agrees to hold in strict confidence all information received and all
information learned in the course of any audit, except to the extent necessary
to comply with any law, regulation or judicial order. Such examination and
audit is to be made at the expense of Vaccinex, except that it shall be at
Surface’s expense if the results of the examination and audit reveal that
Surface, its Affiliate or its Sublicensee underpaid Vaccinex by more than
[***] for the year at issue.
Article 5.
PATENT PROSECUTION
a..Prosecution of Patent Rights.
4.Reimbursement. Within [***] days following the Effective Date, Vaccinex will
submit to Surface (i) an invoice for any of its unreimbursed expenses (if
any) incurred prior to the Effective Date and associated with Prosecution of
Selected Antibody Patent Rights (the “Vaccinex Patent Expenses”), and (ii)
summary documentation of such Vaccinex Patent Expenses. Surface will
pay the undisputed Vaccinex Patent Expenses to Vaccinex within thirty (30)
days following Surface’s receipt of Vaccinex’s invoice and documentation
therefore.
5.Direction of Prosecution. As of and after the Effective Date, Surface, at its sole
expense and in the name of and with the cooperation of Vaccinex, hereby
assumes the responsibility for and shall maintain all control, including the
selection of counsel, over the Prosecution of the Selected Antibody Patent
Rights. At a reasonable time prior to the contemplated filing date, but in any
event not less than [***] days prior, Surface shall submit to Vaccinex for
review and comment a substantially completed draft of any patent
application hereunder before Surface’s first filing of such patent application
in any jurisdiction, and Vaccinex agrees to review and provide such
comments, if any, to Surface on an expedited basis if necessary to avoid loss
of patent rights. All expenses of Prosecuting such patents and patent
applications shall be borne by Surface. Surface shall provide Vaccinex
reports no less frequently than once per calendar year listing all patents and
patent applications Prosecuted pursuant to the provisions hereof, including
identification of the patents and patent applications by number and country,
together with a brief description of the status of the prosecution or patent.
Surface shall permit Vaccinex to review and comment on all patent
applications, and related decisions and actions under this Section 5.1(b),
provided that Surface will have all final decision-making rights over
Prosecution decisions made with respect to the Selected Antibody Patent
Rights. If Surface determines not to file or not to continue to Prosecute any
patents or patent applications within the Selected Antibody Patent Rights for
any country or region such that patent rights to a Selected Antibody would
terminate for that country or region, then Surface shall promptly, and in any
event not less than [***] days prior to the date in which a failure to file or
respond would prejudice the rights of Vaccinex hereunder, notify Vaccinex
in writing of such determination. Vaccinex may then Prosecute such patent
or patent application at its own expense in that country or region. If
Vaccinex exercises its rights under this Section 5.1(b) with respect to any
such patent or patent application in any country or region that Surface has
decided not to continue Prosecuting, the licenses set forth in this Agreement
shall become non-exclusive but with the same license consideration terms
(i.e., fees, payments, royalties) as set forth in Article
4, with respect to such patent or patent application, and patents issued
therefrom in that country or region.
6.Cooperation. Vaccinex agrees to cooperate with Surface in the preparation, filing,
prosecution and maintenance of any Selected Antibody Patent Rights
pursuant to this Section 5.1 (Prosecution of Patent Rights). Such cooperation
includes executing all papers and instruments, or requiring employees or
others to execute such papers or instruments, so as to effectuate the
ownership of such Selected Antibody Patent Rights and to enable the filing,
prosecution, maintenance, and extension thereof in any country or region. In
addition, Vaccinex agrees to cooperate with Surface in obtaining patent term
restoration or supplemental protection certificates or their equivalents in any
country in the Territory where applicable to the Selected Antibody Patent
Rights.
7.Disclosure. Each Party agrees that it will not make any public disclosure that
would adversely impact the patentability of any Selected Antibody prior to
filing of a protective patent in the United States, Europe, Canada and Japan.
8.Common Interest. All information exchanged between the Parties, or with or
between the Parties’ outside patent counsel, including Prosecution counsel,
regarding Prosecution of the Selected Antibody Patent Rights will be the
Confidential Information of both Parties and potentially be privileged. In
addition, the Parties acknowledge and agree that, with regard to such
Prosecution of the Selected Antibody Patent Rights, the interests of the
Parties are to obtain the strongest patent protection possible, and as such, are
aligned and are legal in nature. The Parties agree and acknowledge that they
have not waived, and nothing in this Agreement constitutes a waiver of, any
legal privilege concerning the Selected Antibody Patent Rights, including
privilege under the common interest doctrine and similar or related
doctrines.
Article 6.
INFRINGEMENT ACTIONS
a..Notice of Infringement. During the Term, each Party will inform the other Party
promptly in writing of any alleged infringement of the Selected Antibody Patent Rights by a Third
Party of which it becomes aware, and of any available evidence thereof.
