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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-36500
CYMABAY THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
Incorporation or Organization)
94-3103561
(I.R.S. Employer
Identification No.)
7999 Gateway Blvd., Suite 130
Newark, CA 94560
(510) 293-8800
(Address, including zip code, and telephone number, including area code, of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.0001 par value per share
Name of each exchange on which registered
NASDAQ Capital Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
¨
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
¨
x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant based upon the closing price of its Common Stock
on the Nasdaq Capital Market on June 30, 2015, was $40,789,823. This excludes 95,500 shares of the registrant’s Common Stock held by executive officers, directors
and stockholders affiliated with directors outstanding at June 30, 2015. Exclusion of such shares should not be construed to indicate that any such person possesses the
power, direct or indirect, to direct or cause the direction of the management or policies of the registrant or that such person is controlled by or under common control
with the registrant.
The number of shares of common stock outstanding as of March 1, 2016, was 23,447,003.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2016 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120
days after the registrant’s fiscal year ended December 31, 2015, are incorporated by reference in Part III, Items 10-14 of this Annual Report on Form 10-K.
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CYMABAY THERAPEUTICS, INC.
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2015
TABLE OF CONTENTS
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART I
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART III
Item 15. Exhibits, Financial Statement Schedules
Signatures
PART IV
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This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by
those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently
available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,”
“could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “potential,” “seek,” “target,” “goal,” “intend,”
and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties
and other factors which may cause our actual results, performance, time frames or achievements to be materially different from any future
results, performance, time frames or achievements expressed or implied by the forward-looking statements. We discuss many of these risks,
uncertainties and other factors in this Annual Report on Form 10-K in greater detail under the heading “Risk Factors.” Given these risks,
uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking
statements represent our estimates and assumptions only as of the date of this filing. You should read this Annual Report on Form 10-K
completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify
our forward-looking statements by our cautionary statements. Except as required by law, we assume no obligation to update these
forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these
forward-looking statements, even if new information becomes available in the future.
Item 1. Business
CymaBay Overview
PART I
CymaBay Therapeutics, Inc. is focused on developing therapies to treat metabolic diseases with high unmet medical need, including
serious rare and orphan disorders. Our two key clinical development candidates are MBX-8025 and arhalofenate.
We are currently developing MBX-8025 for the treatment of various orphan lipid and liver diseases. In an earlier Phase 2 clinical
study conducted in patients with mixed dyslipidemia, MBX-8025 demonstrated favorable effects on cholesterol, triglycerides and markers
of liver health. In March 2016, we announced data from a second Phase 2 clinical study evaluating MBX-8025 in 13 patients with
homozygous familial hypercholesterolemia (HoFH). Five patients in this study experienced what we believe was a clinically meaningful
maximal decrease in low density lipoprotein (LDL-C) of greater than 20% with three of them having decreases greater than 30%. However,
given the variability in responses observed in this study, including a number of patients that did not experience a decrease in LDL-C, we
believe additional proof-of-concept data would be warranted before determining whether or not to advance to a registration study of MBX-
8025 in patients with HoFH. In November 2015, we initiated a double-blind, placebo-controlled Phase 2 study of MBX-8025 in patients
with primary biliary cholangitis (PBC), formerly referred to as primary biliary cirrhosis. In this study, approximately 75 patients with PBC
who have had an inadequate response to ursodiol are to be enrolled and randomized to receive either placebo or MBX-8025 (either 50 mg or
200 mg) for 12 weeks. The primary endpoint will be the change in alkaline phosphatase, and the study is expected to include patients from
the U.S., as well as Canada, Germany, Poland and the U.K. We expect this study to be completed by the end of 2016. We also believe that
MBX-8025 could have utility in the treatment of severe hypertriglyceridemia (SHTG) and the more prevalent, but high unmet need,
indication of nonalcoholic steatohepatitis (NASH). We have obtained orphan-drug designations for MBX-8025 in both HoFH and SHTG
(Frederickson type I or V hyperlipoproteinemia).
Arhalofenate, is being developed for the treatment of gout. Arhalofenate has been studied in five Phase 2 clinical trials in patients
with gout and consistently demonstrated the ability to reduce gout flares and reduce serum uric acid (sUA). Gout flares are recurring and
painful episodes of joint inflammation that are triggered by
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the presence of monosodium urate crystals that form as a result of elevated sUA levels. We believe the potential for arhalofenate to prevent
or reduce flares while also lowering sUA could differentiate it from currently available treatments for gout and classify it as the first
potential drug in what we believe could be a new class of gout therapy referred to as Urate Lowering Anti-Flare Therapy (ULAFT).
Arhalofenate has established a favorable safety profile in clinical trials involving over 1,100 patients exposed to date. We have completed
end of phase 2 discussions with the FDA and intend to partner arhalofenate prior to advancing into phase 3 development.
CymaBay has reported net losses of $15.5 million and $31.9 million for the year ended December 31, 2015 and 2014, respectively.
Our cash, cash equivalents and marketable securities balances as of December 31, 2015, were $41.5 million. Our average monthly cash
usage for the year ended December 31, 2015, was approximately $1.9 million. As more completely described below under the heading
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we have engaged in a series of private
placements and public offerings from September 2013 through December 2015, pursuant to which we have raised an aggregate of $76.1
million of proceeds after deducting placement agent fees and offering expenses. We believe that our existing cash will allow us to continue
operation through at least the next twelve months.
CymaBay Strategy
Our goal is to become a leading biopharmaceutical company focused on developing and commercializing proprietary new medicines
for metabolic and rare diseases with high unmet need. Key elements of our strategy are to:
•
•
•
•
develop MBX-8025 for high unmet need or orphan indications linked to defects in lipid storage, handling and utilization and
certain diseases effecting liver function;
develop arhalofenate as a dual-acting treatment to lower sUA and prevent or reduce flares in patients with gout;
pursue partnerships to advance and commercialize arhalofenate and potentially other clinical candidates; and
strengthen our patent portfolio and other means of protecting exclusivity.
CymaBay Pipeline Overview
Our pipeline includes three unpartnered clinical stage product candidates and a number of preclinical programs.
MBX-8025
MBX-8025 is a selective agonist for the peroxisome proliferator-activated receptor delta (PPARd). An agonist is a substance that
elicits a response by binding to a receptor. The PPARd receptor is a nuclear receptor that regulates genes involved in lipid storage, transport
and metabolism (particularly fatty acid oxidation), in insulin signaling and sensitivity, and regulates certain inflammatory cells. MBX-8025
has the potential to treat a variety of disorders of lipid metabolism and certain diseases of the liver. Previously, MBX-8025 had been in
development for the treatment of mixed dyslipidemia, which is characterized by elevated LDL-C and triglycerides (TGs). Results from our
Phase 2 clinical study of MBX-8025 in patients with mixed dyslipidemia established effects of the drug that we believe have the potential
to benefit patients affected with other conditions. In this study, MBX-8025 demonstrated an anti-atherogenic profile in which it lowered
LDL-C, decreased the more atherogenic small dense LDL-C particles and raised HDL-C. In addition, MBX-8025 decreased TGs and free
fatty acids. MBX-8025 also decreased C-reactive protein, a marker of systemic and local inflammation. Treatment with MBX-8025 also
resulted in significant reductions in alkaline phosphatase (AP) and in gamma-glutamyl transferase (GGT). Taken together these metabolic
improvements suggest that
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MBX-8025 can address disorders manifested by increases in LDL-C, increases in TGs, liver cholestasis (the impairment of the flow of bile
from the liver) and liver fat accumulation with subsequent inflammation.
Based on an evaluation of possible indications, we have decided to focus the development of MBX-8025 for serious rare and orphan
diseases or more prevalent diseases with high unmet medical need and for which we can obtain positive initial clinical data in studies of less
than six months duration. Compounds like MBX-8025 that work by interacting with the PPAR class of receptors (PPARa, PPARg and
PPARd) are subject to a FDA partial clinical hold which limits clinical studies to durations of less than six months until the two-year rodent
carcinogenicity studies are completed and evaluated. The decision as to whether to lift the hold is based on a benefit/risk assessment made
by the FDA in which they weigh the potential benefit of the therapy for the proposed indication vs. any potential risk that may be identified
from the rodent carcinogenicity findings. Thus, the lifting of the hold is typically taken when the carcinogenicity data (and the results of
any subsequent de-risking experiments) and clinical efficacy data are both in hand. We have completed the carcinogenicity studies for
MBX-8025 and have had discussions with the FDA regarding them. We have initiated additional experiments seeking to confirm that the
findings are not relevant to human risk. Some of these experiments have been completed and others are on-going. Our goal is to complete
the outstanding de-risking studies and to provide those data together with clinical data from HoFH and/or PBC to the FDA so that they can
determine whether to lift the partial clinical hold. The decision on timing to meet with the FDA to discuss lifting the partial clinical hold is
contingent on the availability and strength of the results from each of the HoFH and PBC studies. We will make those decisions when the
results have been obtained and interpreted.
We believe MBX-8025 may provide a significant benefit for patients across a wide range of rare diseases associated with disorders of
lipid metabolism, such as homozygous familial hypercholesterolemia (HoFH) and severe hypertriglyceridemia (SHTG) syndromes, and
disorders of liver function, such as primary biliary cholangitis (PBC). We also believe that MBX-8025 could have utility in the treatment of
the more prevalent, but high unmet need, indication of nonalcoholic steatohepatitis (NASH).
Nonclinical Overview
In vitro studies with cells and animal tissues, showed that MBX-8025 up-regulates genes involved in the metabolism and handling of
lipids, most notably stimulation of fatty acid synthesis, transport and oxidation.
In preclinical studies in rodents, dogs and primates, MBX-8025 demonstrated a variety of beneficial effects on the lipid profile and
other metabolic parameters. MBX-8025 treatment increased peripheral oxidation of fatty acids leading to reduced levels of TGs and LDL-
C, while raising HDL-C. MBX-8025 also inhibited fat mass accumulation, resulting in attenuation of body weight gain in rodent models of
obesity.
Three-month toxicology studies in rodents (alone and in combination with atorvastatin, the generic name of the cholesterol lowering
drug Lipitor®) and in monkeys have been completed. In 2014, we initiated six month and twelve month toxicology studies of MBX-8025 in
rodents and monkeys, respectively, that we expect to be completed and analyzed by the second quarter of 2016. In addition, the two-year
carcinogenicity studies in mice and rats have been completed. Johnson & Johnson Pharmaceutical Research & Development filed an IND
for this compound with the FDA in July 2005 and subsequently transferred the application to CymaBay in March 2007.
Clinical Studies with MBX-8025
Five Phase 1 and two Phase 2 clinical trials with MBX-8025 have been completed. A third Phase 2 clinical trial is currently ongoing
in patients with primary biliary cholangitis (PBC). The first phase 2 clinical trial in overweight and obese patients with mixed dyslipidemia
was an eight-week trial in which MBX-8025 was administered at doses of 50 or 100 mg/day both alone and in combination with 20 mg/day
of atorvastatin. This study also had a placebo arm and a 20 mg/day atorvastatin monotherapy arm. Treatment effects with MBX-8025
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observed in this study included lowering of LDL-C with selective depletion of pro-atherogenic dense LDL-C particles, decreases in
triglycerides and increases in HDL. Patients taking MBX-8025 also experienced decreased levels of alkaline phosphatase and gamma
glutamyl transferase, which when elevated are biochemical markers of cholestasis.
Based on our understanding of the mechanism of action of MBX-8025 and our prior clinical experience with the compound, we have
redirected the development of MBX-8025 toward serious rare and orphan diseases or more prevalent diseases with higher unmet medical
need. We have focused on diseases in which there is a clear scientific rationale or clinical data to suggest that the beneficial effects of
MBX-8025 observed in our mixed dyslipidemia trial may be retained in that disease population, include HoFH, PBC, SHTG and NASH.
Our Phase 2 studies with MBX-8025 in HoFH and PBC are summarized below.
Homozymogous Familial Hypercholesterolemia (HoFH)
HoFH is a rare, life-threatening, genetic disease characterized by marked elevations in plasma levels of LDL-C leading to severe
atherosclerosis and the development of premature cardiovascular diseases. While normal LDL-C levels are approximately 100 mg/dL,
patients with HoFH may have levels in the 500 to 1000 mg/dL range. Symptomatic cardiovascular disease often presents during the first
decades of life leading to myocardial infarction, ischemic stroke, and death. If untreated, most HoFH patients do not survive beyond the age
of 30.
HoFH is caused by loss-of-function mutations in both copies of the low-density lipoprotein receptor ( ldlr) gene, leading to reduced or
absent LDL-receptor protein (LDL-R) function. The disease affects approximately one in one million persons. The loss of LDL-R function
leads to impaired removal of circulating LDL-C by the liver, resulting in exceptionally high LDL-C blood concentrations.
Treatment of HoFH is focused on reducing LDL-C levels, as compelling evidence exists from randomized, double-blind, placebo-
controlled studies to support the causality of LDL-C in atherosclerotic cardiovascular disease. Considerable evidence implicates LDL-C as
a causal mediator of cardiovascular disease in HoFH patients and reductions in LDL-C can be expected to decrease the risk of
cardiovascular disease. HoFH subjects sometimes undergo a procedure called LDL-C apheresis, a process resembling dialysis in which
blood is removed from a patient, the plasma is separated from blood cells, and the plasma is passed over a column to remove LDL prior to
recombining it with the blood cells and returned to the patient. The reduction in LDL-C by apheresis has been shown to reduce
cardiovascular events in HoFH patients. Initial treatment of HoFH entails adoption of a low fat diet and exercise program, usually with
limited effectiveness. This is followed by first-line therapies for reducing LDL-C, including statins, cholesterol absorption inhibitors and
bile acid sequestrants. Unfortunately, these conventional therapies work largely through up-regulation of the LDL-R. Thus, they do not
provide optimal control of LDL-C in patients with HoFH in whom LDL-R activity is impaired or absent. Patients having a small amount of
residual LDL-R activity may receive a modest reduction in LDL-C with maximal conventional therapy, but most patients with HoFH
respond insufficiently.
As mentioned above, LDL apheresis is complicated mechanical method to reduce LDL-C and is currently a treatment of last resort for
HoFH. It is a complex and inconvenient procedure that sometimes requires an arterio-venous fistula, similar to the situation for patients
undergoing chronic dialysis. The procedure is not widely available. Apheresis transiently reduces LDL-C, but rebound of LDL-C levels
requires that it be repeated chronically every one to two weeks.
Several drugs have been recently approved for use in combination with diet, exercise and conventional lipid lowering therapy to treat
HoFH. The first is lomitapide (Juxtapid, Aegerion® Pharmaceuticals) that lowers LDL-C by inhibiting microsomal triglyceride transfer
protein (MTP), a protein whose activity is required for the production of very low density lipoprotein (VLDL-C), a precursor of LDL-C.
Lomitapide produces decreases in LDL-C of approximately 40% from a baseline LDL-C level of 337 mg/dL and gets 28% of patients to the
LDL-C
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target of <100 mg/dL. A side effect of lomitapide treatment is that fat accumulates in the liver, thereby causing hepatic steatosis, with or
without concurrent increases in transaminases. For this reason, the drug carries a black box warning and a requirement for monthly liver
function monitoring tests. Lomitapide also blocks MTP in enterocytes (cells lining the gastrointestinal tract), leading to an accumulation of
fat in the intestinal mucosa. This can reduce the absorption of fat-soluble nutrients and causes gastrointestinal issues (diarrhea, abdominal
pain). Subjects on lomitapide should be prescribed concomitant fat-soluble vitamin supplementation and should adhere to a restrictive diet
supplying less than 20% of energy from fat.
The second drug is mipomersen (Kynamro, Genzyme Corp.). It lowers LDL-C by acting as an anti-sense oligonucleotide inhibitor that
blocks the synthesis of apo B-100, the protein component of LDL-C. Mipomersen lowers LDL-C by approximately 25% from a baseline
LDL-C of 439 mg/dL. Like lomitapide, mipomersen causes the accumulation of fat in the liver, confers a risk of hepatic steatosis and
carries a black box warning and requirement for monthly liver function monitoring tests.
The third and most recently approved drug for HoFH is evolocumab (Repatha, Amgen Inc.). Evolocumab is a human monoclonal
IgG2 antibody directed against human proprotein convertase subtilisin kexin 9 (PCSK9). Evolocumab binds to PCSK9 and inhibits
circulating PCSK9 from binding to the LDL-R, preventing PCSK9 targeting of LDL-R degradation and permitting LDL-R to recycle back
to the liver cell surface. By inhibiting the binding of PCSK9 to LDL-R, evolocumab increases the number of hepatic cell surface LDL-Rs
available to clear LDL from the blood, thereby lowering LDL-C levels.
While these drugs offer additional treatment options for patients with HoFH, there remains a high degree of unmet medical need.
Even with an aggressive combination of available therapies, subjects with HoFH generally have LDL-C levels substantially above
treatment targets. Many patients also have difficulty accessing or tolerating available treatments.
In January 2015, we announced preclinical data demonstrating the potential of MBX-8025 to treat patients with HoFH. MBX-8025
gave durable and significant decreases in LDL-C concentrations of greater than 40% in the Watanabe Heritable Hyperlipidemic rabbit, an
accepted pre-clinical model of human HoFH. Based on this preclinical data, our understanding of the mechanism of action of MBX-8025
and the remaining unmet need for these patients despite the approval of recent therapies, we conducted a Phase 2 pilot study of MBX-8025
in HoFH patients.
Phase 2 Study of MBX-8025 in HoFH
In April 2015, we initiated a Phase 2 study of MBX-8025 in patients with HoFH. This was an open label, dose escalation study of 12
weeks duration conducted at five centers in Europe and Canada. Thirteen patients were enrolled, all of whom had genetically confirmed
HoFH, including 2 subjects who had functionally negative mutations in their LDL-R genes. All of the subjects were taking ezetimibe and
were on maximum statin therapy. None of the study participants received lomitapide, mipomersen or a PCSK9 inhibitor. Eight patients
were undergoing concomitant apheresis on a weekly or biweekly schedule. Despite being on maximal conventional therapy, the average
baseline LDL-C was 368 mg/dL. Subjects received once daily treatment with 50 mg of MBX-8025 for 4 weeks, after which the dose was
escalated to 100 and 200 mg in successive 4 week periods. The goals of the study were to evaluate the effect on LDL-C as well as a
spectrum of other lipid-related parameters, including PCSK9 levels, and to collect safety information.
Two different per-protocol analyses were performed on 12 subjects. A responder analysis was carried out which reflects the largest
decrease in LDL-C observed during treatment for each subject. Three subjects (25%) exhibited a greater than or equal to 30% decrease.
Five subjects (42%) had a greater than or equal to 20% decrease, including one patient that was receptor negative and seven subjects (58%)
had a greater than or equal to 15% decrease. Five subjects had a less than 15% decrease. The average maximum decrease in the study was
19%. Because of the high baseline LDL-C levels in these individuals, these percentage decreases correspond to
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significant absolute decreases in LDL-C (mean decrease of 109 mg/dL for the subjects with the greater than or equal to 15% decrease).
Although reductions in LDL-C tended to be greater at the higher doses, no clear dose response was observed.
In a second analysis, the mean change in LDL-C for each subject was calculated by averaging values across all doses and dosing
periods while on treatment. The overall mean change for all 12 subjects was a decrease of 10%. Eight of these subjects had a mean decrease
in LDL-C of 16%, including three with a greater than 20% decrease. This included one patient who was receptor negative. This was offset
by four patients who showed a mean increase of 4%.
Mean PCSK9 was elevated at baseline (544 +/- 133 ng/mL), as anticipated for patients with HoFH, and increased during treatment by
a mean of 43%. During the study, decreases in the mean levels of alkaline phosphatase (30%), gamma glutamyl transferase (27%) and total
bilirubin (22%), which are markers of cholestasis, were also observed. There were three severe adverse events (SAEs), none drug related,
and three treatment discontinuations for adverse events (AEs) possibly related to MBX-8025.