b..Surface’s Right to Enforce and Defend Patent Rights. During the Term of this
Agreement, Surface will have the first right, and control over in its sole discretion, but will not be
obligated, to take any measures with respect to any Third Party’s activities concerning any product,
method or service that infringes or misappropriates, or which Surface reasonably suspects infringes
or misappropriates, the Selected Antibody Patent Rights (an “Infringing Product”), including (i) by
initiating or prosecuting an infringement, misappropriation or other
appropriate suit or action against such Third Party in a court of law (each an “Infringement
Action”) at its sole expense, or (ii) subject to Section 2.2 (Sublicenses), by granting adequate rights
and licenses necessary for continued activities, including development, manufacture or
commercialization, concerning any Infringing Product in the Territory to any Third Party who at
any time has infringed or misappropriated, or is suspected of infringing or misappropriating, any
Selected Antibody Patent Rights. Surface will also have the first right, and control over in its sole
discretion, but will not be obligated, to defend any action or proceeding (including a declaratory
judgment action or nullification action, re-examination, inter partes review, opposition,
interference, post-grant review or other proceeding) brought by a Third Party in a court of law or
before any patent office that challenges the patentability, validity or enforceability of any Selected
Antibody Patent Rights or that seeks a determination that any Infringing Product does not infringe
or misappropriate any Selected Antibody Patent Rights, and any appeals of the foregoing (any such
action or proceeding a “Challenge Action”) in the Territory, at Surface’s expense. In furtherance of
such right, Vaccinex hereby agrees that Surface may include Vaccinex as a party in any such
Infringement Action or Challenge Action and that Vaccinex will provide reasonable assistance to
Surface in connection with an Infringement Action or Challenge Action, in each case without
expense to Vaccinex. If Surface elects not to exercise its first right with respect to such Infringing
Product or Challenge Action, it shall promptly notify Vaccinex of the same. Upon receipt of such
notice, Vaccinex shall have the right, but not the obligation, to take any of the measures stated in
this Section 6.2 with respect to such Infringing Product or Challenge Action. Both Parties shall
cooperate with each other in good faith in the prosecution of any such action or proceeding. The
total cost of any such action commenced or defended solely by a Party will be borne by such Party
and the other Party will receive a percentage of any recovery or damages for past infringement
derived therefrom as follows: the recovered amounts will be used to reimburse
the Parties for their reasonable and previously unreimbursed documented costs and expenses,
including attorneys’ fees incurred in making such recovery (which amounts will be allocated pro
rata if insufficient to cover the totality of such expenses) with any remainder to be equally shared
by the Parties.
c..Cooperation. With respect to any Infringement Action or Challenge Action, or any
proceeding that a Party may institute to enforce the Selected Antibody Patent Rights pursuant to
this Agreement, the other Party will, at the request and expense of the first Party, reasonably
cooperate in all respects and, to the extent reasonably practicable, have its employees testify when
requested and make available relevant records, information, samples, specimens, and other
evidence upon request. If either Party reasonably determines that the other Party is an
indispensable party to the action, the other Party hereby consents to be joined. In such event, both
Parties shall have the right to be represented in that action by counsel of their own choice and at
their own expense.
d..EU Unitary Patent System. Without limitation of Surface’s rights under Article 6
(Infringement Actions), Surface will have the exclusive right to opt-in and opt-out the Selected
Antibody Patent Rights from the jurisdiction of the European Union Unified Patent Court when it
becomes operational, in accordance with the Unified Patent Court (Regulation (E.U.) No
1257/2012) and its applicable Annexes and Rules of Procedure, as amended and from time to time
in effect, and Vaccinex will not do so.
e..Patent Term Extensions. Surface will have the exclusive right to seek and obtain all
available extensions of the Selected Antibody Patent Rights with respect to a Licensed Product,
including any supplementary protection certificates, in any country in the Territory. Vaccinex will
execute such authorizations and other documents and, at Surface’s expense, take such other actions
as may be reasonably requested by Surface to obtain any such extensions, restorations and
supplementary protection certificates of the Selected Antibody Patent Rights in the Territory.
Article 7.
REPRESENTATIONS AND WARRANTIES
a..Vaccinex. Vaccinex represents and warrants to Surface as follows:
9.Vaccinex (i) is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, (ii) has the corporate power and
authority to enter into this Agreement and to perform its obligations
hereunder, and (iii) has taken sufficient steps such that the execution and
delivery of this Agreement by Vaccinex and the performance by Vaccinex of
its obligations hereunder have been duly authorized by all necessary
corporate action.
10.Vaccinex exclusively own all rights, title and interests in and to the Vaccinex
Program IP including the patent rights identified on Exhibit B, and Vaccinex
exclusively Controls all rights, title and interests in and to the Vaccinex
Program IP.
11.As of the Effective Date, there have been no claims, judgments, security interests
or settlements with respect to the Vaccinex Program IP, or pending claims or
litigation relating to the Vaccinex Program IP.
12.Exhibit B sets forth a complete and accurate list of each of the Selected
Antibody Patent Rights as of the Effective Date.
13.Any Selected Antibody Patent Rights existing as of the Effective Date have been
duly prepared, filed, prosecuted, obtained, and maintained by Vaccinex in
accordance with all applicable laws, rules, and regulations, it being
recognized that Vaccinex has conducted such activities based on advice
received from external patent agents.
14.The execution and delivery of this Agreement and the performance of Vaccinex’s
obligations hereunder are not inconsistent with or in breach of any
contractual obligations which Vaccinex owes to any Third Party, and will
not constitute a violation of any judgment, order or decree of any court,
arbitrator, governmental agency or authority binding upon Vaccinex.
b..Surface. Surface represents and warrants to Vaccinex as follows:
15.Surface is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the corporate power and
authority to enter into this Agreement and to perform its obligations
hereunder.
16.The execution and delivery of this Agreement by Surface and the performance
by Surface of its obligations hereunder have been duly authorized by all
necessary corporate action.