The LDL-C levels of most HoFH patients are not optimally controlled and there is still a need for new therapeutic approaches. The
finding that MBX-8025 lowers LDL-C while raising PCSK9 indicates that the full potential of MBX-8025 should be evaluated when
treating HoFH patients on a background of maximal conventional lipid lowering therapy and a PCSK9 inhibitor. We are currently
evaluating the feasibility of such a study.
Primary Biliary Cholangitis (PBC)
PBC is a slowly progressive autoimmune disease of the liver characterized by portal inflammation and immune-mediated destruction
of intrahepatic bile ducts. The loss of bile duct function leads to decreased bile secretion and the retention of toxic substances within the
liver, resulting in further hepatic damage, fibrosis, cirrhosis and, eventually, liver failure. It is a common cause of liver transplantation.
PBC affects primarily women with peak incidence in the fifth decade of life. It has been recognized as an orphan disease both in the
U.S. and in the E.U. It is a long-term debilitating and life-threatening disease. Fatigue and pruritus (itching) are the most common
presenting symptoms. Pruritus, which occurs in 20 to 70% of patients, can be extremely distressing for patients. Other common findings
include jaundice, hyperlipidemia (notably hypercholesterolemia), hypothyroidism, osteopenia and osteoporosis, and coexisting autoimmune
diseases. Portal hypertension is a late complication of the disease, as is malabsorption, deficiencies of fat-soluble vitamins, and steatorrhea
(excess fat in feces).
Currently, the only FDA-approved treatment is ursodeoxycholic acid, also known as ursodiol, an isomer of chenodeoxycholic acid.
Ursodiol decreases serum levels of AP, bilirubin, alanine aminotransferase, aspartate aminotransferase, cholesterol, and immunoglobulin
M, all of which are elevated in patients with PBC and can serve as biochemical markers of the disease. In a study that combined data from
three controlled trials with a total of 548 patients, ursodiol significantly reduced the likelihood of liver transplantation or death after four
years. Ursodiol also delayed the progression of hepatic fibrosis in early-stage PBC, but was not effective in advanced disease. It is also
known that up to 50% of PBC patients fail to respond to ursodiol therapy.
Other therapies, such as colchicine, methothrexate, prednisone and multiple immunosuppressive regimens have been attempted.
However, their efficacy is controversial, limited, or unproven and they are associated with multiple side-effects, impacting tolerance and
safety. Liver transplantation improves survival in patients with PBC, and it is the only effective treatment for those with liver failure.
However cirrhosis recurs in 15% of patients at three years and in 30% at 10 years. As a result, despite the previously mentioned therapeutic
interventions, it is recognized that PBC continues to progress in many patients and additional medical treatment is needed to address this
disease.
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The bile acid analog obeticholic acid (OCA, Intercept Pharmaceuticals) is under review by the FDA and the European Medicines
Agency for PBC. OCA has received orphan designations in the U.S. and the E.U. and Fast Track status in the U.S. Clinical proof-of-
concept has been established in two 12-week Phase 2 studies (one in ursodiol non-responders and one in treatment naïve or intolerant
patients) using AP as the primary endpoint (<1.67 times the upper limit of normal with >15% reduction) + normal bilirubin. Approximately
40% of patients met the primary endpoint. A Phase 3 study was completed that met its primary endpoint. It remains unclear what the
criteria are for registration.
Both AP and GGT are common biochemical markers of cholestasis and their elevation is presumably a consequence of the toxic
effects of retention of bile acids in liver cells. AP levels in PBC patients have been used as a primary outcome measure in proof-of-concept
clinical trials and as a key secondary outcome in pivotal trials. The observation that MBX-8025 produces significant reductions in these
surrogate markers suggests that the drug may improve biliary function, ameliorate cholestasis and, hence, be a novel treatment for PBC.
The coordinate decrease in AP and GGT levels indicates that the AP decrease is indeed hepatic in origin. The magnitude of the change in
AP with MBX-8025 (~30-40%) is similar to that seen after treatment with ursodeoxycholic acid after eight weeks. In addition to the
potential benefit to improving biliary function, we believe MBX-8025 may confer improvements in lipid parameters including reductions in
LDL-C and TGs.
The precise mechanism by which MBX-8025 improves cholestasis by acting as a PPARd agonist is not fully understood. However,
there is some supporting preclinical data. In the bile ligation model of cholestasis, the PPARd agonist KD3010 reduced hepatic injury,
fibrosis and inflammation, while increasing survival. In addition, treatment of mice with the PPARd agonist GW610742 has been shown to
produce significant and large increases in bile flow and the production of bile salts.
Phase 2 Study of MBX-8025 in PBC
In November 2015, we initiated a Phase 2 study of MBX-8025 in patients with primary biliary cholangitis. In this study, approximately 75
patients who have had an inadequate response to ursodiol will be enrolled and randomized to receive either placebo or MBX-8025 (either
50 mg or 200 mg once daily) for 12 weeks. The primary endpoint will be the change in alkaline phosphatase, a parameter that has been
used in prior clinical studies with PBC and which is believed to reflect the status of the disease. A variety of secondary outcomes including
safety, tolerability, effects of MBX-8025 on PBC response criteria, effects of MBX-8025 on other markers of liver function, lipids, pruritus
and Quality of Life will also be studied. We expect the study to enroll patients in the U.S. as well as Canada, Germany, Poland and the U.K.
and expect it to be completed by the end of 2016.
Severe Hypertriglyceridemia (SHTG)
Severe HTG (SHTG, TGs > 500 mg/dL) is associated with an increased risk of pancreatitis. As a result, management of HTG and
SHTG is also an important goal of lipid therapy. Most patients with HTG can be managed with available TG-lowering therapies including
fibrates, niacin and fish oil components. However, there remains an unmet need for addressing SHTG which may arise from a variety of
circumstances. It is estimated that there are approximately five million patients in the U.S. with SHTG; however, the Fredrickson
classification of hyperlipidemias further subdivides the overall population into several types, some of which can be classified as orphan
diseases.
According to the Fredrickson classification of hyperlipidemias, several types of HTG have been identified. This includes Type 1a, a
rare genetic disease also called familial chylomicronemia syndrome (FCS), in which chylomicrons (lipoprotein particles formed in the
intestine that are rich in TGs and which serve to transport lipid to other tissues in the body) are markedly elevated due to decreased activity
of liporprotein lipase (LPL), the enzyme that is primarily responsible for their metabolism. FCS affects about one in one million people
worldwide. Type 1b is another form characterized by a deficiency in a protein component of chylomicrons called apo-CII which is needed
to activate LPL and facilitate chylomicron metabolism. Another form is Type 5 in
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which very low density lipoprotein (VLDL) is elevated in addition to chylomicrons and is likely caused by yet incompletely defined variety
of molecular defects. Elevated chylomicrons are thought to have a number of consequences including increased risk of acute and chronic
pancreatitis which are serious medical conditions. Extremely high levels of TGs are a surrogate marker for high chylomicron levels.
The need for better treatments for SHTG has been recognized and several new therapies either have been brought to the market or are
in development. One popular approach has been to develop components of fish oil. Lovaza is a marketed drug that is a mixture of the
omega-3 fatty acids esters eicosapentaenoic acid (EPA) and docosahexaenoic acid (DHA) isolated from fish oil. In patients with SHTG
(TGs > 500 mg/dL), it has been shown to reduce TGs by over 40%, but the reductions are accompanied by increases in LDL-C of over
40%. Vascepa, an ethyl ester of EPA, is also on the market for the treatment of SHTG and lowers TGs by approximately 30% with no
significant effect on LDL-C. Epanova is a complex mixture of polyunsaturated free fatty acids derived from fish oils, including multiple
long-chain omega-3 and omega-6 fatty acids, with EPA, DHA, and docosapentaenoic acid being the most abundant forms. In patients with
SHTG, Epanova produced decreases in TGs of approximately 30% with increases of approximately 25% in LDL-C.
Other drugs are currently in earlier stage development for SHTG. ISIS-APOCIIIRX is an oligonucleotide inhibitor of apo-CIII, a
lipoprotein component that regulates TG metabolism. Loss-of-function mutations in apo-CIII are associated with lower levels of TGs. In a
Phase 2 study in patients with SHTG, ISIS-APOCIIIRX produced reductions in TGs of up to 70%. The effects on LDL-C were not
reported. Another product candidate, CAT-2003, produced decreases in both fasting and post prandial (post meal) TGs in normal healthy
volunteers and has been advanced into Phase 2 studies in SHTG.
We believe that MBX-8025 may be able to benefit patients with SHTG by virtue of its ability to simultaneously lower TGs and LDL-
C. This benefit has been observed both in monotherapy as well as in combination with atorvastatin in patients with mixed dyslipidemia.
Drugs currently marketed for the treatment of SHTG lower TGs with either a worsening or lack of meaningful improvement in LDL-C.
Recognizing that SHTG is a heterogeneous collection of diseases, we are continuing our assessment of the best patient populations to study
in a small Phase 2 clinical trial.
Non-Alcoholic Fatty Liver Disease (NAFLD) / Nonalcoholic Steatohepatitis (NASH)
NAFLD is a disease characterized by accumulation of fat in the liver of people who drink little or not at all. Approximately one-third
of NAFLD patients develop NASH, which is characterized by inflammation in the liver that is often accompanied by fibrosis. This can
progress to cirrhosis, followed by eventual liver failure and death. NASH is the third most common reason for liver transplantation in the
United States. NASH is a major challenge to healthcare systems worldwide. NASH is initially a silent disease, the first sign of which may
be elevations in transaminases such as alanine aminotransferase (ALT) or aspartate aminotransferase (AST) from routine blood test panels.
When further evaluation rules out medications, viral hepatitis, alcohol, etc. as a cause, or when imaging studies of the liver show fat, NASH
is suspected. A confirmation of a diagnosis of NASH requires a liver biopsy.
There are currently no drugs approved by the FDA for the treatment of NASH. However, a number of clinical studies have been
carried out or are underway with drug candidates that may affect disease outcomes in patients with NASH, including OCA (Intercept
Pharmaceuticals) and GFT505, a PPARa/d agonist (Genfit SA).
Based on data from our Phase 2 clinical trial in patients with mixed dyslipidemia and available data from other PPARd agonists, we
believe MBX-8025 may have utility in treating patients with NASH. The decrease in GGT, a biochemical marker which has been
recognized to be linked with hepatic fat accumulation, observed in our phase 2 mixed dyslipidemia trial is consistent with results reported
for another PPARd agonist GW501516. A short term clinical trial with GW501516 demonstrated that the compound decreased hepatic fat.
In addition to our clinical experience with MBX-8025, along with that of other PPARd agonists, the well documented property
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that MBX-8025 induces the oxidation of fatty acid leads us to believe that our compound could potentially benefit patients affected with
NAFLD who are further at risk of developing NASH. We continue to evaluate the opportunity to develop MBX-8025 in NASH among a
number of additional indications.
Arhalofenate—Gout
Gouty arthritis, or gout, is the most common form of inflammatory arthritis in men and affects more than eight million people in the
United States (U.S.). Gout is caused by elevated levels of uric acid in the blood, or hyperuricemia. A great majority, approximately 90%, of
gout patients have an under excretion of uric acid. The hallmark symptom of gout is a flare, characterized by debilitating pain, along with
tenderness and inflammation of affected joints. Gout has a significant impact on patients’ quality of life and health care utilization. Patients
experiencing gout flares miss an average of 4.6 more days of work per year than those without gout. Gout flares also result in increased
health care utilization with approximately 35% of patients with moderate flare and 50% of patients with severe flare having at least one
acute care visit per year.
Gout flares are triggered by the presence of monosodium urate (MSU) crystals in joints. These crystals are formed in tissues when
the concentration of sUA exceeds its solubility limit (approximately 6.8 milligrams per deciliter mg/dL). Long term accumulation of MSU
crystals in the body leads to the progression of gout with an increase in the frequency of flares, the involvement of multiple joints, their
progressive deformation, and the appearance of masses of MSU crystals called tophi. Hence, the goal of treatment is to maintain sUA
below 6 mg/dL, or even 5 mg/dL when tophi needs to be dissolved. Elevated levels of sUA, or hyperuricemia, most commonly results from
the under excretion of uric acid by the kidney. Uric acid is normally filtered through the glomerular section of the kidney and reabsorbed in
the proximal renal tubule back to the blood by specialized urate transporters/exchangers.
Multiple clinical studies indicate that gout patients have a high incidence of comorbidities, such as hypertension (50% or more),
chronic kidney disease (~40%), coronary artery disease (>35%), and diabetes (~20%). Managing patients with these comorbidities is
challenging because medication currently used to treat gout flares could be contraindicated. For instance, non-steroidal anti-inflammatory
drugs (NSAIDs) have renal toxicity and corticosteroids worsen hypertension and diabetes.
Market Opportunity
Unmet Needs in the Treatment of Gout
To halt the progression of gout and provide long term reduction in flares, MSU crystals must be eliminated from the body. Therefore,
the major goals of gout treatment are to prevent flares and lower sUA to below 6 mg/dL in order to dissolve MSU crystals. Of the eight
million patients with gout in the U.S., we estimate that over three million patients are on urate lowering therapy (ULT) and of these patients
on ULTs, as many as 60% may not get to their sUA goal of below 6.0 mg/dL. In addition, we estimate about one million patients continue
to experience three or more flares per year. According to a 2012 study, patients having three or more flares per year typically incur $10,000
more in annual health care costs than patients without gout. With a large number of patients not reaching the sUA goal of below 6 mg/dL
on current therapies, gout remains a significantly undermanaged disease. Studies have also shown that abrupt decreases in sUA with
existing ULTs paradoxically cause an increase in flares, leading many patients to discontinue or avoid therapy. Non-adherence to therapy is
thus a significant problem.
Current Treatment
Xanthine oxidase (XO) inhibitors are ULTs that decrease the production of uric acid. The XO inhibitors, allopurinol and febuxostat
(marketed by Takeda Pharmaceutical Company Limited as Uloric®), are the most commonly prescribed drugs in the ULT market. Generic
allopurinol at doses up to 300 mg accounts for about 90% of ULT prescriptions in the U.S. Studies have shown that the most commonly
prescribed doses of these
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drugs (allopurinol 300 mg or febuxostat 40 mg) in the U.S. result in only about 40% of patients reaching the sUA goal of below 6.0 mg/dL.
In addition, both allopurinol and febuxostat can cause an increase in gout flares for up to 6 – 12 months following initiation of treatment.
Uricosurics are ULTs that lower sUA by promoting the excretion of uric acid by the kidney. Lesinurad (Zurampic ®, AstraZeneca
PLC) is a uricosuric that blocks URAT1, the main urate transporter/exchanger in renal proximal tubules. Zurampic 200mg in combination
with a xanthine oxidase inhibitor was approved in the U.S. in 2015 and in the E.U. in 2016 for the treatment of hyperuricemia associated
with gout in patients that have not reached target serum uric acid levels with an XO inhibitor alone. The FDA approved Zurampic with a
black-box warning regarding the potential for acute renal failure and the approved indication is restricted to its use in combination with an
XO inhibitor.
To address the increase in flare rate associated with initiation of ULT therapy, anti-inflammatory drugs such as colchicine and
NSAIDs are co-prescribed with ULTs. These agents cause adverse effects. The risks associated with colchicine include diarrhea, nausea,
vomiting, and neuromuscular toxicity. Long term use of colchicine should be carefully monitored. NSAIDs are associated with
gastrointestinal (GI) bleeding that can be severe and life-threatening. Their long-term use is associated with an increased risk of renal
toxicity, chronic renal insufficiency and increased cardiovascular morbidity. Steroids are also associated with GI bleedings. They can
severely worsen hypertension and diabetes that are frequent comorbities of gout patients and their chronic use is associated with debilitating
osteoporosis and bone fractures.
Arhalofenate Has the Potential to Address the Unmet Needs in Gout
We believe that a significant opportunity exists for arhalofenate as a result of its combined anti-flare activity and its sUA lowering
activity. As an investigational Urate Lowering Anti-Flare Therapy (ULAFT), arhalofenate has the potential to address the unmet needs of
gout patients by preventing flares while helping patients to achieve sUA target goals. This dual activity might also be advantageous when
combining arhalofenate with febuxostat to increase the number of patients reaching their desired sUA targets, to limit the number of flares
and, in patients with tophaceous gout, to potentially resolve tophi.
Clinical Studies with Arhalofenate
The Gout Development Program
Arhalofenate is a prodrug which upon absorption is converted to its active form, arhalofenate acid. Arhalofenate acid’s dual actions
are to inhibit uric acid reabsorption by urate transporters in the kidney and to block the MSU crystal-stimulated production of IL-1ß by
macrophages (white blood cells that play an important role in the body’s defense against pathogens and foreign matter) in inflamed joints.
Arhalofenate has been studied in five Phase 2 gout clinical studies. Collectively across these studies, we evaluated the safety and
efficacy of arhalofenate in doses ranging from 400 mg – 800 mg as monotherapy and in combination with the two approved XO inhibitors,
allopurinol and febuxostat. The results of these studies collectively support further development of arhalofenate as a potential urate-
lowering anti-flare therapy (ULAFT) for the large number of gout patients that are inadequate responders or are intolerant to XO inhibitors.
Conclusions of Arhalofenate’s Clinical Experience
Arhalofenate has been studied in a total of 17 clinical studies with over 1,100 subjects in healthy volunteer, type 2 diabeticand gout
populations. These include Phase 1 studies of safety, tolerability and PK, Phase 2 studies of blood glucose effects in diabetics, and Phase 2
studies of sUA and flare effects in gout patients. Arhalofenate was generally well tolerated with a safety profile that supports development
for gout.
In clinical studies conducted to date that included over two hundred patients with hyperuricemia and a diagnosis of gout, arhalofenate
was found to be well tolerated when dosed at 400 mg, 600 mg or 800 mg once daily
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up to twelve weeks. Arhalofenate treatment resulted in reductions in sUA whether administered alone or in combination with a XO
inhibitor. As a uricosuric, arhalofenate decreases sUA by increasing the urinary excretion of uric acid. In clinical trials to date, Arhalofenate
has increased the fractional excretion of uric acid with levels that were at or near normal without overcorrection.
In addition, arhalofenate when administered at 800 mg daily without colchicine decreased the incidence of flares and also increased
the proportion of patients not experiencing any flare. Activity against flares would address one of the most burdensome symptoms for gout
patients.
Phase 3 Gout Program
In January 2016, we announced the completion of our End of Phase 2 discussions with the FDA for arhalofenate. We reached
agreement with the FDA on all of the key elements of a Phase 3 program that would support registration. The program would include two
Phase 3 studies of arhalofenate in combination with febuxostat in patients with chronic gout and a third study in tophaceous gout, a more
advanced form of the disease in which patients have deforming nodular deposits of urate crystals in soft tissues and joints, referred to as
tophi. In total, the agreed upon Phase 3 program would enroll approximately 1300 patients intended to receive treatment for at least 12
months. The dose of arhalofenate would be 800 mg in all three studies. For the two trials in chronic gout patients, the febuxostat dose would
be 40 mg, while in the tophaceous gout study, it would be 80 mg.
Agreement was reached on coprimary efficacy endpoints for the sUA and flare effects of arhalofenate. The sUA responder rates for a
target of <6 for patients with chronic gout and <5 mg/dL for patients with tophaceous gout. These data could support an indication for the
management of hyperuricemia associated with gout in combination with febuxostat. Patient reported flares would be collected with an
electronic diary and assessed using the same flare definition successfully used in the Phase 2 program. These data could support an
indication for flare prophylaxis. In addition, agreement was reached on the methodology to be used for assessing the resolution of tophi in
patients with tophaceous gout.
The goal of this program would be to establish clinically meaningful benefit on endpoints for both flare parameters and sUA
responder rates. Studies in this program would be randomized, double-blind studies, with appropriate controls and statistical power. A
small number of Phase 1 studies, including necessary drug-drug interaction studies, or special population studies, would also be conducted
prior to submission of an NDA.