17.The execution and delivery of this Agreement and the performance of Surface’s
obligations hereunder are not inconsistent with or in breach of any
contractual obligations that Surface owes to any Third Party and will not
constitute a violation of any judgment, order or decree of any court,
arbitrator, governmental agency or authority binding upon Surface.
c..No Other Warranties. EXCEPT AS SPECIFICALLY SET FORTH IN THIS ARTICLE
7, NEITHER PARTY MAKES ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, TITLE, VALIDITY, NON-
INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.
Article 8.
INDEMNIFICATION; LIMITATION OF LIABILITY
a..Indemnification by Surface. Surface will at all times, during the term of this Agreement
and thereafter, indemnify, defend and hold harmless Vaccinex and its Affiliates, sublicensees,
directors, officers, agents and employees from any and all liabilities, damages, losses, costs or
expenses (including attorneys’ and professional fees and other expenses of litigation and/or
arbitration) resulting from third party claims arising out of or resulting from: (i) the gross
negligence or willful misconduct of Surface (or its directors, officers, employees or agents)
hereunder; (ii) the breach by Surface of any representation, warranty or covenant in this
Agreement; or (iii) the exercise or practice of the rights granted hereunder to Surface, including the
development, manufacture, holding, use, testing, marketing, advertisement, sale or other
disposition by Surface, its Affiliates or Sublicensees, of the Licensed Product (or any other product
or service offered by Surface, and/or its Affiliates or collaborators), the Selected Antibody, or its
related cell lines (or their progeny or derivatives, other biological materials, method, process,
device or apparatus), except in each case (i)-(iii), to the extent caused by the gross negligence,
willful misconduct or breach of this Agreement of or by Vaccinex.
b..Indemnification by Vaccinex. Vaccinex will at all times, during the term of this
Agreement and thereafter, indemnify, defend and hold harmless Surface and its Affiliates,
sublicensees, directors, officers, agents and employees from any and all liabilities, damages, losses,
costs or expenses (including attorneys’ and professional fees and other expenses of litigation
and/or arbitration) resulting from third party claims arising out of or resulting from: (i) the gross
negligence or willful misconduct of Vaccinex (or its directors, officers, employees or
agents) hereunder; or (ii) the breach by Vaccinex of any representation, warranty or covenant in
this Agreement; except in each case (i)-(ii), to the extent caused by the gross negligence, willful
misconduct or material breach of Surface.
intends
(the “Indemnitee”)
c..Indemnification Procedures.
to claim
If a Party
indemnification under this Article 8 (Indemnification; Limitation of Liability) it will promptly
notify the indemnifying Party (the “Indemnitor”) in writing of any claim, demand, action or other
proceeding for which the Indemnitee intends to claim such indemnification, and the Indemnitor
will assume control of the defense thereof, with counsel of its choice; provided that Indemnitor
will not settle any such proceeding in a manner that requires the Indemnitee to admit to any legal
violation or assume any liability that is not paid for in its entirety by Indemnitor without
Indemnitee’s prior written consent, not to be unreasonably withheld. The Indemnitee will have the
right to retain its own counsel and participate in the defense thereof, with the fees and expenses to
be paid at its own expense. The indemnity agreement in this Article 8 (Indemnification; Limitation
of Liability) will not apply to amounts paid in settlement of any claim, demand, action or other
proceeding if such settlement is effected without the consent of the Indemnitor, which consent will
not be withheld or delayed unreasonably. The failure to deliver written notice to the Indemnitor
within a reasonable time after the commencement of any such action, if prejudicial to its ability to
defend such action, will relieve such Indemnitor of any liability or obligation to the Indemnitee
under this Article 8 (Indemnification; Limitation of Liability). The Party claiming indemnification
under this Article 8 (Indemnification; Limitation of Liability), its employees and agents, will
reasonably cooperate with the Indemnitor and its legal representatives in the investigation of any
claim, demand, action or other proceeding covered by this indemnification.
Article 9.
TERM AND TERMINATION
a..Term. The term of this Agreement (the “Term”) will commence on the Effective Date
and will continue in full force and effect until terminated in accordance with Section 9.2
(Termination).
b..Termination.
18.Termination for Convenience. Surface may terminate this Agreement at any time
upon [***] days’ prior written notice to Vaccinex.
19.Termination for Cause. Either Party may terminate this Agreement in its entirety,
effective upon written notice to the other Party, if the other Party materially
breaches this Agreement and fails to cure such breach within [***] days
after receiving written notice thereof, provided that if the alleged breaching
Party disputes in good faith the existence or materiality of any such breach
specified in the notice provided by the other Party, and the alleged breaching
Party provides notice of such dispute within such [***] day period then such
[***] day cure period will be tolled during the pendency of such dispute and
the Party alleging such breach shall not have
the right to terminate this Agreement unless and until such dispute is
resolved.
20.Payment Default. Notwithstanding Section 9.2(b) (Termination for Cause), if
Surface shall at any time default in the payment of any royalty or other
payment required by this Agreement, Vaccinex may, at its option, terminate
this Agreement upon [***] days’ written notice, provided that if Surface
disputes in good faith the existence of any such payment default specified in
the notice provided by Vaccinex, and Surface provides notice of such
dispute within such [***] day period, then such [***] day period will be
tolled during the pendency of such dispute, provided such dispute is handled
as an Expedited Dispute (as defined in Exhibit D). Vaccinex will not have
the right to terminate this Agreement unless and until such Expedited
Dispute is resolved, and provided, further that (a) if Surface has fully cured
its default within such period, then the rights and licenses herein granted
shall remain in force as if no breach or default had occurred and (b) if any
payments are determined to be payable to Vaccinex following the resolution
of the dispute, such payment shall be immediately payable with interest as
of the original payment due date at the lower of (a) the maximum rate
permitted by applicable law and (b) the rate of [***] per annum above
“Prime” as defined in The Wall Street Journal on the original payment due
date or, if unavailable, on the latest date prior to the payment due date on
which such rate is available, calculated on a daily basis on the actual number
of days elapsed from the payment due date to the date of actual payment.
21.Diligence Failure. Notwithstanding Section 9.2(b) (Termination for Cause),
Vaccinex may terminate this Agreement in the event that Surface is in
material breach of its diligence obligations under Section 3.1 (General
Obligation) and fails to cure such material breach within [***] days after
receiving written notice thereof from Vaccinex, provided that if Surface
disputes in good faith the existence or materiality of any such breach
specified in the notice provided Vaccinex, and Surface provides notice of
such dispute within such [***] day period then such [***] day cure period
will be tolled during the pendency of such dispute, and Vaccinex shall not
have the right to terminate this Agreement unless and until such dispute is
resolved.
22.Subject to applicable laws, Vaccinex may terminate this Agreement immediately
upon written notice to Surface in the event that Surface, its Affiliate or
Sublicensee Challenges (as defined below) any patent or patent application
contained in the Vaccinex Program IP or Other Intellectual Property Rights
(each a “Licensed Patent”) provided, however, that no such termination right
shall apply to (i) any Challenge that is commenced by a Sublicensee where
Surface demands that such
Sublicensee withdraw such Challenge promptly after Surface becomes
aware of such Challenge and terminates the sublicense agreement with the
applicable Sublicensee if such Sublicensee does not withdraw such
Challenge within [***] days after receipt of notice from Surface, or (ii)
providing documents or testimony in response to any discovery requests or
court order in a valid legal process. As used in this Section 9.2(e),
“Challenge” means to Contest the validity or enforceability of any Licensed
Patent in whole or in part, in any court, arbitration proceeding, or other
tribunal, including the USPTO, the United States International Trade
Commission, or any foreign equivalent thereof. For the avoidance of doubt,
the term “Contest” means: (a) commencing, filing, joining in, or assisting a
Third Party in filing an action under 28 U.S.C. §§ 2201-2202, seeking a
declaration of invalidity or unenforceability of any Licensed Patent or any
portion thereof; (b) commencing, filing, joining in, or assisting a Third Party
in filing a petition under 35 U.S.C. § 311 to institute inter-partes review of
any Licensed Patent or any portion thereof; (c) commencing, filing, joining
in, or assisting a Third Party in filing a petition under 35 U.S.C. § 321 to
institute post-grant review of any Licensed Patent or any portion thereof; or
(d) any foreign equivalents of subsection (a) through (c) applicable in any
country. As used herein, the term “Contest” does not include any action
taken by Surface, its Affiliate or Sublicensee for the sole purpose of
complying with the duty to disclose information material to patentability as
set forth in 37 CFR 1.56 or any foreign equivalent thereof, or to exercise its
rights to Prosecute the Selected Antibody Patent Rights pursuant to Article
5.
c..Effects of Termination. Upon termination of this Agreement pursuant to Section 9.2
(Termination), all of Surface’s unpaid payment obligations to Vaccinex pursuant to Article 4
(License Consideration) will terminate, provided that neither Party will be released from any
obligation that accrued prior to the effective date of such termination. Upon termination of this
Agreement pursuant to Section 9.2 (Termination), all rights granted by Vaccinex to Surface under
Article 2 (Grant), including Vaccinex Program IP (including Vaccinex’s interest in rights jointly
controlled with Surface), will revert to Vaccinex. Surface and any Sublicensee may, after the
effective date of such termination, sell all Licensed Products that were produced prior to the
effective date of such termination but in any event for no longer than [***] months after the
effective date of such termination.
d..Effect of Termination on Sublicenses. In the event of any termination of this Agreement
pursuant to Section 9.2 (Termination), where such termination has not been caused by any action
or inaction on the part of any Sublicensee or by any material breach by such Sublicensee of its
obligations under its Sublicense from Surface, and termination of this Agreement will be without
prejudice to the rights of each non-breaching Sublicensee, and Vaccinex will enter into a license
agreement directly with each such Sublicensee (the “New License Agreement”) on substantially
the same terms and conditions as those set forth in this Agreement; provided, however, that (a) the
New License Agreement will provide that in no event
will such Sublicensee be liable to Vaccinex for any actual or alleged default by Surface of this
Agreement, (b) the scope and territory of the license grant under the New License Agreement will
be the same as that granted by Surface to such Sublicensee pursuant to the Sublicense between
Surface and such Sublicensee, (c) the financial terms of any New License Agreement will be such
that Vaccinex will receive no less than the same consideration that it would have received under
this Agreement had it not been terminated, and (d) Vaccinex will not have any obligations under
the New License Agreement that are greater than or inconsistent with the obligations of Vaccinex
under this Agreement. Each such Sublicensee will be deemed a third party beneficiary of this
Section 9.4 (Effect of Termination on Sublicenses) with the right to enforce it directly against
Vaccinex.