MBX-2982
Type 2 diabetes (T2DM) is a chronic debilitating disease characterized by a progressive loss of the normal control of glucose levels in
the blood and other tissues. There are several established and emerging classes of drug therapies for diabetes. Over the last decade,
injectable drugs have emerged as competing drugs with significant benefits in glucose control as well as effects on weight loss and the
potential to protect the pancreas from the damage caused by the progression of diabetes. These drugs are primarily analogs of the natural
hormone glucagon-like 1 peptide (GLP-1), and include exenatide, liraglitide and lixisenatide among others. These drugs are given by
subcutaneous injection once or twice daily. Their action is to provide glucose-regulated insulin secretion with weight loss and the potential
to preserve function of pancreatic islets. New members of this class with once weekly to once monthly dose schedules have been approved
or are in late stage development. In spite of the variety of drugs available for the treatment of diabetes, the medications used to manage
diabetes have not led to optimal control of hyperglycemia and many are associated with dose-limiting side effects. MBX-2982 is an oral, G-
protein coupled receptor (GPR119) agonist being evaluated as a novel therapeutic agent for patients with T2DM, with a dual mechanism
including direct effects and indirect effects mediated by gastrointestinal hormones known as incretins on glucose-dependent insulin
secretion, as well as potentially beneficial effects on islet health.
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GPR119 is expressed in pancreatic islet cells and gastrointestinal hormone secreting cells (enteroendocrine cells). Activation of
GPR119 in pancreatic ß-islets either by natural (endogenous) substances or by drugs developed to interact with it (GPR119 agonists) results
in direct stimulation of glucose-dependent insulin secretion in vitro. Activation of GPR119 in intestinal enteroendocrine cells either by
endogenous substances or by GPR119 agonists results in stimulation of glucagon-like peptide 1 (GLP-1) and gastrointestinal inhibitory
peptide release, and subsequent enhanced glucose-dependent insulin secretion and suppression of glucagon, leading to improved acute
glucose tolerance, both in vitro and in vivo. MBX-2982 was synthesized and screened as a GPR119 agonist, and is capable of activating
endogenous GPR119 in a cell line over-expressing the receptor. MBX-2982 has been shown to increase glucose-dependent insulin secretion
in both in vitro and in animal models. MBX-2982 also increases incretin hormone levels in animals, which may contribute to its glucose
lowering effects.
Nonclinical studies show that MBX-2982 has desirable effects on blood glucose levels, and this effect is additive to the effect of the
dipeptidyl peptidase-4 (DPP-4) inhibitor, sitagliptin. Based on these results, there may be an important role for MBX-2982 as a novel
therapeutic agent in the treatment of T2DM, alone or in combination with other anti-diabetic agents, including the DPP-4 inhibitors.
Presently, there are no other agents approved in the U.S. within this pharmacologic class for the treatment of T2DM.
Extensive preclinical toxicological (up to 6 months in rats and dogs) have been completed, and PK profiling of MBX-2982 has shown
low potential for safety risk. We filed an IND for MBX-2982 with the FDA in January 2008.
Clinical Studies with MBX-2982
Four Phase 1 clinical studies and one Phase 2 clinical study with MBX-2982 have been completed and the safety review showed no
safety or tolerability concerns with escalating doses (25, 100, and 300 mg/day) tested for up to 4 weeks of dosing. The four-week study in
type 2 diabetics can be summarized as follows:
•
•
•
•
•
MBX-2982 generally lowered mean weighted glucose and post-meal glucose during an extended mixed-meal tolerance test
(MMTT), although not always to a statistically significant degree and not to the extent of sitagliptin. The effect at the 300 mg dose
may have been mitigated by the inclusion of a very small number of patients who experienced extreme worsening of glucose to
the degree of being statistical outliers. Decreases in fasting glucose were generally not observed with MBX-2982.
Four weeks of treatment with MBX-2982 tended to increase insulin, active GLP-1, and total GLP-1 during an extended MMTT.
Decreases in glucagon were not as consistently observed. Changes in active GLP-1 were not as robust as those observed with
sitagliptin. Four weeks of treatment with MBX-2982 also tended to increase fasting insulin and c-peptide, and decrease fasting
triglycerides.
Overall, the data suggest that MBX-2982 may decrease glucose, potentially through effects on GLP-1, glucagon, and insulin.
Changes in HbA1c are difficult to assess over a 4-week treatment period, but trended in the downward direction. Glucose-
lowering effects and mechanism of action will need to be explored more robustly in longer duration trials of MBX-2982.
The PK results observed in this study are similar to those seen in the completed Phase 1 study that used the same formulation,
demonstrating dose-dependent increases in drug exposure and a profile supporting once daily oral dosing.
MBX-2982 at doses of 25, 100, and 300 mg was safe and well tolerated.
Based on these results, we believe further testing with MBX-2982 in combination with sitagliptin and/or metformin for the treatment
of diabetes is warranted.
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Next Steps in Development of MBX-2982
A proof-of-concept study has been designed to determine the effects of MBX-2982 on fasting and post-challenge blood glucose in
patients with T2DM either as dual therapy in combination with either metformin or sitagliptin, or as triple therapy in combination with
metformin and sitagliptin.
We do not anticipate conducting this study until a suitable partner is found to contribute funding or resources for the project, or until
sometime in the future when we have sufficient capital resources.
License Agreements and Intellectual Property
General
We actively seek to obtain, where appropriate, patent protection and regulatory exclusivity for the proprietary technology that we
consider important to our business, including compounds, compositions and formulations, their methods of use and processes for their
manufacture both in the United States and other countries. We also rely on trade secrets, know-how, continuing technological innovation
and in-licensing to develop and maintain our proprietary position. Our success depends in part on our ability to obtain, maintain and enforce
proprietary protection for our product candidates, technology and know–how, to operate without infringing the proprietary rights of others,
and to exclude others from infringing our proprietary rights. However, patent protection may not afford us complete protection against
competitors who seek to circumvent our patents.
We also depend upon the skills, knowledge, experience and know-how of our management, research and development personnel, as
well as that of our advisors, consultants and other contractors. To help protect our proprietary know-how, which is not patentable, and for
inventions for which patents may be difficult to enforce, we currently rely, and will in the future rely, on trade secret protection and
confidentiality agreements to protect our interests. To this end, we require all of our employees, consultants, advisors and other contractors
to enter into confidentiality agreements that prohibit the disclosure of confidential information and, where applicable, require disclosure
and assignment to us of the ideas, developments, discoveries and inventions important to our business.
Collaborations and Licensing Agreements
We have entered into various arrangements with licensors and licensees. The current collaborations are summarized below.
Johnson and Johnson: In June 2006, we entered into a license agreement with Janssen Pharmaceutical NV (Janssen NV) in which
we received an exclusive worldwide, royalty-bearing license to MBX-8025 and certain other PPARd compounds (the “PPARd Products”)
with the right to grant sublicenses to third parties to make, use and sell such PPARd Products. Under the terms of the agreement, we have
full control and responsibility over the research, development and registration of any PPARd Products and are required to use diligent
efforts to conduct all such activities. Janssen NV has the sole responsibility for the preparation, filing, prosecution, maintenance of, and
defense of the patents with respect to, the PPARd Products. Janssen NV has a right of first negotiation under the agreement to license a
particular PPARd Product from us in the event that we elect to seek a third party corporate partner for the research, development,
promotion, and/or commercialization of such PPARd Products. Under the terms of the agreement Janssen NV is entitled to receive up to an
8% royalty on net sales of PPARd Products. Under the terms of the agreement, if we do not expend more than a de minimus amount of
effort and resources on the research and/or development of at least one PPARd product, such action would constitute a default under the
agreement. In addition, if we fail to make any payment called for under the agreement, disclose any non-exempt confidential information
related to the agreement, or fail to use diligent efforts to promote, market and sell any PPARd Product under the agreement, such action
would constitute a default under the agreement. In the event of such default, or upon our termination of the agreement, we shall grant
Janssen NV a worldwide, exclusive, irrevocable license under the agreement in all information that is controlled, developed or
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acquired by us which relate to a PPARd compound or PPARd Product and in all patents that are filed during the term of the agreement with
a priority date after the effective date of the agreement and relate to a PPARd compound or PPARd Product.
In June 2010, we entered into two development and license agreements with Janssen Pharmaceuticals, Inc. (Janssen) to further
develop and discover undisclosed metabolic disease target agonists for the treatment of T2DM and other disorders and received a one-time
nonrefundable technology access fee related to the agreements. We are also eligible to receive up to $228 million in contingent payments if
certain development and commercial events are achieved as well as royalties on worldwide net sales of products. No such payments have
been made to date. Under the terms of the agreements, Janssen has full control and responsibility over the research, development and
registration of any products developed and/or discovered from the metabolic disease targets and is required to use diligent efforts to conduct
all such activities. A joint steering committee with equal representation from each party will oversee the development of products.
Following June 2012, all decisions of the joint steering committee are to be made by Janssen. We have the sole responsibility for the
preparation, filing, prosecution, maintenance of, and defense of our patents with respect to metabolic disease target agonists. Under the
terms of the agreements, if we disclose any non-exempt confidential information related to the agreements, such action would constitute a
default under the agreements. In addition, if we breach any of our representations or warranties under the agreements, such action would
constitute a default. In the event of a default, the agreements do not provide that we will lose any of our rights to the intellectual property
developed under the agreement. We received a termination notice from Janssen, effectively ending these development and licensing
agreements in early April 2015. In December 2015, we exercised an option pursuant to the terms of one of the original agreements to
continue work to research, develop and commercialize compounds with activity against an undisclosed metabolic disease target. Janssen
granted us an exclusive, worldwide license (with rights to sublicense) under the Janssen know-how and patents to research, develop, make,
have made, import, use, offer for sale and sell such compounds. We have full control and responsibility over the research, development and
registration of any products developed and/or discovered from the metabolic disease target and are required to use diligent efforts to
conduct all such activities.
DiaTex: On June 30, 1998, we entered into a License and Development Agreement with DiaTex, Inc. Under the agreement, DiaTex
granted us an exclusive license to develop and commercialize therapeutic products containing halofenate, its enantiomers (mirror images,
including arhalofenate), derivatives, and analogs (the licensed products) for the treatment of diseases. Under terms of the agreement,
DiaTex will work cooperatively and assist us in conducting a program for the research and development of halofenate and its enantiomers
including the right to sublicense, to use and to practice all patents controlled by DiaTex that claim halofenate and its enantiomers, and all
information, data, know-how, trade secrets, inventions, developments, results, techniques and materials, whether or not patentable, that are
necessary or useful towards such commercialization. Under the agreement, we are obligated to use diligent efforts to conduct preclinical
and clinical testing of halofenate and its enantiomers in order to determine its efficacy for use in the treatment or prevention of human
diseases or conditions. On April 15, 1999 the agreement was amended by the parties to allow DiaTex to transfer to us their interest in an
IND application that they filed with the FDA. The amendment also provided for DiaTex to indemnify us against any and all losses resulting
or arising from any third party claims, actions or proceedings under the IND application, any negligent or wrongful acts or omissions of
DiaTex in connection with the IND application, and any misrepresentations by DiaTex relating to the license agreement. Under the
amendment, we will provide the same indemnifications to DiaTex with respect to any third party claims, actions, or proceedings in
connection with negligent or wrongful conduct of clinical trials relating to the license agreement, provided the claims are not related to
negligent or wrongful acts or omissions committed by DiaTex.
The license agreement contains a $2,000 per month license fee as well as a requirement to make additional payments for development
achievements and royalty payments on any sales of licensed products. DiaTex is entitled to up to $0.8 million for the future development of
arhalofenate, as well as a 2% royalty payment on any net sales of products containing arhalofenate. A $50,000 milestone payment was
made in May 2005 but no other milestone or royalty payments have been made since then. The agreement will expire upon the expiration
of the
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last of DiaTex’s patents related to the license granted, or, if later, the expiration of all payment obligations under the agreement. The
agreement may also terminate upon a material breach by DiaTex or us, if written notice of such breach is delivered to the breaching party,
and the breaching party has not (i) cured the breach or (ii) initiated good faith efforts to cure the breach within a specified time period.
Under the terms of the agreement, if we fail to use diligent efforts to conduct preclinical and clinical testing of halofenate and its
enantiomers to determine its efficacy for use in the treatment or prevention of human diseases or conditions, fail to make any payment
called for under the agreement, or disclose non-exempt confidential information under the agreement, such action would constitute a
material breach under the agreement. In addition, if we fail to execute all instruments and assignments or fail to take any action to effect
joint ownership of any enantiomer patent with DiaTex, such action would constitute a material breach under the agreement. We may
terminate the agreement at any time if we determine we are no longer interested in DiaTex’s license grant, provided we provide sufficient
written notice within a specified time period.
Research and Development Agreements
INC Research: In February 2014, we entered into a Master Services Agreement with INC Research, LLC and related initial work
order for INC Research to provide contract clinical research and development services to us in connection with our Phase 2b study of
arhalofenate in gout. The Agreement provides that we may engage INC Research from time to time to provide services in accordance with
work orders mutually agreed and budgeted between the parties for clinical research and development of arhalofenate which total is
anticipated to exceed approximately $8 million. The master services agreement provides customary terms and conditions, including those
for performance of services by INC Research in compliance with work orders, standard operating procedures, FDA and ICH requirements
and all applicable laws. We remain responsible for all regulatory responsibilities and the determination of any work orders, subject to
mutual agreement on the specific terms of any such work orders. The master services agreement has a term of five years; provided that we
may terminate the master services agreement or any individual work order on thirty (30) days written notice, or immediately in the event of
any safety risk associated with the services the being performed. In addition, either party may terminate the master services agreement or
any applicable work order upon thirty (30) days written notice for a material breach by the other party.
Pharmaceutical Research Associates, Inc.: In September 2015, we entered into a Master Services Agreement with Pharmaceutical
Research Associates, Inc (PRA) and related initial work order for PRA to provide contract clinical research and development services to us
in connection with our Phase 2 study of MBX-8025 in PBC. Under this agreement, we may engage PRA from time to time in accordance
with mutually agreed work orders. The initial work order includes services for our clinical candidate, MBX-8025, and the total cost under
such initial work order are anticipated to be approximately $6.2 million. The agreement provides for performance of services by PRA in
compliance with work orders, industry standards, FDA and ICH requirements and all applicable laws. We remain responsible for all
regulatory responsibilities unless specifically transferred to PRA, as well as the determination of any work orders, subject to mutual
agreement on the specific terms of any such work orders. The agreement has a term of five years, and we can terminate the agreement or
any individual work order upon thirty (30) days written notice. In addition, either party may terminate the agreement or any applicable
work order upon thirty (30) days written notice for an uncured material breach by the other party, or immediately in the event of the other
party’s bankruptcy, insolvency, liquidation or assignment for the benefit of creditors.
Intellectual Property
We own and co-own approximately 46 United States patents, 175 foreign patents, as well as 19 United States patent applications and
115 foreign and Patent Cooperation Treaty applications which are counterparts to certain United States patents and patent applications. In
addition, we license from third parties approximately 17 United States patents and 2 United States patent application, 304 foreign patents
and 68 foreign and Patent Cooperation Treaty applications which are counterparts to certain United States patents and patent applications.
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These patents and patent applications include claims covering various aspects of our product pipeline and research and development
strategies, including: arhalofenate crystal forms, methods of use both alone and in combination with other drugs and methods of
manufacture, certain PPAR delta agonists, their compositions and uses, certain GPR119 agonist compositions and uses and undisclosed
metabolic disease target agonist compositions and uses.
The arhalofenate portfolio consists of approximately 141 issued patents and 103 pending patent applications relating to composition,
method of use or methods of manufacture. We believe our issued patents protect Arhalofenate through at least 2019-2032 before
accounting for any potential patent term extension. The MBX-8025 portfolio consists of approximately 325 issued patents and 67 pending
patent applications related to composition and method of use that we believe protect it through at least 2024-2026 before accounting for any
potential patent term extension. Patent and trade secret protection is critical to our business. Our success will depend in large part on our
ability to obtain, maintain, defend and enforce patents and other intellectual property to extend the life of patents covering our product
candidates, to preserve trade secrets and proprietary know-how, and to operate without infringing the patents and proprietary rights of third
parties we actively seek patent protection in the U.S.
Manufacturing
We do not currently own or operate manufacturing facilities for the production or testing of MBX-8025, arhalofenate or other product
candidates that we develop, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We presently
depend on third party contract manufacturers to obtain all of our required raw materials, Active Pharmaceutical Ingredients (APIs) and
finished products for our clinical studies for arhalofenate. We have executed manufacturing agreements for our API and clinical supplies of
arhalofenate and MBX-8025 with established manufacturing firms which are responsible for sourcing and obtaining the raw materials
necessary for the finished products. The raw materials necessary to manufacture the API for arhalofenate, MBX-8025 and MBX-2982 are
available from more than one source and we have also executed manufacturing agreements for the production of MBX-2982.
Siegfried AG
On April 30, 2012, we entered into a Development and Clinical Manufacture Agreement with Siegfried AG for the manufacturing of
the API necessary for the tablet form of arhalofenate. Under the agreement, we shall deliver or Siegfried shall obtain the raw materials
necessary for the API. We own the rights, title and interest to the deliverables and intellectual property covering the deliverables generated
under the agreement. Siegfried shall grant a non-exclusive license to us to use Siegfried intellectual property to exploit any product or
service based or derived from the deliverables under the agreement. Both Siegfried and we have agreed to indemnify the other party with
respect to losses due to the breach of a covenant or obligation under the agreement or the gross negligence, recklessness or intentional
misconduct of the other party. We may terminate the agreement at any time with written notice and Siegfried may terminate the agreement
in the event we discontinue our activities related to the development or commercialization of the API for arhalofenate. In addition, either
party may terminate the agreement at any time for material breach under the agreement or in the case of insolvency of the other party.
Patheon Inc.
On June 5, 2012, we entered into a Development and Clinical Manufacture Agreement with Patheon Inc. for the manufacturing of the
tablet form of arhalofenate. Under the agreement, we shall deliver the API or Patheon shall obtain the API from a qualified vendor. We
own the rights, title and interest to the deliverables and intellectual property generated by Patheon in connection with the performance of
the services for us under the agreement. Both Patheon and we have agreed to indemnify the other party with respect to losses due to the
breach of a covenant or obligation under the agreement or the gross negligence, recklessness or intentional
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misconduct of the other party. We may terminate the agreement at any time with written notice provided that we terminate the agreement
within certain times in advance of the start date of certain services. In addition, either party may terminate the agreement at any time for
material breach under the agreement.
Metrics Inc.
On October 31, 2006, we entered into a Standard Development Agreement with Metrics, Inc. Under the agreement, Metrics will
provide us with pharmaceutical development, formulation and analytical services in consideration of which we will provide appropriate
compensation as outlined in the agreement. We own the rights, title and interest to the intellectual property relating to all pharmaceutical
products developed or manufactured for us by Metrics, as well as any active pharmaceutical ingredient provided to Metrics by us. We have
agreed to indemnify Metrics against third party claims that involve the breach by us of any of our obligations, warranties or representations
under the agreement, and Metrics has agreed to indemnify us against third party claims that involve (i) the negligence, gross negligence, or
intentional misconduct on the part of Metrics, (ii) a failure by Metrics to comply with the law in their performance of the agreement, or
(iii) a breach of Metrics’ obligations, covenants, representations, or warranties under the agreement. Either party may terminate the
agreement at any time with advance written notice.
Research & Development Costs
Our research and development costs for the years ended December 31, 2015 and 2014 were $17.0 million and $15.8 million,
respectively.
Government Regulation and Product Approval
Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among
other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping,
promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of products such as those we
are developing. The pharmaceutical drug product candidates that we develop must be approved by the Food and Drug Administration
(FDA) before they may be legally marketed in the United States.