e..Effect of Termination on IP. Effective upon termination of this Agreement, Vaccinex
shall have the option for a period of [***] days to enter into good faith negotiations with Surface
for an exclusive, worldwide license (with rights to sublicense) under all intellectual property,
including without limitation, pre-clinical or clinical data, regulatory approvals and/or submissions,
then owned or Controlled by Surface as of the effective date of termination as reasonably
necessary to enable Vaccinex to engage in exclusive development and commercialization of the
Selected Antibody and/or the applicable Licensed Product(s).
f..Survival. The following sections of this Agreement along with applicable definitions in
Article 1 (Definitions) applicable thereto will survive termination or expiration of this Agreement:
Section 4.8(c) (Records and Audit), Section 9.3 (Effects of Termination), Section 9.4 (Effect of
Termination on Sublicensees), Section 9.5 (Effect of Termination on IP), Section 9.6 (Survival),
Article 8 (Indemnification; Limitation of Liability), Article 10 (Confidentiality) and Article 11
(Miscellaneous). Except as otherwise provided in this Section 9.6 (Survival), all other provisions
of this Agreement will terminate upon the termination of this Agreement.
Article 10.
CONFIDENTIALITY
a..Non-Disclosure. As used herein, the term “Confidential Information” includes any
information that may be disclosed by one Party (the “Disclosing Party”) to the other Party (the
“Receiving Party”) in connection with this Agreement, regardless of whether such information is
specifically designated as confidential and regardless of whether such information is in oral,
written, electronic or other form, provided that where such information is disclosed in oral form if
the Confidential Information is not of a nature that should reasonably be understood by the
Receiving Party as being confidential, then to be considered Confidential Information for the
purposes of this Agreement, the Disclosing Party must confirm in writing that such information is
to be treated as Confidential Information within [***] days of such disclosure. The Receiving
Party will hold Confidential Information in confidence using the same degree of care that it
employs for its own highly-sensitive confidential or proprietary information, which will in no
event be less than a reasonable standard of care and will use and disclose the Disclosing Party’s
Confidential Information only for the purpose of performing its obligations and exercising its
rights under this Agreement. The Receiving Party may permit those directors, officers,
employees, consultants and advisers who have a need to know the Disclosing Party’s Confidential
Information to access such Confidential Information, provided that such employees are subject to
confidentiality obligations that are no less stringent than those under Article 10 (Confidentiality).
Notwithstanding the foregoing, Surface may disclose the Confidential Information received from
Vaccinex to its advisors or actual or potential acquirers or Sublicensees if such advisors and actual
or potential acquirers or Sublicensees agree prior to disclosure to be bound by confidentiality
obligations no less stringent than those under Article 10 (Confidentiality). The Receiving Party’s
obligations under this Section 10.1 (Non-Disclosure) will continue throughout the Term and for
five (5) years following the termination or expiration of this Agreement. The existence and terms
of this Agreement shall be the Confidential Information of both Parties.
b..Exceptions. The confidentiality and non-use obligations set forth in Section 10.1 (Non-
Disclosure) will not apply to Confidential Information that the Receiving Party can demonstrate by
competent written proof: (a) was known by the Receiving Party without restriction prior to
disclosure under this Agreement; (b) was lawfully disclosed to the Receiving Party by a Third
Party without an obligation of confidentiality; (c) entered the public domain through means other
than an unauthorized disclosure or other breach of this Agreement by the Receiving Party; (d) was
independently developed by the Receiving Party without knowledge or use of or access to
Confidential Information disclosed by the Disclosing Party under this Agreement; (e) was
published or publicly disclosed in accordance with the terms of this Agreement; or (f) to the extent
such information can be shown to be necessary to file a patent application subject to Section 5.1.
Each Party may use or disclose Confidential Information disclosed to it by the other Party to the
extent such use or disclosure is reasonably necessary in (i) filing or prosecuting patent
applications, (ii) conducting clinical trials, (iii) making a permitted sublicense or otherwise
exercising its rights hereunder.
c..Disclosure Required by Law. Notwithstanding Section 10.1 (Non-Disclosure), limited
disclosure of Confidential Information will not be prohibited to the extent such Confidential
Information is required to be produced under applicable law. If a Receiving Party is required by
law, regulation, court order, or request by an agency of a government to disclose any of the
Confidential Information, it will: promptly notify the Disclosing Party, reasonably assist the
Disclosing Party to obtain a protective order or other remedy of Disclosing Party's election, and
provide prior review of any disclosure to Disclosing Party. Only that portion of the Confidential
Information that is legally required will be furnished and reasonable efforts will be made to obtain
assurance that the Confidential Information will be maintained in confidence.
d..Publication. Surface may publish or present the results of research or development
carried out on any Selected Antibody or Licensed Product in its sole discretion, provided that any
publication or presentation that includes Vaccinex’s Confidential Information, or relates to Other
Vaccinex Intellectual Property Rights, shall be subject to (i) Sections 10.1-10.3 hereto, and (ii) the
prior review by Vaccinex, such review period not to exceed [***] days, and Surface shall consider
Vaccinex’s comments in good faith.
e..Publicity. Vaccinex may, subject to Surface’s review and approval, issue a press release
announcing the Parties' entry into this Agreement, provided that such press release shall not
identify the specific indications of the Selected Antibody and Licensed Product hereunder.
Article 11.