United States Pharmaceutical Product Development Process
In the United States, the FDA regulates pharmaceutical products under the Federal Food, Drug and Cosmetic Act, and implementing
regulations. Pharmaceutical products are also subject to other federal, state and local statutes and regulations. The process of obtaining
regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the
expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during
the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. FDA
sanctions could include refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product recalls,
product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution,
disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The
process required by the FDA before a pharmaceutical product may be marketed in the United States generally involves the following:
•
•
Completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices (GLP)
or other applicable regulations;
Submission to the FDA of an Investigational New Drug application (IND), which must become effective before human clinical
studies may begin;
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•
•
•
•
•
Performance of adequate and well-controlled human clinical studies according to the FDA’s current Good Clinical Practices
(GCP), to establish the safety and efficacy of the proposed pharmaceutical product for its intended use;
Submission to the FDA of a New Drug Application (NDA) for a new pharmaceutical product;
Satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the pharmaceutical product is
produced to assess compliance with the FDA’s current Good Manufacturing Practice standards (cGMP), to assure that the
facilities, methods and controls are adequate to preserve the pharmaceutical product’s identity, strength, quality and purity;
Potential FDA audit of selected preclinical and clinical study sites that generated the data in support of the NDA; and
FDA review and approval of the NDA.
The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations
require the expenditure of substantial resources and approvals are inherently uncertain.
Before testing any compounds with potential therapeutic value in humans, the pharmaceutical product candidate enters the preclinical
testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to
assess the potential safety and activity of the pharmaceutical product candidate. The conduct of the preclinical tests must comply with
federal regulations and requirements including Good Laboratory Practices. The sponsor must submit the results of the preclinical tests,
together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the
FDA as part of the IND. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA has concerns and
notifies the sponsor by way of a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before
the clinical study can begin. The FDA may also impose clinical holds on a pharmaceutical product candidate at any time before or during
clinical studies due to safety concerns or non-compliance. Submission of an IND may not result in the FDA allowing clinical studies to
begin and, once begun, issues may arise that lead to suspension or termination of such clinical study.
During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be
prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These
meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice,
and for the sponsor and FDA to reach agreement on the next phase of development. Sponsors typically use the End-of-Phase 2 meeting to
discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical trial that they believe will support approval of
the new drug.
Clinical studies involve the administration of the pharmaceutical product candidate to healthy volunteers or patients under the
supervision of qualified investigators, generally physicians not employed by or under the clinical study sponsor’s control. Clinical studies
are conducted under protocols detailing, among other things, the objectives of the clinical study, dosing procedures, subject selection and
exclusion criteria, how the results will be analyzed and presented and the parameters to be used to monitor subject safety. Each protocol
must be submitted to the FDA as part of the IND. Clinical studies must be conducted in accordance with GCP. Further, each clinical study
must be reviewed and approved by an independent institutional review board (IRB) at, or servicing, each institution at which the clinical
study will be conducted. An IRB is charged with protecting the welfare and rights of study participants and considers such items as whether
the risks to individuals participating in the clinical studies are minimized and are reasonable in relation to anticipated benefits. The IRB also
approves the informed consent form that must be provided to each clinical study subject or his or her legal representative and must monitor
the clinical study until completed.
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Human clinical studies are typically conducted in three sequential phases that may overlap or be combined:
•
•
•
Phase 1. The pharmaceutical product is initially introduced into healthy human subjects and tested for safety, dosage tolerance,
absorption, metabolism, distribution and excretion.
Phase 2. The pharmaceutical product is evaluated in a limited patient population to identify possible adverse effects and safety
risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases, to determine dosage tolerance, optimal
dosage and dosing schedule and to identify patient populations with specific characteristics where the pharmaceutical product may
be more effective.
Phase 3. Clinical studies are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population
at geographically dispersed clinical study sites. These clinical studies are intended to establish the overall risk/benefit ratio of the
product and provide an adequate basis for product labeling. The studies must be well-controlled and usually include a control arm
for comparison. One or two Phase 3 studies are required by the FDA for an NDA approval, depending on the disease severity and
other available treatment options.
•
Post-approval studies, or Phase 4 clinical studies, may be conducted after initial marketing approval. These studies are used to
gain additional experience from the treatment of patients in the intended therapeutic indication.
Progress reports detailing the results of the clinical studies must be submitted at least annually to the FDA and written IND safety
reports must be submitted to the FDA and the investigators for serious and unexpected adverse events or any finding from tests in
laboratory animals that suggests a significant risk for human subjects. Phase 1, Phase 2 and Phase 3 clinical studies may not be completed
successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical study
at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.
Similarly, an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in
accordance with the IRB’s requirements or if the pharmaceutical product has been associated with unexpected serious harm to patients.
Concurrent with clinical studies, companies usually complete additional animal studies and must also develop additional information
about the chemistry and physical characteristics of the pharmaceutical product as well as finalize a process for manufacturing the product in
commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing
quality batches of the pharmaceutical product candidate and, among other things, must develop methods for testing the identity, strength,
quality and purity of the final pharmaceutical product. Additionally, appropriate packaging must be selected and tested and stability studies
must be conducted to demonstrate that the pharmaceutical product candidate does not undergo unacceptable deterioration over its shelf life.
United States Review and Approval Processes
The results of product development, preclinical studies and clinical studies, along with descriptions of the manufacturing process,
analytical tests conducted on the chemistry of the pharmaceutical product, proposed labeling and other relevant information are submitted
to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment of
substantial user fees; a waiver of such fees may be obtained under certain limited circumstances.
In addition, under the Pediatric Research Equity Act (PREA), an NDA or supplement to an NDA must contain data to assess the
safety and effectiveness of the pharmaceutical product for the claimed indications in all relevant pediatric subpopulations and to support
dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for
submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any pharmaceutical product
for an indication for which orphan designation has been granted.
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The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting
an NDA for filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under the goals and policies
agreed to by the FDA under the Prescription Drug User Fee Act (PDUFA), the FDA has 10 months from filing in which to complete its
initial review of a standard NDA and respond to the applicant, and six months from filing for a priority NDA. The FDA does not always
meet its PDUFA goal dates for standard and priority NDAs. The review process and the PDUFA goal date may be extended by three
months if the FDA requests or if the NDA sponsor otherwise provides additional information or clarification regarding information already
provided in the submission within the last three months before the PDUFA goal date.
After the NDA submission is accepted for filing, the FDA reviews the NDA application to determine, among other things, whether
the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to
assure and preserve the product’s identity, strength, quality and purity. The FDA may refer applications for novel pharmaceutical products
or pharmaceutical products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes
clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what
conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully
when making decisions. During the pharmaceutical product approval process, the FDA also will determine whether a risk evaluation and
mitigation strategy (REMS) is necessary to assure the safe use of the pharmaceutical product. If the FDA concludes that a REMS is needed,
the sponsor of the NDA must submit a proposed REMS; the FDA will not approve the NDA without a REMS, if required.
Before approving an NDA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the
product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to
assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically
inspect one or more clinical sites as well as the site where the pharmaceutical product is manufactured to assure compliance with GCP and
cGMP. If the FDA determines the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the
deficiencies in the submission and often will request additional testing or information. In addition, the FDA will require the review and
approval of product labeling.
The NDA review and approval process is lengthy and difficult and the FDA may refuse to approve an NDA if the applicable
regulatory criteria are not satisfied or may require additional clinical data or other data and information. Even if such data and information
is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical studies are
not always conclusive and the FDA may interpret data differently than we interpret the same data. The FDA will issue a complete response
letter if the agency decides not to approve the NDA. The complete response letter describes the specific deficiencies in the NDA identified
by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional
clinical studies. Additionally, the complete response letter may include recommended actions that the applicant might take to place the
application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the NDA, addressing all of
the deficiencies identified in the letter, or withdraw the application.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications
for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain
contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may require Phase 4 testing which
involves clinical studies designed to further assess pharmaceutical product safety and effectiveness and may require testing and surveillance
programs to monitor the safety of approved products that have been commercialized.
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Post-Approval Requirements
Any pharmaceutical products for which we receive FDA approvals are subject to continuing regulation by the FDA, including, among
other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and
efficacy information, product sampling and distribution requirements, complying with certain electronic records and signature requirements
and complying with FDA promotion and advertising requirements, which include, among others, standards for direct-to-consumer
advertising, prohibitions on promoting pharmaceutical products for uses or in patient populations that are not described in the
pharmaceutical product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities and
promotional activities involving the internet. Failure to comply with FDA requirements can have negative consequences, including adverse
publicity, enforcement letters from the FDA, actions by the United States Department of Justice and/or United States Department of Health
and Human Services Office of Inspector General, mandated corrective advertising or communications with doctors, and civil or criminal
penalties. Although physicians may prescribe legally available pharmaceutical products for off-label uses, manufacturers may not directly
or indirectly market or promote such off-label uses.
Manufacturers of our products are required to comply with applicable FDA manufacturing requirements contained in the FDA’s
cGMP regulations. cGMP regulations require, among other things, quality control and quality assurance, as well as the corresponding
maintenance of records and documentation. Pharmaceutical product manufacturers and other entities involved in the manufacture and
distribution of approved pharmaceutical products are required to register their establishments with the FDA and certain state agencies, and
are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws.
Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain
cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of
an approved NDA, including withdrawal of the product from the market. In addition, changes to the manufacturing process generally
require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications
and additional labeling claims, are also subject to further FDA review and approval.
The FDA also may require post-marketing testing, known as Phase 4 testing, risk minimization action plans and surveillance to
monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product.
U.S. Foreign Corrupt Practices Act
The U.S. Foreign Corrupt Practices Act, or FCPA, prohibits certain individuals and entities, including us, from promising, paying,
offering to pay, or authorizing the payment of anything of value to any foreign government official, directly or indirectly, to obtain or retain
business or an improper advantage. The U.S. Department of Justice and the U.S. Securities and Exchange Commission, or SEC, have
increased their enforcement efforts with respect to the FCPA. Violations of the FCPA may result in large civil and criminal penalties and
could result in an adverse effect on a company’s reputation, operations, and financial condition. A company may also face collateral
consequences such as debarment and the loss of export privileges.
Federal and state fraud and abuse laws
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare laws have
been applied to restrict certain business practices in the biopharmaceutical industry in recent years. These laws include anti-kickback
statutes, false claims statutes, data privacy and security laws, as well as transparency laws regarding payments or other items of value
provided to healthcare providers. The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering,
paying, soliciting, or receiving remuneration to induce or in return for purchasing, leasing, ordering, or arranging for the purchase, lease, or
order of any healthcare item or service reimbursable under Medicare, Medicaid, or other federally financed healthcare programs. The term
“remuneration” has been broadly interpreted to include anything of
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value, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of
payment, ownership interests and providing anything at less than its fair market value. The Anti-Kickback Statute has been interpreted to
apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the
other. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from
prosecution, the exemptions and safe harbors are drawn narrowly, and our practices may not in all cases meet all of the criteria for statutory
exemptions or safe harbor protection. Practices that involve remuneration that may be alleged to be intended to induce prescribing,
purchases, or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Several courts have
interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals
of federal healthcare covered business, the statute has been violated. The intent standard of the Anti-Kickback Statute was also broadened
by the Patient Protection and Affordable Health Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively
the PPACA, so that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have
committed a violation. In addition, the PPACA provides that the government may assert that a claim including items or services resulting
from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act
(discussed below).
The federal False Claims Act prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to
the federal government. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for
allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other
companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for
unapproved, and thus non-reimbursable, uses. Additionally, the civil monetary penalties statute imposes penalties against any person who
is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for
an item or service that was not provided as claimed or is false or fraudulent. The federal Health Insurance Portability and Accountability
Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit knowingly and willfully executing a scheme to defraud any
healthcare benefit program, including private third-party payers and knowingly and willfully falsifying, concealing or covering up a
material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare
benefits, items or services.
The federal Physician Payments Sunshine Act, created under the PPACA, and its implementing regulations, require certain
manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the
Children’s Health Insurance Program (with certain exceptions) to report annually information related to certain payments or other transfers
of value provided to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the
physicians and teaching hospitals, and applicable manufacturers and group purchasing organizations to report annually certain ownership
and investment interests held by physicians and their immediate family members.
We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our
business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its
implementing regulations, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health
information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates”—
independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a
service on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities,
business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or
injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil
actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from
each other in significant ways and may not have the same effect, thus complicating compliance efforts.
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The majority of states also have statutes or regulations similar to the aforementioned federal fraud and abuse laws, some of which are
broader in scope and apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless
of the payor. Further, some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug
manufacturers to report information related to payments or other transfers of value provided to physicians and other health care providers
and entities or marketing expenditures.
These federal and state laws may impact, among other things, our proposed sales, marketing and education programs. If our
operations are found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply
to us, we may be subject to penalties, including criminal and significant civil monetary penalties, damages, fines, imprisonment, exclusion
from participation in government healthcare programs, and the curtailment or restructuring of our operations, any of which could adversely
affect our ability to operate its business and our results of operations. To the extent that any of our product candidates are ultimately sold in
a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing
requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting
of payments or transfers of value to healthcare professionals.
Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of the FDA approval of the use of our pharmaceutical product candidates, some of
our patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984,
commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five
years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term
restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term
restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus the time
between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved pharmaceutical
product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The United
States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or
restoration. In the future, we may apply for restoration of patent term for one of its currently owned or licensed patents to add patent life
beyond its current expiration date, depending upon the expected length of the clinical studies and other factors involved in the filing of the
relevant NDA.
Market exclusivity provisions under the U.S. Food, Drug, and Cosmetic Act can also delay the submission or the approval of certain
applications of other companies seeking to reference another company’s NDA. Currently seven years of reference product exclusivity are
available to pharmaceutical products designated as Orphan Drugs, during which the FDA may not approve generic products relying upon
the reference product’s data. Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric
exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the
end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric clinical study in
accordance with an FDA-issued “Written Request” for such a clinical study.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any pharmaceutical product candidates for which we
obtain regulatory approval. In the United States and markets in other countries, sales of any products for which we receive regulatory
approval for commercial sale will depend in part upon the availability of reimbursement from third-party payors. Third-party payors
include government payors such as
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Medicare and Medicaid, managed care providers, private health insurers and other organizations. In the United States, no uniform policy of
coverage and reimbursement for products exists among third-party payors. While commercial payors often follow Medicare cover policy
and payment limitations, coverage and reimbursement for products can differ significantly from payor to payor. The process for
determining whether a payor will provide coverage for a pharmaceutical product may be separate from the process for setting the price or
reimbursement rate that the payor will pay for the pharmaceutical product. Third-party payors may limit coverage to specific
pharmaceutical products on an approved list, or formulary, which might not include all of the FDA-approved pharmaceutical products for a
particular indication.
Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical
products and services, in addition to their safety and efficacy. We may need to conduct expensive pharmaco-economic studies in order to
demonstrate the medical necessity and cost-effectiveness of its products, in addition to the costs required to obtain the FDA approvals. Our
pharmaceutical product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for
a pharmaceutical product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may
not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. In
addition, in the United States there is a growing emphasis on comparative effectiveness research, both by private payors and by government
agencies. To the extent other drugs or therapies are found to be more effective than our products, payors may elect to cover such therapies
in lieu of our products and/or reimburse our products at a lower rate.
Different pricing and reimbursement schemes exist in other countries. The downward pressure on health care costs in general,
particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new
products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a
country.
The marketability of any pharmaceutical product candidates for which we receive regulatory approval for commercial sale may suffer
if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in
the United States has increased and we expect this will continue to increase the pressure on pharmaceutical pricing. Coverage policies and
third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more
products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the
future.
In the United States and foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare system
that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the United
States federal and state levels that seek to reduce healthcare costs. For example, in March 2010 the PPACA was enacted, which includes
measures to significantly change the way healthcare is financed by both governmental and private insurers. Among the provisions of the
PPACA of importance to the pharmaceutical and biotechnology industry are the following:
•
•
•
•
an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents,
apportioned among these entities according to their market share in certain government healthcare programs;
an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average
manufacturer price for branded and generic drugs, respectively;
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts to
negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the
manufacturer’s outpatient drugs to be covered under Medicare Part D;
extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid
managed care organizations;
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•
•
•
•
•
•
•
•
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to
additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of
the Federal Poverty Level, thereby potentially increasing manufacturers’ Medicaid rebate liability;
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
new transparency reporting requirements under the federal Physician Payments Sunshine Act, created under Section 6002 of the
PPACA;
a requirement to annually report drug samples that manufacturers and distributors provide to physicians;
expansion of health care fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government
investigative powers, and enhanced penalties for noncompliance;
a licensure framework for follow-on biologic products;
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical
effectiveness research, along with funding for such research; and
establishment of a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower
Medicare and Medicaid spending, potentially including prescription drug spending.
Since its enactment there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we
expect there will continue to be additional challenges and amendments to it in the future.
In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. In August 2011, the president
signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction, or
joint committee, to recommend proposals in spending reductions to Congress. The joint committee did not achieve its targeted deficit
reduction of at least $1.2 trillion for the years 2013 through 2021, triggering automatic reductions to several government programs. These
reductions include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013 and, due to
subsequent legislative amendments, will remain in effect through 2025 unless additional congressional action is taken. In January 2013, the
president signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several
providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
More recently, there have been several recent congressional inquiries and proposed bills designed to, among other things, bring more
transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program
reimbursement methodologies for drug products. These new laws may result in additional reductions in Medicare and other healthcare
funding, which could have a material adverse effect on our financial operations.
International Regulation
In addition to regulations in the United States, there are a variety of foreign regulations governing clinical studies and commercial
sales and distribution of our future product candidates. Whether or not FDA approval is obtained for a product, approval of a product must
be obtained by the comparable regulatory authorities of foreign countries before clinical studies or marketing of the product can commence
in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA
approval. The requirements governing the conduct of clinical studies, product licensing, pricing and reimbursement vary greatly from
country to country. In addition, certain regulatory authorities in select countries
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may require us to repeat previously conducted preclinical and/or clinical studies under specific criteria for approval in their respective
country which may delay and/or greatly increase the cost of approval in certain markets targeted for approval by us.
Corporate Information
CymaBay Therapeutics, Inc., formerly Metabolex, Inc., was incorporated under the laws of the State of Delaware on October 5, 1988,
originally under the name Transtech Corporation. Our executive offices are located at 7999 Gateway Blvd., Suite 130, Newark, CA 94560.
The telephone number at our executive office is (510) 293-8800. Our corporate website address is www.cymabay.com. We do not
incorporate the information contained on, or accessible through, our website into this Annual Report on Form 10-K, and you should not
consider it part of this Annual Report. All of our long-lived assets are located in the United States.
Implications of Being an “Emerging Growth Company”
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an
“emerging growth company,” we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable
generally to public companies. These provisions include:
•
•
•
•
only two years of audited financial statements in addition to any required unaudited interim financial statements with
correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
reduced disclosure about our executive compensation arrangements;
no requirement that we solicit non-binding advisory votes on executive compensation or golden parachute arrangements; and
exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
We have taken advantage of the reduced disclosure obligations. Section 107 of the JOBS Act also provides that an emerging growth
company can take advantage of the extended transition period provided in the Securities Act of 1933, as amended, or the Securities Act, for
complying with new or revised accounting standards. In other words, an emerging growth company can elect to delay the adoption of
certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourself of this
exemption to take advantage of the extended transition period for complying with new or revised accounting standards.
We could remain an emerging growth company for up to five years or until the earliest of (i) the last day of the first fiscal year in
which our annual gross revenues exceed $1 billion, (ii) the date that we becomes a “large accelerated filer” as defined in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock that
are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, (iii) the
date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period and (iv) the last day of
the fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective
registration statement under the Securities Act (a date which occurred in July 2014). At this time we expect to remain an “emerging growth
company” for the foreseeable future.
We also qualify as a “smaller reporting company” and have the advantage of not being required to provide the same level of
disclosure as larger public companies.