MISCELLANEOUS
a..Force Majeure. Neither Party shall be responsible to the other for failure or delay in
performing any of its obligations under this Agreement or for other non-performance hereof (other
than failure to pay) provided that such delay or non-performance is occasioned by a cause beyond
the reasonable control and without fault or negligence of such Party, including, but not limited to
earthquake, fire, flood, explosion, discontinuity in the supply of power, court order or
governmental interference, or act of God, and provided that such Party will inform the other Party
of such event as soon as is reasonably practicable and that it will use commercially reasonable
efforts to perform its obligations immediately after the relevant cause has ceased its effect.
b..Validity. Should one or several provisions of this Agreement be or become invalid, then
the Parties shall substitute for such invalid provisions valid ones, which in their economic effect
come so close to the invalid provisions that it can be reasonably assumed that the Parties would
have contracted this Agreement with those new provisions. In the event that such provisions
cannot be determined, the invalidity of one or several provisions of the Agreement shall not affect
the validity of the Agreement as a whole, unless the invalid provisions are of such essential
importance for this Agreement that it is to be reasonably assumed that the Parties would not have
contracted this Agreement without the invalid provisions.
c..Disputes. Any claim, dispute or controversy arising out of or in connection with or
relating to this Agreement shall be submitted for adjudication in Federal District Court in the
Southern District of New York, USA.
d..Notices. Any legal notice required or permitted to be given under this Agreement shall
be in writing and shall be sent by expedited delivery or emailed with receipt confirmed in writing,
as follows and shall be effective upon receipt:
If to Vaccinex:
President
Vaccinex, Inc.
1895 Mt. Hope Avenue
Rochester, NY 14620
USA
EMAIL: [***]
If to Surface:
Chief Legal Officer
Surface Oncology, Inc.
50 Hampshire Street, 8th Floor
Cambridge, Massachusetts 02139
USA
EMAIL: [***]
Either Party may update the contact information in this Section 11.4 upon written notice to the
other Party by email with receipt confirmed in writing.
e..Governing Law. Except as otherwise set forth in this Agreement the validity,
performance, construction, and effect of this Agreement shall be governed by the laws of the state
of New York, without regard to its conflict of law rules.
f..Entire Agreement. This Agreement, if executed, constitutes the entire agreement between
the Parties with respect to the subject matter within and supersede all previous agreements,
whether written or oral. This Agreement shall not be changed or modified orally, but only by an
instrument in writing signed by both Parties.
g..Waiver. No waiver or release of any obligation under or provision of this Agreement
shall be valid or effective unless in writing and signed by the waiving Party. The failure of either
Party to insist on the performance of any obligation hereunder shall not be deemed to be a waiver
of such obligation. Waiver of any provision hereunder or of any breach of any provision hereof
shall not be deemed to be a continuing waiver or a waiver of any other breach of such provision (or
any other provision) on such occasion or any succeeding occasion.
h..Assignment. The rights of either Party under this Agreement may not be assigned, and
the duties of either Party under this Agreement may not be delegated, without the prior written
consent of the other Party, which consent shall not be unreasonably withheld; provided, however,
that either Party may assign this Agreement without prior written consent to an Affiliate of such
Party or to a party which acquires all or substantially all of that Party’s business to which this
Agreement relates, whether by merger, sale of assets or otherwise.
i..Export. Each Party acknowledges that the laws and regulations of the U.S. restrict the
export and re-export of commodities and technical data of U.S. origin. Each Party agrees that it
will not export or re-export restricted commodities or the technical data of the other Party in any
form without the appropriate U.S. and foreign government licenses.
j..Headings. Any headings and captions used in this Agreement are for convenience and
reference only and are not a part of this Agreement.
k..Independent Contractors. The relationship between Vaccinex and Surface hereunder will
be that of independent contractors and neither Party shall have the authority to bind or commit the
other to any third party. Nothing in this Agreement will be construed to create a joint venture,
partnership, agency or employer-employee relationship between the Parties and Vaccinex shall be
solely responsible for all employment and withholding taxes applicable to the services provided by
its employees and contractors under this Agreement.
l..NO INDIRECT DAMAGES. EXCEPT FOR DAMAGES RESULTING FROM A
PARTY’S BREACH OF CONFIDENTIALITY OR OF SECTIONS 7.1(b), 7.1(f) OR 7.2(c), OR
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR IN CONNECTION WITH A
PARTY’S INDEMNIFICATION OBLIGATIONS HEREUNDER, NEITHER PARTY WILL BE
LIABLE FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL, MULTIPLE, PUNITIVE,
EXEMPLARY OR OTHER INDIRECT DAMAGES, AND NEITHER PARTY WILL BE
RESPONSIBLE FOR LOST PROFITS OR LOST REVENUES, REGARDLESS OF ANY
NOTICE OF SUCH DAMAGES.
m..Counterparts. This Agreement may be executed in any number of counterparts (which
may be transmitted in the form of a facsimile or pdf), each of which shall be an original, and all of
which shall constitute together but one and the same document.
n..Construction. Whenever the singular number is used in this Agreement and when
required by the context, the same shall include the plural and vice versa, and the masculine gender
shall include the feminine and neuter genders and vice versa. The words “include” and “including”
shall mean respectively includes and including without limitation. The word “or” shall not be
deemed to be used in the exclusive sense and shall instead be used in the inclusive sense to mean
“and/or.” Each Party signing this Agreement acknowledges that such Party has had the opportunity
to review this Agreement with legal counsel of such Party’s choice, and there shall be no
presumption that ambiguities shall be construed or interpreted against the drafter.
[Signature Page to Exclusive License Agreement Follows]
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the
Effective Date.
vaccinex, INC.
By /s/ Maurice Zauderer
Name: Maurice Zauderer, Ph.D.
Title: President & Chief Executive Officer
SURFACE ONCOLOGY, INC.
By /s/ Jeff Goater
Name: Jeff Goater
Title: Chief Executive Officer
By /s/ Jessica Fees
Name: Jessica Fees
Title: Senior Vice President, Finance
[Signature Page to Exclusive Product License Agreement]
EXHIBIT B
SELECTED ANTIBODY PATENT RIGHTS
[***]
EXHIBIT C
SELECTED ANTIBODIES
[***]
EXHIBIT D
Determination of Combination Product Value
[***]
SIGNIFICANT SUBSIDIARIES OF COHERUS BIOSCIENCES, INC.
Name of Subsidiary
Surface Oncology, LLC
Jurisdiction of Organization
Delaware
EXHIBIT 21.1
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorpora on by reference in the following Registra on Statements:
(1) Registra on Statements (Form S-3 Nos. 333-208625, 333-220590, 333-222698, and 333-268252) of Coherus
BioSciences, Inc.,
(2) Registra on Statements (Form S-8 Nos. 333-200593, 333-203356, 333-209936, 333-216679, 333-222700, 333-
229480, 333-236068, 333-251876, 333-262134, and 333-269291) pertaining to the BioGenerics, Inc. 2010
Equity Incen ve Plan, as amended, the Coherus BioSciences, Inc. 2014 Equity Incen ve Award Plan, and the
Coherus BioSciences, Inc. 2014 Employee Stock Purchase Plan, and
(3) Registra on Statements (Form S-8 Nos. 333-213077, 333-225616, 333-228274, 333-229479, 333-231329, 333-
234601, 333-236065, 333-251877 and 333-262941) pertaining to the 2016 Employment Commencement
Incen ve Plan of Coherus BioSciences, Inc.;
of our reports dated March 15, 2024, with respect to the consolidated financial statements of Coherus BioSciences, Inc.
and the effec veness of internal control over financial repor ng of Coherus BioSciences, Inc. included in this Annual
Report (Form 10-K) of Coherus BioSciences, Inc. for the year ended December 31, 2023.
/s/ Ernst & Young LLP
San Mateo, California
March 15, 2024
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
SECTION 13a-14(a) OR 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Dennis M. Lanfear, cer fy that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Coherus BioSciences, Inc. (the "registrant");
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial informa on included in this report, fairly present in all material
respects the financial condi on, results of opera ons and cash flows of the registrant as of, and for, the periods presented in this
report;
The registrant’s other cer fying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial repor ng (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material informa on rela ng to the registrant, including its consolidated subsidiaries, is made
known to us by others within those en es, par cularly during the period in which this report is being prepared;
Designed such internal control over financial repor ng, or caused such internal control over financial repor ng to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial repor ng and the prepara on of
financial statements for external purposes in accordance with generally accepted accoun ng principles;
Evaluated the effec veness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effec veness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evalua on; and
Disclosed in this report any change in the registrant’s internal control over financial repor ng 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 repor ng; and
5.
The registrant’s other cer fying officer(s) and I have disclosed, based on our most recent evalua on of internal control over financial
repor ng, to the registrant’s auditors and the audit commi ee of the registrant’s board of directors (or persons performing the
equivalent func ons):
(a)
(b)
All significant deficiencies and material weaknesses in the design or opera on of internal control over financial repor ng which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial informa on;
and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial repor ng.
Date: March 15, 2024
/s/ Dennis M. Lanfear
Dennis M. Lanfear
President and Chief Execu ve Officer
(Principal Execu ve Officer)
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
SECTION 13a-14(a) OR 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Bryan McMichael, cer fy that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Coherus BioSciences, Inc. (the "registrant");
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial informa on included in this report, fairly present in all material
respects the financial condi on, results of opera ons and cash flows of the registrant as of, and for, the periods presented in this
report;
The registrant’s other cer fying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial repor ng (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material informa on rela ng to the registrant, including its consolidated subsidiaries, is made
known to us by others within those en es, par cularly during the period in which this report is being prepared;
Designed such internal control over financial repor ng, or caused such internal control over financial repor ng to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial repor ng and the prepara on of
financial statements for external purposes in accordance with generally accepted accoun ng principles;
Evaluated the effec veness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effec veness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evalua on; and
Disclosed in this report any change in the registrant’s internal control over financial repor ng 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 repor ng; and
5.
The registrant’s other cer fying officer(s) and I have disclosed, based on our most recent evalua on of internal control over financial
repor ng, to the registrant’s auditors and the audit commi ee of the registrant’s board of directors (or persons performing the
equivalent func ons):
(a)
(b)
All significant deficiencies and material weaknesses in the design or opera on of internal control over financial repor ng which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial informa on;
and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial repor ng.
Date: March 15, 2024
/s/ Bryan McMichael
Bryan McMichael
Interim Chief Financial Officer
(Principal Financial Officer)
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
Pursuant to 18 U.S.C. Sec on 1350, as adopted pursuant to Sec on 906 of the Sarbanes-Oxley Act of 2002, the undersigned officers
of Coherus BioSciences, Inc. (the “Registrant”) cer fy that the Registrant’s Annual Report on Form 10-K for the year ended December 31,
2023 (the “Report”) fully complies with the requirements of Sec on 13(a) or 15(d), as applicable, of the Securi es Exchange Act of 1934, as
amended, and the informa on contained in the Report fairly presents, in all material respects, the financial condi on and results of
opera ons of the Registrant.