Employees
As of March 1, 2016, we had 21 full-time employees, 7 of whom hold Ph.D.s, 2 of whom hold M.D.s and 3 of whom hold a Masters
degree in relevant areas of expertise.
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Executive Officers of Registrant
As of March 1, 2016, our executive officers, who are appointed by and serve at the discretion of the board of directors, were as
follows:
Name
Executive Officers
Harold Van Wart, Ph.D.
Sujal Shah
Pol Boudes, M.D.
Robert L. Martin, Ph.D.
Charles A. McWherter, Ph.D.
Patrick J. O’Mara
Kirk Rosemark
Biographical Information
Executive Officers
Age
Position Held With CymaBay
68 President, Chief Executive Officer & Director
42 Chief Financial Officer
58 Chief Medical Officer
53 Senior Vice President, Manufacturing and Nonclinical Development
60 Senior Vice President, Chief Scientific Officer
54 Vice President, Business Development
51 Vice President, Regulatory Affairs and Quality Assurance
Harold E. Van Wart, Ph.D. has served as CymaBay’s President since April 2001 and Chief Executive Officer and member of its
board of directors since 2003. He served as Chief Operating Officer from December 2002 to January 2003 and Senior Vice President,
Research and Development from October 2000 to December 2002. From 1999 to 2000, Dr. Van Wart was vice president and therapy area
head for arthritis and fibrotic diseases at Roche Biosciences, a biopharmaceutical company. From 1992 to 1999, he was vice president and
director of the institute of biochemistry and cell biology at Syntex Corporation, a biopharmaceutical company acquired by Roche
Biosciences in 1994. From 1978 to 1992, Dr. Van Wart served on the faculty of Florida State University. Dr. Van Wart holds a Ph.D. from
Cornell University and a B.A. from SUNY Binghamton. Dr. Van Wart has been a member of the board of directors of Conatus
Pharmaceuticals since 2007. He currently also serves on the Emerging Companies and Health Section Governing Boards of the
Biotechnology Industry Organization (BIO), as well as on its board of directors, and on the board of directors and executive committee at
BayBio.
Sujal Shah has served as our Chief Financial Officer since December of 2013. Prior to that he served as a consultant and acting Chief
Financial Officer for us from June 2012 to December 2013. From 2010 to 2012, Mr. Shah served as Director, Health Care Investment
Banking for Citigroup Inc., where he was responsible for managing client relationships and executing strategic and financing related
transactions for clients focused in life sciences. From 2004 to 2010 Mr. Shah was employed with Credit-Suisse, last serving in the capacity
as Vice President, Health Care Investment Banking Group. Mr. Shah received a MBA from Carnegie Mellon University – Tepper School
of Business and M.S. and B.S. degrees in Biomedical Engineering from Northwestern University.
Pol Boudes, M.D. has served as our Chief Medical Officer since April 2014. Prior to joining CymaBay, Dr. Boudes was Chief
Medical Officer at Amicus Therapeutics, from 2009 to 2013 where he was responsible for clinical development, pharmacology, medical
affairs, regulatory affairs and quality assurance, and toxicology. From 2004 to 2009, Dr. Boudes was with Berlex Laboratories (which
merged with Bayer HealthCare Pharmaceuticals in 2006) where Dr. Boudes held the position of Vice President, Global Clinical
Development, Women’s, Health Care US. From 1990 to 2004, he held positions of increasing responsibility with Wyeth-Ayerst Research
both in Philadelphia, PA and in Europe, with Hoffmann-La Roche, and with Pasteur-Merieux Serums & Vaccines. Dr. Boudes received his
M.D. from the University of Aix-Marseilles, France. He completed his internship and residency in Marseilles and in Paris, France and was
an Assistant Professor of Medicine at the University of Paris. He is specialized in Endocrinology and Metabolic Diseases, Internal
Medicine, and Geriatric diseases.
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Robert L. Martin, Ph.D., has served as our Senior Vice President, Manufacturing and Nonclinical Development since April 2015.
Previously, he served as our Vice President of Nonclinical Development and Project Management from 2008 to 2015. Dr. Martin served as
our Sr. Director of Preclinical Development and Project Management from 2006 to 2008 and our Director of Preclinical Development and
Project Management from 2004 to 2006. From 1994 to 2004, Dr. Martin served in various positions with Roche Palo Alto, a division of F.
Hoffman-La Roche Ltd. Dr. Martin obtained his Ph.D. in Biochemistry from the University of California, Davis.
Charles A. McWherter, Ph.D. has served as our Senior Vice President and Chief Scientific Officer since July 2007. From 2003 to
2007, he served as Vice President and head of the cardiovascular therapeutics areas of Pfizer Inc., a biopharmaceutical company. From
2001 to 2003, Dr. McWherter served as Vice President of Drug Discovery at Sugen, Inc., a biopharmaceutical company acquired by Pfizer
Inc. in 2003. Dr. McWherter obtained his Ph.D. from Cornell University.
Patrick O’Mara has served as our Vice President, Business Development since August 2006. Previously he served as our Sr.
Director of Business Development from 2004 to 2006, our Director of Business Development from 2000 to 2004 and our Manager of
Business Development from 1997 to 2000. Mr. O’Mara served as our Manager of Laboratory Operations from 1991 to 1997. Mr. O’Mara
received a B.A. in Biochemistry from the University of California, Berkeley.
Kirk Rosemark has served as our Vice President Regulatory Affairs and Quality Assurance since April 2015. Prior to joining
CymaBay Mr. Rosemark held the position of Vice President Regulatory Affairs and Quality Assurance at Exelixis, Inc. from 2003 to 2014,
where he was responsible for all regulatory affairs and quality assurance functions supporting both development and marketed products. He
served in the same capacity at NeoPharm Inc from 2001 to 2003. Prior to that, Mr. Rosemark held various positions of increasing
responsibility within the Regulatory Affairs and Quality Assurance department at Solvay Pharmaceuticals, Inc., Ciba Vision and Bausch &
Lomb Pharmaceuticals, Inc. Mr. Rosemark obtained a B.S. in Chemistry from Cleveland State University.
Item 1A. Risk Factors
Risks Related to Our Financial Condition and Capital Requirements
We will need additional capital in the future to sufficiently fund our operations and research.
We have consumed substantial amounts of capital to date as we continue our research and development activities. As of December 31,
2015, we had cash, cash equivalents and marketable securities of approximately $41.5 million. We believe that these funds, which were
obtained through recent equity and debt financings, will allow us to continue operation through at least the next twelve months. We
currently believe that we will need to raise additional capital to continue our operations thereafter. Our monthly spending levels vary based
on new and ongoing development and corporate activities.
Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and
uncertain process that takes years to complete. We expect our research and development expenses to substantially increase in connection
with our ongoing activities, particularly as we advance development of our lead clinical product candidates MBX-8025 and arhalofenate.
In the event we do not successfully raise sufficient funds in financing our product development activities, particularly related to the
ongoing development of MBX-8025 and arhalofenate, it will be necessary to curtail our product development activities commensurate with
the magnitude of the shortfall or our product development activities may cease altogether. To the extent that the costs of the ongoing
development of MBX-8025 or arhalofenate exceed our current estimates and we are unable to raise sufficient additional capital to cover
such additional costs, we will need to reduce operating expenses, enter into a collaboration or other similar
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arrangement with respect to development and/or commercialization rights to MBX-8025 or arhalofenate, outlicense intellectual property
rights to MBX-8025 or arhalofenate, sell assets or effect a combination of the above. No assurance can be given that we will be able to
effect any of such transactions on acceptable terms, if at all. Failure to progress the development of arhalofenate and MBX-8025 will have a
negative effect on our business, future prospects and ability to obtain further financing on acceptable terms (if at all).
Beyond the plan of operations outlined above, our future funding requirements and sources will depend on many factors, including
but not limited to the following:
•
•
•
•
•
•
•
•
the rate of progress and cost of our clinical studies, including in particular the Phase 3 studies of arhalofenate and Phase 2 studies
of MBX-8025;
the need for additional or expanded clinical studies;
the rate of progress and cost of our Chemistry, Manufacturing and Control development, registration and validation program;
the timing, economic and other terms of any licensing, collaboration or other similar arrangement into which we may enter;
the costs and timing of seeking and obtaining FDA and other regulatory approvals;
the extent of our other development activities;
the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and
the effect of competing products and market developments.
If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing
development and commercialization efforts, which will have a material adverse effect on our business, operating results and prospects and
on our ability to develop our product candidates.
We have incurred significant net losses in each year since our inception, including a net loss of approximately $15.5 million and
$31.9 million for the years ended December 31, 2015, and 2014, respectively. We anticipate that we will continue to incur significant
losses for the foreseeable future, and we may never achieve or maintain profitability. As of December 31, 2015, we had an accumulated
deficit of $396.3 million.
To date, we have financed our operations primarily through the sale of equity securities, licensing fees, issuance of debt and
collaborations with third parties. We have devoted most of our financial resources to research and development, including our preclinical
development activities and clinical trials. We have not completed development of any product candidates. We expect to continue to incur
significant and increasing losses and negative cash flows for the foreseeable future. The size of our losses will depend, in part, on the rate
of future expenditures and our ability to generate revenues. In particular, we expect to incur substantial and increased expenses as we:
•
•
•
•
•
•
continue the development of our product candidates MBX-8025 and arhalofenate;
expand our research and development activities and advance our clinical programs, including MBX-8025;
seek a partner for further development and potential commercialization of arhalofenate;
seek to obtain regulatory approvals for arhalofenate;
prepare for the potential commercialization of arhalofenate;
scale up manufacturing capabilities to commercialize arhalofenate for any indications for which we receive regulatory approval;
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•
•
•
•
•
begin outsourcing of the commercial manufacturing of arhalofenate for any indications for which we receive regulatory approval;
establish an infrastructure for the sales, marketing and distribution of arhalofenate for any indications for which we receive
regulatory approval;
maintain, expand and protect our intellectual property portfolio;
continue our research and development efforts and seek to discover additional product candidates; and
add operational, financial and management information systems and personnel, including personnel to support our product
development and commercialization efforts and operations as a public company.
We do not anticipate that we will generate revenue from the sale of our products for the foreseeable future. Our ability to become
profitable depends upon our ability to generate significant continuing revenues.
In the absence of additional sources of capital, which may not be available to us on acceptable terms, or at all, the development of
MBX-8025, arhalofenate or future product candidates may be reduced in scope, delayed or terminated. If our product candidates fail in
clinical studies or do not gain regulatory approval, or if our future products, if any, do not achieve market acceptance, we may never
become profitable.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to
become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business,
diversify our product offerings or continue our operations.
Our ability to generate future revenues from product sales is uncertain and depends upon our ability to successfully develop, obtain
regulatory approval for, and commercialize our product candidates.
Our ability to generate revenue and achieve profitability depends on our ability, alone or with collaborators, to successfully complete
the development of, obtain the necessary regulatory approvals for and commercialize our product candidates. We do not anticipate
generating revenues from sales of our product candidates for the foreseeable future, if ever. Our ability to generate future revenues from
product sales depends heavily on our success in:
•
•
•
•
•
•
obtaining favorable results for and advancing the development of arhalofenate, including raising sufficient capital or partnering
with a third party to successfully initiate our Phase 3 clinical development;
obtaining United States (U.S.) and foreign regulatory approvals for arhalofenate;
launching and commercializing arhalofenate, either on our own or with a partner, including building a sales force and
collaborating with third parties;
achieving broad market acceptance of arhalofenate in the medical community and by third-party payors and patients;
obtaining favorable results for and advancing the development of MBX-8025; and
generating a pipeline of product candidates.
Conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete,
and we may never generate the necessary data required to obtain regulatory approval and achieve product sales. Our anticipated
development costs would likely increase if we do not obtain favorable results or if development of our product candidates is delayed. In
particular, we would likely incur higher costs than we currently anticipate if development of our product candidates is delayed because we
are required by a regulatory authority such as the U.S. FDA to perform studies or trials in addition to those that we currently
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anticipate. Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to predict
the timing or amount of any increase in our anticipated development costs.
In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be
derived from sales of products that we do not expect to be commercially available for several years, if at all. Even if one or more of our
product candidates is approved for commercial sale, we anticipate incurring significant costs in connection with commercialization. As a
result, we cannot assure you that we will be able to generate revenues from sales of any approved product candidates, or that we will
achieve or maintain profitability even if we do generate sales.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to
our technologies or product candidates.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination
of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution
arrangements. We do not have any committed external source of funds.
In order to raise additional funds to support our operations, we may sell additional equity or debt securities, enter into collaborations,
strategic alliances, or licensing arrangements or other marketing or distribution arrangements. In July 2015, we completed the issuance of
8,188,000 shares of our common stock at $2.81 per share in an underwritten public offering. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, ownership interests of our stockholders will be diluted, and the terms of these
securities may include liquidation or other preferences that adversely affect the rights of stockholders. Debt financing, if available, may
involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt,
making capital expenditures, and declaring dividends, and will impose limitations on our ability to acquire, sell or license intellectual
property rights and other operating restrictions that could adversely impact our ability to conduct our business.
If we raise additional funds through collaborations, strategic alliances, or licensing arrangements or other marketing or distribution
arrangements with third parties, we may have to relinquish valuable rights to our intellectual property, technologies, future revenue
streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to expand our
operations or otherwise capitalize on our business opportunities, our business, financial condition and results of operations could be
materially adversely affected and we may not be able to meet our debt service obligations. If we are unable to raise additional funds
through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or
commercialization efforts, or grant others rights to develop and market product candidates that we would otherwise prefer to develop and
market ourselves.
We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth
companies will make our common stock less attractive to investors.
We are an emerging growth company. Under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, emerging growth
companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We are
availing ourselves of this exemption from new or revised accounting standards and, therefore, we may not be subject to the same new or
revised accounting standards as other public companies that are not “emerging growth companies.”
For as long as we continue to be an emerging growth company, we also intend to take advantage of certain other exemptions from
various reporting requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding
advisory stockholder vote on
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executive compensation and any golden parachute payments not previously approved, exemption from the requirement of auditor
attestation in the assessment of our internal control over financial reporting and exemption from any requirement that may be adopted by
the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing
additional information about the audit and the financial statements (auditor discussion and analysis). If we do, the information that we
provide stockholders may be different than what is available with respect to other public companies. We cannot predict if investors will find
our common stock less attractive because we will rely on these exemptions. If investors find our common stock less attractive as a result of
our status as an emerging growth company, there may be less liquidity for our common stock and our stock price may be more volatile.
We will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our
common stock that is held by non-affiliates exceeds $700 million as of the end of the second fiscal quarter, (ii) the end of the fiscal year in
which we have total annual gross revenues of $1 billion or more during such fiscal year, (iii) the date on which we issue more than $1
billion in non-convertible debt in a three-year period or (iv) the end of the fiscal year following the fifth anniversary of the date of the first
sale of our common stock pursuant to an effective registration statement filed under the Securities Act (a date which occurred in July 2014).
Risks Related to Clinical Development and Regulatory Approval
We depend on the success of our product candidates, arhalofenate and MBX-8025, which are still under clinical development and we
may not obtain regulatory approval or successfully commercialize either of these product candidates.
We have not marketed, distributed or sold any products. The success of our business depends upon our ability to develop and
commercialize our product candidates, including arhalofenate, which has completed eight Phase 1 and nine Phase 2 clinical trials, including
five Phase 2 studies in gout and MBX-8025, which has completed five Phase 1 and two Phase 2 clinical trials. We had an end of phase 2
meeting with the FDA in the third quarter of 2015 to review the results of our clinical studies and to discuss the proposed design of a phase
3 program for arhalofenate. There is no guarantee that our clinical trials will be completed or, if completed, will be successful. In March
2016, we completed a second Phase 2 clinical study for MBX-8025 in patients with homozygous familial hypercholestorolemia (HoFH). In
November 2015, we initiated enrollment in a Phase 2 clinical study of MBX-8025 for patients with PBC. The success of arhalofenate and
MBX-8025, respectively, will depend on several factors, including the following:
•
•
•
•
•
•
•
•
•
•
successful enrollment and completion of clinical trials;
recognition by the FDA and other regulatory authorities outside of the U.S. of orphan disease designation for MBX-8025 in target
indications in addition to those already obtained;
obtaining a partner to further develop and potentially commercialize arhalofenate;
receipt of marketing approvals from the FDA and regulatory authorities outside the U.S. for our product candidate;
establishing commercial manufacturing capabilities by making arrangements with third-party manufacturers;
launching commercial sales of the product, whether alone or in collaboration with others;
acceptance of the product by patients, the medical community and third-party payors;
effectively competing with other therapies;
a continued acceptable safety profile of the product following approval; and
obtaining, maintaining, enforcing and defending intellectual property rights and claims.
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If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to
successfully commercialize MBX-8025 or arhalofenate, which would materially harm our business.
We have never obtained regulatory approval for a drug and we may be unable to obtain, or may be delayed in obtaining, regulatory
approval for arhalofenate.
We have never obtained regulatory approval for a drug. In the U.S. it is possible that the FDA may refuse to accept our New Drug
Application (NDA) for substantive review or may conclude after review of our data that our application is insufficient to obtain regulatory
approval of arhalofenate. If the FDA does not accept or approve our NDA, it may require that we conduct additional clinical, nonclinical or
manufacturing validation studies and submit that data before it will reconsider our application. Depending on the extent of these or any
other FDA required studies, approval of any NDA or application that we submit may be delayed by several years, or may require us to
expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be
considered sufficient by the FDA to approve our NDA.
We currently do not know when we might commence our Phase 3 study of arhalofenate or achieve FDA approval of arhalofenate. We
currently do not have the capital necessary to conduct or complete our Phase 3 studies of arhalofenate and we may not be able to raise
sufficient funds necessary or secure a partnership to conduct this study.
Any delay in obtaining, or an inability to obtain, regulatory approvals would prevent us from commercializing arhalofenate,
generating revenues and achieving and sustaining profitability. If any of these outcomes occur, we may be forced to abandon our
development efforts for arhalofenate, which would have a material adverse effect on our business and could potentially cause us to cease
operations.
We depend on the successful completion of clinical trials for our product candidates, including MBX-8025 and arhalofenate. The
positive clinical results obtained for our product candidates in prior clinical studies may not be repeated in future clinical studies.
Before obtaining regulatory approval for the sale of our product candidates, including MBX-8025 and arhalofenate, we must conduct
additional clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult
to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more of our clinical trials can
occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical
trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often
susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed
satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products.
We have completed nine Phase 2 clinical studies of arhalofenate, including five in gout. In addition, seven clinical studies with MBX-
8025 and five clinical studies with MBX-2982 have been completed. However, we have never conducted a Phase 3 clinical trial. The
positive results we have seen to date in our Phase 2 clinical trials of arhalofenate for gout do not ensure that later clinical trials will
demonstrate similar results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy
characteristics despite having progressed satisfactorily through preclinical studies and initial clinical testing. A number of companies in the
pharmaceutical and biotechnology industries, including those with greater resources and experience, have suffered significant setbacks in
Phase 3 clinical development, even after seeing promising results in earlier clinical trials.
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We may experience a number of unforeseen events during clinical trials for our product candidates, including MBX-8025 and
arhalofenate, that could delay or prevent the commencement and/or completion of our clinical trials, including the following:
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regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a
clinical trial at a prospective trial site;
the clinical study protocol may require one or more amendments delaying study completion;
clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may
require us, to conduct additional clinical trials or abandon product development programs;
the number of subjects required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these
clinical trials may be insufficient or slower than we anticipate or subjects may drop out of these clinical trials at a higher rate than
we anticipate;
clinical investigators or study subjects fail to comply with clinical study protocols;
trial conduct and data analysis errors may occur, including, but not limited to, data entry and/or labeling errors;
our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely
manner, or at all;
we might have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the
subjects are being exposed to unacceptable health risks;
regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various
reasons, including noncompliance with regulatory requirements;
the cost of clinical trials of our product candidates may be greater than we anticipate;
the supply or quality of our clinical trial materials or other materials necessary to conduct clinical trials of our product candidates
may be insufficient or inadequate; and
our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators to
suspend or terminate the trials.