Date: March 15, 2024
Date: March 15, 2024
/s/ Dennis M. Lanfear
By:
Name: Dennis M. Lanfear
Title: President and Chief Execu ve Officer
/s/ Bryan McMichael
By:
Name: Bryan McMichael
Title:
Interim Chief Financial Officer
This cer fica on accompanies the Annual Report on Form 10-K to which it relates, is not deemed filed with the Securi es and Exchange
Commission and is not to be incorporated by reference into any filing of the Registrant under the Securi es Act of 1933, as amended, or the
Securi es Exchange Act of 1934, as amended, (whether made before or a er the date of the Report), irrespec ve of any general
incorpora on language contained in such filing.
EXHIBIT 97.1
COHERUS BIOSCIENCES, INC. (the “Company”)
CLAWBACK POLICY
Approved and adopted by the Board on December 1, 2023
Introduction
The Board of Directors of the Company (the “Board”) believes that it is in the best interests of the Company and its
shareholders to create and maintain a culture that emphasizes integrity and accountability and that reinforces the
Company's pay-for-performance compensation philosophy. The Board has therefore adopted this policy which
provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting
from material noncompliance with financial reporting requirements under the federal securities laws (the “Policy”).
This Policy is designed to comply with Section 10D of the Securities Exchange Act of 1934 (the “Exchange Act”).
Administration
This Policy shall be administered by the Board or, if so designated by the Board, the Compensation Committee, in
which case references herein to the Board shall be deemed references to the Compensation Committee. Any
determinations made by the Board shall be final and binding on all affected individuals.
Covered Executives
This Policy applies to the Company's current and former executive officers, as determined by the Board in accordance
with Section 10D of the Exchange Act and the listing standards of the national securities exchange on which the
Company's securities are listed (“Covered Executives”).
Recoupment; Accounting Restatement
In the event the Company is required to prepare an accounting restatement of its financial statements due to the
Company's material noncompliance with any financial reporting requirement under the securities laws, the Board will
require reimbursement or forfeiture of any excess Incentive Compensation (as defined below) received by any Covered
Executive during the three completed fiscal years immediately preceding the date on which the Company is required to
prepare an accounting restatement.
Incentive Compensation
For purposes of this Policy, “Incentive Compensation” means any of the following; provided that, such compensation
is granted, earned, or vested based wholly or in part on the attainment of a financial reporting measure:
● Annual bonuses and other short- and long-term cash incentives.
● Stock options.
● Stock appreciation rights.
● Restricted stock.
● Restricted stock units.
● Performance shares.
● Performance units.
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Financial reporting measures include:
● Company stock price.
● Total shareholder return.
● Revenues, including Revenues for any particular product.
● Net income.
● Earnings before interest, taxes, depreciation, and amortization (EBITDA).
● Expenses, including SG&A and R&D operating expenses.
● Funds from operations.
● Liquidity measures such as working capital or operating cash flow.
● Return measures such as return on invested capital or return on assets.
● Earnings measures such as earnings per share.
Excess Incentive Compensation: Amount Subject to Recovery
The amount to be recovered will be the excess of the Incentive Compensation paid to the Covered Executive based on
the erroneous data over the Incentive Compensation that would have been paid to the Covered Executive had it been
based on the restated results, as determined by the Board.
If the Board cannot determine the amount of excess Incentive Compensation received by the Covered Executive
directly from the information in the accounting restatement, then it will make its determination based on a reasonable
estimate of the effect of the accounting restatement.
Method of Recoupment
The Board will determine, in its sole discretion, the method for recouping Incentive Compensation hereunder which
may include, without limitation:
(a) requiring reimbursement of cash Incentive Compensation previously paid;
(b) seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any
equity-based awards;
(c) offsetting the recouped amount from any compensation otherwise owed by the Company to the Covered Executive;
(d) cancelling outstanding vested or unvested equity awards; and/or
(e) taking any other remedial and recovery action permitted by law, as determined by the Board.
No Indemnification
The Company shall not indemnify any Covered Executives against the loss of any incorrectly awarded Incentive
Compensation.
Interpretation
The Board is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or
advisable for the administration of this Policy. It is intended that this Policy be interpreted in a manner that is
consistent with the requirements of Section 10D of the Exchange Act 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.
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Effective Date
This Policy shall be effective as of the date it is adopted by the Board (the “Effective Date”) and shall apply to
Incentive Compensation that is approved, awarded or granted to Covered Executives on or after that date.
Amendment; Termination
The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary
to reflect final regulations adopted by the Securities and Exchange Commission under Section 10D of the Exchange
Act and to comply with any rules or standards adopted by a national securities exchange on which the Company's
securities are listed. The Board may terminate this Policy at any time.
Other Recoupment Rights
The Board intends that this Policy will be applied to the fullest extent of the law. The Board may require that any
employment agreement, equity award agreement, or similar agreement entered into on or after the Effective Date shall,
as a condition to the grant of any benefit thereunder, require a Covered Executive to agree to abide by the terms of this
Policy. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of
recoupment that may be available to the Company pursuant to the terms of any similar policy in any employment
agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company.
Impracticability
The Board shall recover any excess Incentive Compensation in accordance with this Policy unless such recovery
would be impracticable, as determined by the Board in accordance with Rule 10D-1 of the Exchange Act and the
listing standards of the national securities exchange on which the Company's securities are listed.
Successors
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors,
administrators or other legal representatives.
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