We expect our research and development expenses to increase in connection with our ongoing activities, particularly as we commence
a Phase 3 clinical trial with arhalofenate and undertake additional clinical trials of our other product candidates MBX-8025 and MBX-2982.
We currently plan to obtain a partner for arhalofenate before commencing the Phase 3 program. It is possible that in addition to obtaining a
partner for arhalofenate, we may also be required to raise additional capital to complete Phase 3 development. We also will need to raise
substantial additional capital in the future to complete the development and commercialization of MBX-8025, as well as MBX-2982 for
which we currently have no planned clinical trials. Because successful development of our product candidates is uncertain, we are unable to
estimate the actual funds required to complete research and development and commercialize our products under development.
Negative or inconclusive results of our future clinical trials of MBX-8025 or arhalofenate, or any other clinical trial we conduct, could
cause the FDA to require that we repeat or conduct additional clinical studies. Despite the results reported in earlier clinical trials for
arhalofenate, we do not know whether any clinical trials we may conduct will demonstrate adequate efficacy and safety to result in
regulatory approval to market our product candidates, including arhalofenate. If later stage clinical trials do not produce favorable results,
our ability to obtain regulatory approval for our product candidates, including arhalofenate, may be adversely impacted.
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We have only recently commenced testing of MBX-8025 in clinical studies for the indications which we are currently pursuing for
MBX-8025, including homozygous familial hypercholesterolemia (HoFH) and Primary Biliary Cholangitis (PBC). If MBX-8025 does
not demonstrate safety or efficacy in the treatment of any of these indications, or if the benefits of treatment with MBX-8025 do not
outweigh the risks, our ability to successfully develop and commercialize MBX-8025 may be adversely affected.
We have only recently commenced clinical trials of MBX-8025 for the indications for which we currently are pursuing, including
HoFH and PBC and MBX-8025 may not be demonstrated to be effective in treatment of these or other indications we may target. For
instance, in March 2016, we completed a Phase 2 clinical study evaluating MBX-8025 in 13 patients with HoFH. However, as a result of
the variability in responses observed in this study, including a number of patients that did not experience a decrease in LDL-C, we believe
additional proof-of-concept data would be warranted before determining whether or not to advance to a registration study of MBX-8025 in
patients with HoFH. Although we believe that MBX-8025 may be beneficial to address the diseases for which we are considering
redirecting its development, there is no guarantee that MBX-8025 will prove to be safe or efficacious in the treatment of these diseases, or
that we will be able to obtain regulatory approval for these indications. The results of these clinical studies and other nonclinical studies
may determine whether the benefits perceived from the use of MBX-8025 would outweigh the risks perceived from treatment with MBX-
8025.
Delays in clinical trials are common and have many causes, and any delay could result in increased costs to us and jeopardize or delay
our ability to obtain regulatory approval and commence product sales.
Clinical testing is expensive, difficult to design and implement, can take many years to complete, and is uncertain as to outcome. We
may experience delays in clinical trials at any stage of development and testing of our product candidates. Our planned clinical trials may
not begin on time, have an effective design, enroll a sufficient number of subjects, or be completed on schedule, if at all.
Events which may result in delays or unsuccessful completion of clinical trials, including our future clinical trials for MBX-8025 and
arhalofenate, include the following:
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inability to raise funding necessary to initiate or continue a trial;
delays in obtaining regulatory approval to commence a trial;
delays in reaching agreement with the FDA or other regulatory authorities on final trial design;
imposition of a clinical hold following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory
authorities;
delays in reaching agreement on acceptable terms with prospective contract research organizations (CROs) and clinical trial sites;
delays in obtaining required institutional review board (IRB) approval at each site;
delays in recruiting suitable patients to participate in a trial;
delays in having subjects complete participation in a trial or return for post-treatment follow-up;
delays caused by subjects dropping out of a trial due to side effects or otherwise;
delays caused by clinical sites dropping out of a trial;
time required to add new clinical sites; and
delays by our contract manufacturers to produce and deliver sufficient supply of clinical trial materials.
If initiation or completion of any of our clinical trials for our product candidates, including MBX-8025 and arhalofenate, is delayed
for any of the above reasons, our development costs may increase, the approval process
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could be delayed, any periods during which we may have the exclusive right to commercialize our product candidates may be reduced and
our competitors may bring products to market before us. Any of these events could impair our ability to generate revenues from product
sales and impair our ability to generate regulatory and commercialization milestones and royalties, all of which could have a material
adverse effect on our business.
Our product candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval or limit
the scope of any approved label or market acceptance.
Arhalofenate has been studied in a total of 17 clinical trials with over 1,100 subjects. The emergence of adverse events (AEs) caused
by arhalofenate in future studies could cause us, other reviewing entities, clinical study sites or regulatory authorities to interrupt, delay or
halt clinical studies and could result in the denial of regulatory approval. There is also a risk that our other product candidates, including
MBX-8025, may induce AEs, many of which may be unknown at this time. If an unacceptable frequency and/or severity of AEs are
reported in our clinical trials for our product candidates, our ability to obtain regulatory approval for product candidates, including
arhalofenate and MBX-8025, may be negatively impacted.
Furthermore, if any of our approved products cause serious or unexpected side effects after receiving market approval, a number of
potentially significant negative consequences could result, including the following:
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regulatory authorities may withdraw their approval of the product or impose restrictions on its distribution in a form of a risk
evaluation and mitigation strategy (REMS);
regulatory authorities may require the addition of labeling statements, such as warnings or contraindications that could diminish
the usage of the product or otherwise limit the commercial success of the affected product;
we may be required to change the way the product is administered or to conduct additional clinical studies;
we may choose to discontinue sale of the product;
we could be sued and held liable for harm caused to patients; and
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate and could
substantially increase the costs of commercializing our product candidates.
We have obtained orphan drug designation for some of the targeted indications for MBX-8025 but not all possible indications for which
we may seek approval and we may not be able to obtain or maintain orphan designation or obtain the benefits associated with orphan
drug status, including market exclusivity.
Regulatory authorities in some jurisdictions, including the United States and the European Union, or EU, may designate drugs for
relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, as amended, the FDA may designate a drug as an
orphan drug if it is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000
individuals annually in the United States. Generally, if a drug with an orphan drug designation subsequently receives the first marketing
approval for the indication for which it has such designation, the drug is entitled to a period of marketing exclusivity, which precludes the
FDA or the European Medicines Agency, or EMA, from approving another marketing application for the same drug for that time period.
The applicable period is seven years in the United States and ten years in the European Union. The EU exclusivity period can be reduced to
six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity
is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially
defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or
condition. In addition, the orphan drug designation does not convey any advantage in, or shorten
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the duration of, the regulatory review or approval process. Also, regulatory approval for any product candidate may be withdrawn and other
candidates may obtain approval before us.
We have obtained orphan-drug designations for MBX-8025 for the treatments of HoFH and Frederickson Type I or V
hyperlipoproteinemia. That exclusivity, or any other orphan exclusivity we may receive for another product candidate or indication, may
not effectively protect the candidate from competition because: different drugs can be approved for the same condition; the same drugs can
be approved for different indications and prescribed off-label; and the first entity with an orphan drug designation to receive regulatory
approval for a particular indication will receive marketing exclusivity. If one of our product candidates that receives an orphan drug
designation, including MBX-8025, is approved for a particular indication or use within the rare disease or condition, the FDA may later
approve the same product for additional indications or uses within that rare disease or condition that are not protected by our exclusive
approval. Even after an orphan drug is approved, the FDA can subsequently approve another drug for the same condition if the FDA
concludes that the later drug is clinically superior in that it is shown to be safer in a substantial portion of the target population, more
effective or makes a major contribution to patient care.
If any product candidate that we successfully develop does not achieve broad market acceptance among physicians, patients, health care
payors and the medical community, the revenues that it generates from its sales will be limited.
Even if arhalofenate, MBX-8025 or any other product candidates receive regulatory approval, the products may not gain market
acceptance among physicians, patients, health care payors and the medical community. Coverage and reimbursement of our product
candidates by third-party payors, including government payors, generally is also necessary for commercial success. The degree of market
acceptance of any of our approved products will depend upon a number of factors, including:
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the efficacy and safety, as demonstrated in clinical studies;
the risk/benefit profile of our product candidates such as arhalofenate;
the prevalence and severity of any side effects;
the clinical indications for which the product is approved;
acceptance of the product by physicians, other health care providers and patients as a safe and effective treatment;
the potential and perceived advantages of product candidates over alternative treatments;
the safety of product candidates seen in a broader patient group, including if physicians prescribe our products for uses outside
the approved indications;
the cost of treatment in relation to alternative treatments;
the timing of market introduction of competitive products;
the availability of adequate reimbursement and pricing by third parties and government authorities;
relative convenience and ease of administration; and
the effectiveness of our or our partners’ sales, marketing and distribution efforts.
If any product candidate is approved but does not achieve an adequate level of acceptance by physicians, hospitals, health care payors
and patients, we may not generate sufficient revenue from these products and we may not become or remain profitable.
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Potential conflicts of interest arising from relationships and any related compensation with respect to clinical studies could adversely
affect the process.
Principal investigators for our clinical studies may serve as scientific advisors or consultants to us from time to time and receive cash
compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of
interest, the integrity of the data generated at the applicable clinical study site may be questioned or jeopardized.
We may be subject to costly claims related to our clinical studies and may not be able to obtain adequate insurance.
Because we conduct clinical studies in humans, we face the risk that the use of arhalofenate, MBX-8025 or future product candidates,
will result in adverse side effects. We cannot predict the possible harms or side effects that may result from our clinical studies. Although
we have clinical study liability insurance, our insurance may be insufficient to cover any such events. There is also a risk that we may not
be able to continue to obtain clinical study coverage on acceptable terms. In addition, we may not have sufficient resources to pay for any
liabilities resulting from a claim excluded from, or beyond the limit of, our insurance coverage. There is also a risk that third parties that we
have agreed to indemnify could incur liability. Any litigation arising from our clinical studies, even if we are ultimately successful, would
consume substantial amounts of our financial and managerial resources and may create adverse publicity.
After the completion of our clinical trials, we cannot predict whether or when we will obtain regulatory approval to commercialize our
product candidates and we cannot, therefore, predict the timing of any future revenue from our product candidates. Regulatory
approval of an NDA is not guaranteed, and the approval process is expensive, uncertain and lengthy.
We cannot commercialize our product candidates, including arhalofenate and MBX-8025, until the appropriate regulatory authorities,
such as the FDA, have reviewed and approved the product candidate. The regulatory agencies may not complete their review processes in a
timely manner, or we may not be able to obtain regulatory approval for our product candidates. Additional delays may result if a product
candidate is brought before an FDA advisory committee, which could recommend restrictions on approval or recommend non-approval of
the product candidate. In addition, we may experience delays or rejections based upon additional government regulation from future
legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical studies and
the review process. As a result, we cannot predict when, if at all, we will receive any future revenue from commercialization of any of our
product candidates, including arhalofenate and MBX-8025. The FDA has substantial discretion in the drug approval process, including the
ability to delay, limit or deny approval of a product candidate for many reasons, including the following:
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we may be unable to demonstrate to the satisfaction of regulatory authorities that a product candidate is safe and effective for any
indication;
regulatory authorities may not find the data from nonclinical studies and clinical studies sufficient or may differ in the
interpretation of the data;
regulatory authorities may require additional nonclinical or clinical studies;
the FDA or foreign regulatory authority might not approve our third party manufacturers’ processes or facilities for clinical or
commercial product;
the FDA or foreign regulatory authority may change its approval policies or adopt new regulations;
the FDA or foreign regulatory authorities may disagree with the design or implementation of our clinical studies;
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the FDA or foreign regulatory authority may not accept clinical data from studies that are conducted in countries where the
standard of care is potentially different from that in the U.S.;
the results of clinical studies may not meet the level of statistical significance required by the FDA or foreign regulatory
authorities for approval;
we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; and
the data collection from clinical studies of our product candidates may not be sufficient to support the submission of a NDA or
other submission or to obtain regulatory approval in the U.S. or elsewhere.
In addition, events raising questions about the safety of certain marketed pharmaceuticals may result in increased caution by the FDA
and other regulatory authorities in reviewing new pharmaceuticals based on safety, efficacy or other regulatory considerations and may
result in significant delays in obtaining regulatory approvals.
Even if we obtain regulatory approval for arhalofenate, MBX-8025 and our other product candidates, we will still face extensive
regulatory requirements and our products may face future development and regulatory difficulties.
Even if we obtain regulatory approval in the U.S., the FDA may still impose significant restrictions on the indicated uses or
marketing of our product candidates, including arhalofenate and MBX-8025, or impose ongoing requirements for potentially costly post-
approval studies or post-market surveillance. For example, the labeling ultimately approved for our product candidates, including
arhalofenate and MBX-8025, may include restrictions on use due to the specific patient population and manner of use in which the drug was
evaluated and the safety and efficacy data obtained in those evaluations.
Arhalofenate, MBX-8025 and our other product candidates will also be subject to additional ongoing FDA requirements governing
the labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, record-keeping and reporting of safety and other
post-market information. The holder of an approved NDA is obligated to monitor and report AEs and any failure of a product to meet the
specifications in the NDA. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval
for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must
comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws. Furthermore,
promotional materials must be approved by the FDA prior to use for any drug receiving accelerated approval, the pathway we are pursuing
for arhalofenate in the U.S.
In addition, manufacturers of drug products and their facilities are subject to payment of user fees and continual review and periodic
inspections by the FDA and other regulatory authorities for compliance with current Good Manufacturing Practices (cGMP), and adherence
to commitments made in the NDA. If we, or a regulatory agency, discover previously unknown problems with a product, such as quality
issues or AEs of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency
may impose restrictions relative to that product or the manufacturing facility, including requesting recall or withdrawal of the product from
the market or suspension of manufacturing.
If we, or our third party contractors, fail to comply with applicable regulatory requirements following approval of our product
candidate, a regulatory agency may:
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issue an untitled or warning letter asserting violation of the law;
seek an injunction or impose civil or criminal penalties up to and including imprisonment or monetary fines;
suspend or withdraw regulatory approval;
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suspend any ongoing clinical trials;
refuse to approve a pending NDA or supplements to an NDA; or
request recall and/or seize product.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and
could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize
arhalofenate and our other product candidates and inhibit our ability to generate revenues.
The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. If we
are found to have improperly promoted our products for off-label uses, we may become subject to significant fines and other liability.
The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. In
particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the
product’s approved labeling. If we receive marketing approval for our product candidates, physicians may nevertheless prescribe such
products to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we
may become subject to significant government fines and other related liability. For example, the federal government has levied large civil
and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label
promotion. The FDA also has requested that companies enter into consent decrees or permanent injunctions under which specified
promotional conduct is changed or curtailed.
Even if we obtain FDA approval for arhalofenate, MBX-8025 or any of our other product candidates in the U.S., we may never obtain
approval for or commercialize arhalofenate, MBX-8025 or any of our other product candidates outside of the U.S., which would limit
our ability to realize their full market potential.
In order to market any products outside of the U.S., we must establish and comply with numerous and varying regulatory requirements
on a country-by-country basis regarding safety and efficacy. Approval by the FDA does not ensure approval by regulatory authorities in
other countries or jurisdictions. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other
countries, and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval processes vary
among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign
regulatory approval could result in difficulties and costs for us and require additional preclinical studies or clinical trials which could be
costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction
of our products in those countries. We do not have any product candidates approved for sale in any jurisdiction, including international
markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory
requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are
delayed, our target market will be reduced and our ability to realize the full market potential of our products will be unrealized.
Our relationships with health care professionals, customers and payors will be subject to applicable anti-kickback, fraud and abuse and
other health care laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational
harm and diminished profits and future earnings.
Health care professionals and third party payors play a primary role in the recommendation and prescription of any products for which
we obtain marketing approval. Our future arrangements with healthcare professionals, third-party payors and customers may expose us to
broadly applicable fraud and abuse and other health care laws and regulations that may constrain the business or financial arrangements and
relationships through which we
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market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable federal and state health care
laws and regulations, include the following:
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the federal health Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering,
receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an
individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal
health care programs such as Medicare and Medicaid;
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the federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against
individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are
false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal
government;
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HIPAA, as amended by HITECH, imposes criminal and civil liability for executing a scheme to defraud any health care benefit
program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security
and transmission of individually identifiable health information;
the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or
making any materially false statement in connection with the delivery of or payment for health care benefits, items or services;
the federal transparency requirements under the PPACA, commonly referred to as the Physician Payments Sunshine Act, require
manufacturers of drugs, devices, biologics and medical supplies to report to the Centers for Medicare and Medicaid Services
(CMS) payments and other transfers of value provided to physicians and teaching hospitals and ownership and investment
interests held by physicians and other healthcare providers and their immediate family members in certain manufacturers and
group purchasing organizations; and
analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing
arrangements and claims involving health care items or services reimbursed by non-governmental third-party payors, including
private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring
manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures.
Efforts to ensure that our business arrangements with third parties will comply with applicable health care laws and regulations will
involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current
or future statutes, regulations or case law involving applicable fraud and abuse or other health care laws and regulations. If our operations
are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to
significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded health care programs, such as
Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with
whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or
administrative sanctions, including exclusions from government funded health care programs.
Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize
our product candidates and affect the prices we may obtain.
In the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes
regarding the health care system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-
approval activities and affect our ability to profitably sell any products for which we obtain marketing approval.
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For example, in March 2010, the PPACA was enacted to broaden access to health insurance, reduce or constrain the growth of health
care spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance
industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The PPACA revises the
definition of “average manufacturer price” for reporting purposes, which could increase the amount of Medicaid drug rebates to states.
Further, the new law imposes a significant annual fee on companies that manufacture or import branded prescription drug products. New
provisions affecting compliance have also been enacted, which may affect our business practices with health care practitioners. Since its
enactment there have been judicial and Congressional challenges to certain aspects of the PPACA, and we expect there will be additional
challenges and amendments to it in the future. Although the full effect of the PPACA remains uncertain, it appears likely to continue the
pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating
costs. Further, other legislative changes have been adopted since the PPACA was enacted, such as the Budget Control Act of 2011 and the
American Taxpayer Relief Act of 2012, which have resulted in reduced reimbursement under the Medicare program.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional
activities for pharmaceutical products. In addition, there have been several recent Congressional inquiries and proposed bills designed to,
among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs,
and reform government program reimbursement methodologies for drug products. We are not sure whether additional legislative changes
will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the
marketing approvals of our product candidates, if any, may be.
Risks Related to Our Reliance on Third Parties
We rely on third-party manufacturers to produce our preclinical and clinical drug supplies, and we intend to rely on third parties to
produce commercial supplies of any approved product candidates.
We do not own or operate, and we do not expect to own or operate, facilities for product manufacturing, storage and distribution, or
testing. We currently rely on third-party manufacturers for supply of our preclinical and clinical drug supplies. We expect that in the future
we will continue to rely on such manufacturers for drug supplies that will be used in clinical trials of our product candidates, including
arhalofenate, and for commercialization of any of our product candidates that receive regulatory approval.
The facilities used by our contract manufacturers to manufacture the product candidates must be approved by the FDA pursuant to
inspections that will be conducted only after we submit an NDA to the FDA, if at all. We are completely dependent on our contract
manufacturing partners for compliance with the FDA’s requirements for manufacture of finished pharmaceutical products. If our contract
manufacturers cannot successfully manufacture material that conforms to our specifications and the FDA’s strict regulatory requirements of
safety, purity and potency, we will not be able to secure and/or maintain FDA approval for our product candidates. In addition, we have no
direct control over the ability of the contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel.
If our contract manufacturers cannot meet FDA standards, we may need to find alternative manufacturing facilities, which would
significantly impact our ability to develop, obtain regulatory approval for or market our product candidates. No assurance can be given that
our manufacturers can continue to make clinical and commercial supplies of arhalofenate, or future product candidates, at an appropriate
scale and cost to make it commercially feasible.
In addition, we do not have the capability to package and distribute finished products to pharmacies and other customers. Prior to
commercial launch, we will enter into agreements with one or more pharmaceutical product packager/distributor to ensure proper supply
chain management once we are authorized to make commercial sales of our product candidates. If we receive marketing approval from the
FDA, we intend to sell
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pharmaceutical product packaged and distributed by such suppliers. Although we have entered into agreements with our current contract
manufacturers and packager/distributor for clinical trial material, we may be unable to maintain an agreement on commercially reasonable
terms, which could have a material adverse impact upon our business.
We rely on limited sources of supply for the drug substance for our product candidates, arhalofenate and MBX-8025, and any
disruption in the chain of supply may cause delay in developing and commercializing of either or both products.
It is our expectation that only one supplier of drug substance and one supplier of drug product will be qualified by the FDA. If supply
from an approved vendor is interrupted, there could be a significant disruption in commercial supply of our products. An alternative vendor
would need to be qualified through a supplemental registration which would be expensive and could result in further delay. The FDA or
other regulatory agencies outside of the U.S. may also require additional studies if a new drug substance or drug product supplier is relied
upon for commercial production. These factors could cause the delay of clinical trials, regulatory submissions, required approvals or
commercialization of our products, and cause us to incur additional costs. Furthermore, if our suppliers fail to deliver the required
commercial quantities of active pharmaceutical ingredient on a timely basis and at commercially reasonable prices, and we are unable to
secure one or more replacement suppliers capable of production at a substantially equivalent cost, the supply chain for our products may be
delayed, which could inhibit our ability to generate revenues.
Manufacturing issues may arise that could increase product and regulatory approval costs or delay commercialization of our products.
We are increasing the manufacturing batch sizes of our products in preparation of late stage clinical development and commercial
supplies. As the processes are scaled up they may reveal manufacturing challenges or previously unknown impurities which could require
resolution in order to proceed with our planned clinical trials and obtain regulatory approval for the commercial marketing of our products.
In the future, we may identify manufacturing issues or impurities which could result in delays in the clinical program and regulatory
approval for our products, increases in our operating expenses, or failure to obtain or maintain approval for our products.
Our reliance on third-party manufacturers entails risks, including the following:
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the inability to meet our product specifications and quality requirements consistently;
a delay or inability to procure or expand sufficient manufacturing capacity;
manufacturing and product quality issues related to scale-up of manufacturing;
costs and validation of new equipment and facilities required for scale-up;
a failure to comply with cGMP and similar foreign standards;
the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;
termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to
us;
the reliance on a limited number of sources, and in some cases, single sources for key materials, such that if we are unable to
secure a sufficient supply of these key materials, we will be unable to manufacture and sell our product candidates in a timely
fashion, in sufficient quantities or under acceptable terms;
the lack of qualified backup suppliers for those materials that are currently purchased from a sole or single source supplier;
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operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations,
including the bankruptcy of the manufacturer or supplier;
carrier disruptions or increased costs that are beyond our control; and
the failure to deliver our products under specified storage conditions and in a timely manner.
Any of these events could lead to clinical study delays, failure to obtain regulatory approval or impact our ability to successfully
commercialize our products. Some of these events could be the basis for FDA or other regulatory authorities’ action, including injunction,
recall, seizure, or total or partial suspension of production.
We rely on third parties to conduct, supervise and monitor our clinical studies, and if those third parties perform in an unsatisfactory
manner, it may harm our business.
We rely on contract service providers (CSPs) including clinical research organizations, clinical trial sites, central laboratories and
other service providers to ensure the proper and timely conduct of our clinical trials. While we have agreements governing their activities,
we have limited influence over their actual performance. We have relied and plan to continue to rely upon CSPs to monitor and manage
data for our ongoing clinical programs for our product candidates, as well as the execution of nonclinical studies. We control only certain
aspects of our CSPs’ activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the
applicable protocol, legal, regulatory and scientific standards and our reliance on the CSPs does not relieve us of our regulatory
responsibilities.
We and our CSPs are required to comply with the FDA’s guidance, which follows the International Conference on Harmonization
Good Clinical Practice (ICH GCP), which are regulations and guidelines enforced by the FDA for all of our product candidates in clinical
development. The FDA enforces the ICH GCP through periodic inspections of trial sponsors, principal investigators and clinical trial sites.
If we or our CSPs fail to comply with the ICH GCP, the clinical data generated in our clinical trials may be deemed unreliable and the FDA
may require us to perform additional clinical trials before approving our marketing applications. For example, upon inspection, the FDA
may determine that our Phase 3 clinical trial for arhalofenate does not comply with the ICH GCP. In addition, our Phase 3 clinical trials for
arhalofenate will require a sufficiently large number of test subjects to evaluate the safety and effectiveness of arhalofenate. Accordingly, if
our CSPs fail to comply with these regulations or fail to recruit a sufficient number of subjects, we may be required to repeat these Phase 3
clinical trials, which would delay the regulatory approval process.
Our CSPs are not our employees, and we cannot control whether or not they devote sufficient time and resources to our ongoing
clinical and nonclinical programs. These CSPs may also have relationships with other entities, including our competitors, for whom they
may also be conducting clinical studies, or other drug development activities which could harm our competitive position. We face the risk
of potential unauthorized disclosure or misappropriation of our intellectual property by CSPs, which may reduce our trade secret protection
and allow our potential competitors to access and exploit our proprietary technology. If our CSPs do not successfully carry out their
contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is
compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for any other reasons, our clinical trials may
be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize our product
candidates. As a result, our financial results and the commercial prospects for our product candidates that we develop would be harmed, our
costs could increase, and our ability to generate revenues could be delayed.
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Risks Related to Commercialization of Our Product Candidates
The commercial success of arhalofenate, MBX-8025 and our other product candidates will depend upon the acceptance of these
products by the medical community, including physicians, patients and health care payors.
If any of our product candidates, including arhalofenate and MBX-8025, receive marketing approval, they may nonetheless not gain
sufficient market acceptance by physicians, patients, health care payors and others in the medical community. If these products do not
achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree
of market acceptance of any of our product candidates, including arhalofenate and MBX-8025, will depend on a number of factors,
including the following:
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demonstration of clinical safety and efficacy in our clinical trials;
the risk/benefit profile of our product candidates;
the relative convenience, ease of administration and acceptance by physicians, patients and health care payors;
the prevalence and severity of any side effects;
the safety of product candidates seen in a broader patient group, including its use outside the approved indications;
limitations or warnings contained in the FDA and other regulatory authorities approved label for the relevant product candidate;
acceptance of the product by physicians, other health care providers and patients as a safe and effective treatment;
the potential and perceived advantages of product candidates over alternative treatments;
the timing of market introduction of competitive products;
pricing and cost-effectiveness;
the effectiveness of our or any future collaborators’ sales and marketing strategies;
our ability to obtain formulary approval;
our ability to obtain and maintain sufficient third-party coverage or reimbursement, which may vary from country to country; and
the effectiveness of our or any future collaborators’ sales, marketing and distribution efforts.
If any of our product candidates, including arhalofenate, is approved but does not achieve an adequate level of acceptance by
physicians, patients and health care payors, we may not generate sufficient revenue and we may not become or remain profitable.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product
candidates, we may be unable to generate any revenue.
We currently do not have an organization for the sales, marketing and distribution of pharmaceutical products and the cost of
establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market any products that may
be approved, including MBX-8025 and arhalofenate, we must build our sales, marketing, managerial and other non-technical capabilities or
make arrangements with third parties to perform these services. We may enter into strategic partnerships with third parties to
commercialize our product candidates, including MBX-8025 and arhalofenate.
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If we are unable to build our own sales force or negotiate a strategic partnership for the commercialization of our product candidates,
we may be forced to delay the potential commercialization of MBX-8025 and arhalofenate, or reduce the scope of our sales or marketing
activities for arhalofenate. If we elect to increase our expenditures to fund commercialization activities ourselves, we will need to obtain
additional capital, which may not be available to us on acceptable terms, or at all. If we do not have sufficient funds, we will not be able to
bring MBX-8025 and arhalofenate to market or generate product revenue.
If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, we
may not be able to generate sufficient product revenue and may not become profitable. We will be competing with companies that currently
have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform
marketing and sales functions, we may be unable to compete successfully against these more established companies.
In addition, there are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements
with third parties to perform these services. For example, recruiting and training a sales force is expensive and time-consuming and could
delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing
capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization
expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
If we obtain approval to commercialize any products outside of the U.S., a variety of risks associated with international operations could
materially adversely affect our business.
If our product candidates are approved for commercialization, we intend to enter into agreements with third parties to market those
product candidates outside the U.S., including for arhalofenate and MBX-8025. We expect that we will be subject to additional risks related
to international operations, including the following:
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different regulatory requirements for drug approvals in foreign countries;
reduced protection for intellectual property rights;
unexpected changes in tariffs, trade barriers and regulatory requirements;
economic weakness, including inflation, or political instability in particular foreign economies and markets;
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
foreign taxes, including withholding of payroll taxes;
foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations
incident to doing business in another country;
workforce uncertainty in countries where labor unrest is more common than in the U.S.;
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
business interruptions resulting from geopolitical actions, including war and terrorism, pandemics, or natural disasters including
earthquakes, typhoons, volcanic eruptions, floods and fires.
We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed
by both the European Union and many of the individual countries in Europe with which we will need to comply. Many U.S.-based
biopharmaceutical companies have found the process of marketing their own products in Europe to be very challenging.
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If our competitors develop and market products that are more effective, safer or less expensive than our own, our commercial
opportunities will be negatively impacted.
The life sciences industry is highly competitive, and we face significant competition from other pharmaceutical, biopharmaceutical
and biotechnology companies and possibly from academic institutions, government agencies and private and public research institutions that
are researching, developing and marketing products designed to address the treatment of gout. Our competitors may have significantly
greater financial, manufacturing, marketing and drug development resources. Large pharmaceutical companies, in particular, have extensive
experience in the clinical testing of, obtaining regulatory approvals for, and marketing of, drugs. New developments, including the
development of other pharmaceutical technologies and methods of treating disease, occur in the pharmaceutical and life sciences industries
at a rapid pace.
These developments may render our product candidates obsolete or noncompetitive. Compared to us, potential competitors may have
substantially greater:
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research and development resources, including personnel and technology;
regulatory experience;
experience in pharmaceutical development and commercialization;
ability to negotiate competitive pricing and reimbursement with third-party payors;
experience and expertise in exploitation of intellectual property rights; and
capital resources.
As a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than we do or may obtain
patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates. The
competitors may also develop products that are more effective, better tolerated, more useful and less costly than our products and they may
also be more successful in manufacturing and marketing their products.
Formulary approval and reimbursement may not be available for arhalofenate, MBX-8025 and our other product candidates, which
could make it difficult for us to sell our products profitably.
Obtaining formulary approval can be an expensive and time consuming process. We cannot be certain if and when we will obtain
formulary approval to allow us to promote our product candidates, including arhalofenate and MBX-8025, into our target markets. Failure
to obtain timely formulary approval will limit our commercial success.
Furthermore, market acceptance and sales of arhalofenate, MBX-8025 or any other product candidates that we develop, will depend
in part on the extent to which reimbursement for these products and related treatments will be available from government health
administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private
health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A
prevailing trend in the U.S. health care industry and elsewhere is cost containment. Government authorities and these third-party payors
have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party
payors are requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for
medical products. We cannot be sure that reimbursement will be available for any product that we commercialize and, if reimbursement is
available, what the level of reimbursement will be. Reimbursement may impact the demand for, or the price of, any product for which we
obtain marketing approval. We cannot be sure that reimbursement will be available for arhalofenate, or any other product candidates. Also,
reimbursement amounts may reduce the demand for, or the price of, our products. If reimbursement is not available, or is available only to
limited levels, we may not be able to successfully commercialize arhalofenate, or any other product candidates that we develop.
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The availability of generic treatments may also substantially reduce the likelihood of reimbursement for any future products,
including arhalofenate. The application of user fees to generic drug products will likely expedite the approval of additional generic drug
treatments. We expect to experience pricing pressures in connection with the sale of arhalofenate and any other product candidate that we
develop, due to the trend toward managed health care, the increasing influence of health maintenance organizations and additional
legislative changes.
In addition, there may be significant delays in obtaining reimbursement for approved products, and coverage may be more limited
than the purposes for which the product is approved by the FDA or health authorities in other countries. Moreover, eligibility for
reimbursement does not imply that any product will be paid for in all cases or at a rate that covers our costs, including research,
development, manufacture, sale and distribution. Interim payments for new products, if applicable, may also not be sufficient to cover our
costs and may not be made permanent. Payment rates may vary according to the use of the product and the clinical setting in which it is
used, may be based on payments allowed for lower cost products that are already reimbursed, and may be incorporated into existing
payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required by government health care
programs or private payors and by any future relaxation of laws that presently restrict imports of products from countries where they may
be sold at lower prices than in the U.S. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting
their own reimbursement policies.
If we are unable to promptly obtain coverage and profitable payment rates from both government funded and private payors for any of
our product candidates, including arhalofenate, it could have a material adverse effect on our operating results, our ability to raise capital
needed to commercialize products and our overall financial condition.
Even if we receive regulatory approval for arhalofenate or MBX-8025, we will be subject to ongoing FDA and other regulatory
obligations and continued regulatory review, which may result in significant additional expense and limit our ability to commercialize
arhalofenate or MBX-8025.
Any regulatory approvals that we or potential collaboration partners receive for arhalofenate, MBX-8025 or future product
candidates, may also be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for
potentially costly post-marketing studies. In addition, even if approved, the labeling, packaging, adverse event reporting, storage,
advertising, promotion and recordkeeping for any product will be subject to extensive and ongoing regulatory requirements. The subsequent
discovery of previously unknown problems with a product, including AEs of unanticipated severity or frequency, may result in restrictions
on the marketing of the product, and could include withdrawal of the product from the market. Depending on any safety issues associated
with our product candidates that are approved, the FDA may require a REMS, thereby imposing certain restrictions on the sale and
marketability of such products or additional post-marketing requirements.
Regulatory policies may change and additional government regulations may be enacted that could prevent or delay regulatory
approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future
legislation or administrative action, either in the U.S. or abroad. If we are not able to maintain regulatory compliance, we might not be
permitted to market arhalofenate or future products, if any, and we may not achieve or sustain profitability.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization
of our product candidates.
We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical studies, and
will face an even greater risk if we sell our product candidates commercially. An individual may bring a liability claim against us if one of
our product candidates causes, or merely appears to
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have caused, an injury. If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities.
Regardless of merit or eventual outcome, liability claims may result in the following:
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decreased demand for our product candidates;
impairment to our business reputation;
withdrawal of clinical study participants;
distraction of management’s attention from our primary business;
substantial monetary awards to patients or other claimants;
the inability to commercialize our product candidates; and
loss of revenues.
We do carry product liability insurance for our clinical studies. Further, we intend to expand our insurance coverage to include the
sale of commercial products if marketing approval is obtained for any of our product candidates. However, we may be unable to obtain this
product liability insurance on commercially reasonable terms and with insurance coverage that will be adequate to satisfy any liability that
may arise. On occasion, large judgments have been awarded in class action or individual lawsuits relating to marketed pharmaceuticals. A
successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our
insurance coverage, could decrease our cash and adversely affect our business.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates
or indications that may be more profitable or for which there is a greater likelihood of success.
The success of our business depends primarily upon our ability to identify, develop and commercialize product candidates. Because
we have limited financial and managerial resources, we focus on product candidates for specific indications. As a result, we may forego or
delay pursuit of opportunities with other product candidates or other indications that later prove to have greater commercial potential. We
may focus our efforts and resources on product candidates that ultimately prove to be unsuccessful.
If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish
valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have
been advantageous for us to retain sole development and commercialization rights.
We are planning to study the combination of arhalofenate plus febuxostat in our planned Phase 3 program and if the results of these
studies are positive, we will only be able to commercialize this combination if we are able to obtain febuxostat from an FDA qualified
supplier, which we may not be able to do.
In order to commercialize a fixed dose combination product containing arhalofenate and febuxostat we would need to obtain
febuxostat drug substance from a supplier that has been qualified by the FDA. If we are not able to identify a supplier, or if the supplier is
not able to receive approval, we will not be able to receive approval for our fixed-dose combination product. In addition, we may need a
license if the supplier’s manufacturing process or final product infringes another party’s valid patent. If we are not successful at obtaining a
required license our ability to commercialize arhalofenate may be significantly diminished.
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Risks Related to Our Intellectual Property
If we are unable to obtain or protect intellectual property rights related to our products and product candidates, we may not be able to
compete effectively in our market.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property
related to our products and product candidates. The strength of patents in the biotechnology and pharmaceutical field involves complex
legal and scientific questions and can be uncertain. The patent applications that we own, co-own or in-license may fail to result in issued
patents with claims that cover the products in the U.S. or in other countries. If this were to occur, early generic competition could be
expected against our product candidates in development. There is no assurance that all of the potentially relevant prior art relating to our
patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing based on a pending patent
application. Even if patents do successfully issue, third parties may challenge their validity, enforceability, scope or ownership, which may
result in such patents, or our rights to such patents, being narrowed or invalidated. Furthermore, even if they are unchallenged, our patents
and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims. If the
patent applications we hold or license with respect to our product candidates fail to issue or if their breadth or strength of protection is
threatened, it could dissuade companies from collaborating with us and threaten our ability to commercialize our products. We cannot offer
any assurances about which, if any, patents will issue or whether any issued patents will be found invalid or unenforceable, will be
challenged by third parties or will adequately protect our products and product candidates. Further, if we encounter delays in development
or regulatory approvals, the period of time during which we could market our products under patent protection could be reduced. Since
patent applications in the U.S. and most other countries are confidential for a period of time after filing, and some remain so until issued, we
cannot be certain that we or our licensors were the first to file any patent application related to our product candidates. Furthermore, if third
parties have filed such patent applications, an interference proceeding in the U.S. can be provoked by a third party or instituted by us to
determine who was the first to invent any of the subject matter covered by the patent claims of our applications. An unfavorable outcome
could require us to cease using the related technology or to attempt to license it from the prevailing party, which may not be available on
commercially reasonable terms or at all.
In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect
proprietary know-how that is not patentable, processes for which patents are difficult to enforce and other elements of our drug discovery
and development processes that involve proprietary know-how, information or technology that is not covered by patents. Although we
expect all of our employees to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have
access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances
that all such agreements have been duly executed, that such agreements provide adequate protection and will not be breached, that our
trade secrets and other confidential proprietary information will not otherwise be disclosed or that competitors will not otherwise gain
access to our trade secrets or independently develop substantially equivalent information and techniques. If we are unable to prevent
material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we
will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market,
which could materially adversely affect our business, results of operations and financial condition.
Further, the laws of some foreign countries do not protect patents and other proprietary rights to the same extent or in the same
manner as the laws of the U.S. As a result, we may encounter significant problems in protecting and defending our intellectual property
abroad. We may also fail to pursue or obtain patents and other intellectual property protection relating to our products and product
candidates in all foreign countries.
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Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts or
otherwise affect our business.
Our commercial success depends in part on our avoiding infringement and other violations of the patents and proprietary rights of
third parties. There is a substantial amount of litigation, both within and outside the U.S., involving patent and other intellectual property
rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and inter party
re-examination proceedings before the U.S. Patent and Trademark Office (U.S. PTO) and its foreign counterparts. Numerous U.S. and
foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we and our
collaborators are developing product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued,
and as we gain greater visibility and market exposure as a public company, the risk increases that our product candidates or other business
activities may be subject to claims of infringement of the patent and other proprietary rights of third parties.
Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents
or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or
manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent
applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents
in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of
competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the
manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such
product candidate unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patent
were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including
combination therapy, the holders of any such patent may be able to block our ability to develop and commercialize the applicable product
candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially
reasonable terms or at all. In addition, we may be subject to claims that we are infringing other intellectual property rights, such as
trademarks or copyrights, or misappropriating the trade secrets of others, and to the extent that our employees, consultants or contractors
use intellectual property or proprietary information owned by others in their work for us, disputes may arise as to the rights in related or
resulting know-how and inventions.
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further
develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve
substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful
infringement or other intellectual property claim against us, we may have to pay substantial damages, including treble damages and
attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our affected products,
which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be
available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may
need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done
so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we
would be unable to further develop and commercialize one or more of our product candidates, which could harm our business significantly.
We cannot provide any assurances that third-party patents do not exist which might be enforced against our products or product candidates,
resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other
forms of compensation to third parties.
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We license certain key intellectual property from third parties, and the loss of our license rights could have a materially adverse effect
on our business.
We are a party to a number of technology licenses that are important to our business and expect to enter into additional licenses in the
future. For example, we rely on an exclusive license to certain patents, proprietary technology and know-how from DiaTex, which include
arhalofenate. During the term of the exclusive license with DiaTex we may perform research and development of compounds and products
for the treatment of human disease based on the patents, proprietary technology and know-how from DiaTex. If we fail to comply with our
obligations under our agreement with DiaTex, including our obligations to pay royalty payments during the development and
commercialization of arhalofenate, or our other license agreements, or if we are subject to a bankruptcy, 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, including in the case of the
DiaTex license, arhalofenate, which would have a materially adverse effect on our business.
We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights,
which could be expensive, time consuming and unsuccessful.
Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To
counter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. In
addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may
refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An
adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted
narrowly and could put our patent applications at risk of not issuing. The initiation of a claim against a third party may also cause the third
party to bring counter-claims against us.
We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in
countries where the laws may not protect those rights as fully as in the U.S. Our business could be harmed if in a litigation if the prevailing
party does not offer us a license on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property
rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk
that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public
announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive
these results to be negative, it could have a material adverse effect on the price of our common stock.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment
and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-
compliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the U.S. PTO and foreign patent agencies in several stages over
the lifetime of the patent. The U.S. PTO and various foreign governmental patent agencies require compliance with a number of procedural,
documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases
be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance
can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant
jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited
to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal
documents. If we or our licensors that control the prosecution and maintenance of our licensed patents fail
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to maintain the patents and patent applications covering our product candidates, we may lose our rights and our competitors might be able
to enter the market, which would have a material adverse effect on our business.
Risks Related to Our Business Operations and Industry
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
We are highly dependent on principal members of our executive team listed under “Business — Executive Officers of Registrant” of
this Annual Report on Form 10-K. While we have entered into employment agreements or offer letters with each of our executive officers,
any of them could leave our employment at any time, as all of our employees are “at will” employees. We do not maintain “key person”
insurance for any of our executives or other employees. Recruiting and retaining other qualified employees for our business, including
scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled executives in our industry,
which is likely to continue. We also experience competition from universities and research institutions for the hiring of scientific and
clinical personnel. As a result, competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract
and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar
personnel. In addition, failure of any of our clinical studies may make it more challenging to recruit and retain qualified personnel. If we are
unable to successfully recruit key employees or replace the loss of services of any executive or key employee, it may adversely affect the
progress of our research, development and commercialization objectives.
In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and
development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have
commitments under consulting or advisory contracts with other entities that may limit their availability to us, which could also adversely
affect the progress of our research, development and commercialization objectives.
We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our
operations.
As of March 1, 2016, we had 21 full-time employees. As our company matures, we expect to expand our employee base to increase
our managerial, clinical, scientific and engineering, operational, sales, and marketing teams. Future growth would impose significant
additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional
employees, consultants and contractors. Also, our management may need to divert a disproportionate amount of its attention away from our
day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage
the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business
opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant
capital expenditures and may divert financial resources from other projects, such as the development of product candidates. If our
management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or
grow revenues could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our
ability to commercialize our product candidates and compete effectively will depend, in part, on our ability to effectively manage any
future growth.
Our internal computer systems, or those used by our contract research organizations or other contractors or consultants, may fail or
suffer security breaches.
Despite the implementation of security measures, our internal computer systems and those of our contract research organizations and
other contractors and consultants are vulnerable to damage from computer viruses,
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unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any
such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could
result in a material disruption of our product candidate development programs. For example, the loss of clinical study data from completed
or ongoing clinical studies for a product candidate could result in delays in our regulatory approval efforts and significantly increase our
costs to recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data or
applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of
any product candidates could be delayed.
Risks Relating to Owning Our Common Stock
An active trading market for our common stock may not develop and the market price for our common stock may decline in value.
Our common stock is listed on the NASDAQ Capital Market under the symbol “CBAY”. Historically, trading volume for our
common stock has been very limited. The historical trading prices of our common stock on the NASDAQ Capital Market may not be
indicative of the price levels at which our common stock will trade in the future, and we cannot predict the extent to which investor interest
in us generally will lead to the development of an active public trading market for our common stock or how liquid that public market may
become.
Our stock price may be volatile, and our stockholders’ investment in our stock could decline in value.
The trading price of our common stock is likely to be volatile. Our stock price could be subject to wide fluctuations in response to a
variety of factors, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
adverse results or delays in preclinical testing or clinical trials;
inability to obtain additional funding;
any delay in filing an IND or NDA for any of our future product candidates an any adverse development or perceived adverse
development with respect to the FDA’s review of that IND or NDA;
failure to maintain our existing collaborations or enter into new collaborations;
failure of our collaboration partners to elect to develop or commercialize product candidates under our collaboration agreements
or the termination of any programs under our collaboration agreements;
failure by us or our licensors and collaboration partners to prosecute, maintain or enforce our intellectual property rights;
failure to successfully develop and commercialize our future product candidates;
changes in laws or regulations applicable to future products;
inability to obtain adequate product supply for our future product candidates or the inability to do so at acceptable prices;
adverse regulatory decisions;
introduction of new products, services or technologies by our competitors;
failure to meet or exceed financial projections we may provide to the public;
failure to meet or exceed the estimates and projections of the investment community;
the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;
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•
•
•
•
•
•
•
announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our collaboration
partners or our competitors;
disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent
protection for our technologies;
additions or departures of key scientific or management personnel;
significant lawsuits, including patent or stockholder litigation;
changes in the market valuations of similar companies;
sales of our common stock by us or our stockholders in the future; and
trading volume of our common stock.
In addition, companies trading in the stock market in general have experienced extreme price and volume fluctuations that have often
been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively
affect the market price of our common stock, regardless of our actual operating performance.
Sales of a substantial number of shares of our common stock in the public market by our existing stockholders could cause our stock
price to fall.
Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur,
could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity
securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.
Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans,
could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise
additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock,
convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. For
example, in July 2015, we completed the issuance of 8,188,000 shares of our common stock at $2.81 per share in an underwritten public
offering for net proceeds to us of $21.1 million, and in November 2014 we filed a $100 million registration statement on Form S-3 with the
SEC and also entered into an ATM to sell up to $25 million of common stock under the registration statement under which we have sold
additional shares of our common stock for net proceeds to us of $4.3 million during the period January 1, 2015, through December 31,
2015. If in the future, we sell common stock, convertible securities or other equity securities, investors may be materially diluted by
subsequent sales. These sales may also result in new investors gaining rights superior to our existing stockholders. Pursuant to our equity
incentive plans, our management is authorized to grant stock options and other equity-based awards to our employees, directors and
consultants. The number of shares available for future grant under our equity incentive plans as of March 1, 2016, was 890,050 shares.
We do not anticipate paying cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their
investment.
We do not anticipate paying cash dividends in the future. As a result, only appreciation of the price of our common stock, which may
never occur, will provide a return to stockholders. Investors seeking cash dividends
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should not invest in our common stock. In addition, our ability to pay cash dividends is currently prohibited without the prior consent of the
lender pursuant to the terms of our 2015 loan and security agreement with Silicon Valley Bank and Oxford Finance LLC.
We may be subject to securities litigation, which is expensive and could divert management attention.
Our share price may be volatile, and in the past, companies that have experienced volatility in the market price of their stock have
been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us
could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our
business.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to
our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of us. In
addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by
making it more difficult for stockholders to replace members of our board of directors, who are responsible for appointing the members of
our management team. In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which
prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us.
Finally, our charter documents establish advance notice requirements for nominations for election to our board of directors and for
proposing matters that can be acted upon at stockholder meetings. Although we believe these provisions together provide for an opportunity
to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if the offer may be
considered beneficial by some stockholders.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Our corporate office is located in Newark, California. We entered into a lease for our corporate office in November 2013 which
commenced on January 16, 2014, and continues for a period of sixty (60) months with an option to extend the lease for an additional three
years. We believe that our existing facility arrangements are adequate to meet our current requirements.
Item 3. Legal Proceedings
We are not a party to any legal proceedings.
Item 4. Mine Safety Disclosures
Not Applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Common Equity
Our common stock is listed on the NASDAQ Capital Market under the symbol “CBAY” and was previously traded over-the-counter
from January 24, 2014, until June 17, 2014. Prior to such time, there was no public market for our common stock. On March 28, 2016, the
last reported sale price of our common stock on the NASDAQ Capital Market was $1.44 per share. As of March 1, 2016, there were
approximately 307 holders of record of our common stock.
The following table sets forth the high and low sales prices per share of our common stock as reported on the over-the-counter and
NASDAQ Capital Market for the periods indicated. Such quotations represent inter-dealer prices without retail markup, markdown or
commission and may not necessarily represent actual transactions.
Year Ended December 31, 2014
First Quarter (beginning January 24, 2014)
Second Quarter*
Third Quarter
Fourth Quarter
* Our common stock traded on the over-the-counter market until June 18, 2014
Year Ended December 31, 2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Dividend Policy
High
$12.00
$ 8.00
$13.78
$ 9.99
Low
$5.00
$5.05
$4.47
$6.59
High
$13.39
$ 7.03
$ 3.31
$ 2.27
Low
$6.75
$2.64
$1.61
$1.21
We have never declared or paid any cash dividends to our stockholders. Our board of directors will make any future decisions
regarding dividends. We currently intend to retain and use any future earnings, if any, for the development and expansion of our business
and do not anticipate paying any cash dividends in the foreseeable future. Our board of directors has complete discretion on whether to pay
dividends. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations
and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of
directors may deem relevant. Further, we may not pay dividends or redeem shares of our capital stock without the prior consent of the
lenders pursuant to the terms of our current loan and security agreement with Silicon Valley Bank and Oxford Finance LLC.
Item 6. Selected Financial Data
Not applicable
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Some of the statements under in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are
forward-looking statements. These forward-looking statements are based on
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management’s beliefs and assumptions and on information currently available to our management and involve significant elements of
subjective judgment and analysis. Words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “project,” “potential,” “seek,” “target,” “goal,” “intend,” variations of such words, and similar expressions are intended to
identify forward-looking statements. Our actual results and the timing of events may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such a difference include those discussed under the caption “Special Note Regarding
Forward Looking Statements” and in “Risk Factors” and elsewhere in this Annual Report on Form 10-K. These and many other factors
could affect our future financial and operating results. We undertake no obligation to update any forward-looking statement to reflect
events after the date of this Annual Report.
Overview
CymaBay Therapeutics, Inc. is focused on developing therapies to treat metabolic diseases with high unmet medical need, including
serious rare and orphan disorders. Our two key clinical development candidates are MBX-8025 and arhalofenate.
We are currently developing MBX-8025 for the treatment of various orphan lipid and liver diseases. In an earlier Phase 2 clinical
study conducted in patients with mixed dyslipidemia, MBX-8025 demonstrated favorable effects on cholesterol, triglycerides and markers
of liver health. In March 2016, we announced data from a second Phase 2 clinical study evaluating MBX-8025 in 13 patients with
homozygous familial hypercholesterolemia (HoFH). Five patients in this study experienced what we believe was a clinically meaningful
maximal decrease in low density lipoprotein (LDL-C) of greater than 20% with three of them having decreases greater than 30%. However,
given the variability in responses observed in this study, including a number of patients that did not experience a decrease in LDL-C, we
believe additional proof-of-concept data would be warranted before determining whether or not to advance to a registration study of MBX-
8025 in patients with HoFH. In November 2015, we initiated a double-blind, placebo-controlled Phase 2 study of MBX-8025 in patients
with primary biliary cholangitis (PBC), formerly referred to as primary biliary cirrhosis. In this study, approximately 75 patients with PBC
who have had an inadequate response to ursodiol are to be enrolled and randomized to receive either placebo or MBX-8025 (either 50 mg or
200 mg) for 12 weeks. The primary endpoint will be the change in alkaline phosphatase, and the study is expected to include patients from
the U.S., as well as Canada, Germany, Poland and U.K. We expect this study to be completed by the end of 2016. We also believe that
MBX-8025 could have utility in the treatment of severe hypertriglyceridemia (SHTG) and the more prevalent, but high unmet need,
indication of nonalcoholic steatohepatitis (NASH). We have obtained orphan-drug designations for MBX-8025 in both HoFH and SHTG
(Frederickson type I or V hyperlipoproteinemia).
Arhalofenate, is being developed for the treatment of gout. Arhalofenate has been studied in five Phase 2 clinical trials in patients
with gout and consistently demonstrated the ability to reduce gout flares and reduce serum uric acid (sUA). Gout flares are recurring and
painful episodes of joint inflammation that are triggered by the presence of monosodium urate crystals that form as a result of elevated sUA
levels. We believe the potential for arhalofenate to prevent or reduce flares while also lowering sUA could differentiate it from currently
available treatments for gout and classify it as the first potential drug in what we believe could be a new class of gout therapy referred to as
Urate Lowering Anti-Flare Therapy (ULAFT). Arhalofenate has established a favorable safety profile in clinical trials involving over 1,100
patients exposed to date. We have completed end of Phase 2 discussions with the FDA and intend to partner arhalofenate prior to advancing
into Phase 3 development.
We are an emerging growth company. Under the JOBS Act emerging growth companies can delay adopting new or revised
accounting standards until such time of those standards apply to private companies. We have adopted this exemption from new or revised
accounting standards, and therefore, we may not be subject to the same new or revised accounting standards as other public companies that
are not “emerging growth companies.”
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Equity Financings
On July 25, 2014, we completed a public offering of 4.6 million shares of our common stock at $5.50 per share which we refer to as
our 2014 public offering. Net proceeds to us in connection with the 2014 public offering were approximately $23.0 million after deducting
underwriting discounts, commissions and offering expenses.
On November 7, 2014, we filed a $100 million registration statement on Form S-3 with the SEC, which registration statement
includes an at-the-market facility (ATM) to sell up to $25 million of common stock under the registration statement. As of December 31,
2015, we have sold shares of common stock under the ATM with aggregate net proceeds to us of $4.3 million.
On July 27, 2015, pursuant to our shelf registration statement on Form S-3, we completed the issuance of 8.2 million shares of our
common stock at $2.81 per share which we refer to as our 2015 public offering. Net proceeds to us in connection with the 2015 public
offering were approximately $21.1 million after deducting underwriting discounts, commissions and other offering expenses.
Critical Accounting Policies and Use of Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of
these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during
the reporting periods. We base our estimates on historical experience and on various other factors that we believe to be materially
reasonable under the circumstances, the results of which form our basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources, and evaluate our estimates on an ongoing basis. Actual results may materially
differ from those estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2 of our financial statements included in this Annual
Report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation and understanding
of our financial statements.
Research and Development Expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued research and development
expenses. This process involves reviewing contracts, reviewing the terms of our license agreements, communicating with our applicable
personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost
incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. The majority of our service providers
invoice us monthly in arrears for services performed. We make estimates of our accrued expenses as of each balance sheet date in our
financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development
expenses include fees to:
•
•
•
contract research organizations and other service providers in connection with clinical studies;
contract manufacturers in connection with the production of clinical trial materials; and
vendors in connection with preclinical development activities.
We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts
with multiple research institutions and contract research organizations that conduct and manage clinical studies on our behalf. The financial
terms of these agreements are subject to
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negotiation, vary from contract to contract and may result in uneven payment flows and expense recognition. Payments under some of
these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing
service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the
actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual accordingly. Our
understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and
may result in our reporting changes in estimates in any particular period. Adjustments to prior period estimates have not been material for
the years ended December 31, 2015, and 2014.
Stock-Based Compensation
Employee and director stock-based compensation is measured at the grant date, based on the fair-value based measurements of the
stock awards, and the portion that is ultimately expected to vest is recognized as an expense over the related vesting periods, net of
estimated forfeitures. We calculate the fair-value based measurements of options using the Black-Scholes valuation model and recognize
expense using the straight-line attribution method.
The Black-Scholes option pricing model requires the input of highly subjective assumptions. These variables include, but are not
limited to, our stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.
Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect fair value estimates, in management’s opinion, the existing models may not provide a
reliable single measure of the fair value of our employee stock. In addition, management continually assesses the assumptions and
methodologies used to calculate the estimated fair value of stock-based compensation. Circumstances may change and additional data may
become available over time, which could result in changes to the assumptions and methodologies, and which could materially impact our
fair value determination, as well as our stock-based compensation expense.
Equity awards granted to non-employees are accounted for using the Black-Scholes valuation model to determine the fair value of
such instruments. The fair value of equity awards granted to non-employees are re-measured over the related vesting period and amortized
to expense as earned.
Warrant Liabilities
We have issued freestanding warrants to purchase shares of our common stock in connection with financing activities. Our
outstanding common stock warrants issued in connection with various equity and debt financings completed in 2013 through 2015 are
classified as liabilities in the balance sheet as they contain terms for redemption of the underlying security that are outside our control. We
use a binomial lattice option pricing model to value warrants, which requires management to estimate inputs including expected volatility
and expected term, and is most significantly impacted by our common stock price. These inputs are inherently subjective and require
significant analysis and judgment to develop. The fair value of all warrants is re-measured at each financial reporting date with any changes
in fair value being recognized in change in fair value of warrant liabilities, a component of other income (expense), in the statements of
operations and comprehensive income (loss). We will continue to re-measure the fair value of the warrant liabilities until exercise or
expiration of the related warrant.
Results of Operations
General
To date, we have not generated any net income from operations. As of December 31, 2015, we have an accumulated deficit of $396.3
million, primarily as a result of expenditures for research and development and general and administrative expenses. While we may in the
future generate revenue from a variety of sources, including license fees and milestone payments in connection with strategic partnerships,
our product candidates
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are at a mid-level stage of development and may never be successfully developed or commercialized. Accordingly, we expect to continue
to incur substantial losses from operations for the foreseeable future and there can be no assurance that we will ever generate sufficient
revenue to achieve and sustain profitability. Our results of operations for 2015 and 2014 are presented below:
($ in thousands)
2015
2014
Variance
Year Ended
December 31,
Operating expenses:
Research and development
General and administrative
Loss from operations
Interest expense, net
Other income (expense), net
Net loss
Research & Development Expenses
$ 17,026
8,871
(25,897)
(753)
11,121
$(15,529)
$ 15,823
8,185
(24,008)
(681)
(7,228)
$(31,917)
$ 1,203
686
(1,889)
(72)
18,349
$16,388
Conducting research and development is central to our business model. For the years ended December 31, 2015 and 2014, research
and development expenses were $17.0 million and $15.8 million, respectively. Research and development expenses are detailed in the table
below:
($ in thousands)
MBX-8025 – Phase 2 clinical studies
MBX-8025 – Drug manufacturing & toxicology studies
MBX-8025 – Other studies
Arhalofenate – Phase 2b randomized study
Arhalofenate – Febuxostat combo study
Arhalofenate – Drug manufacturing
Other Projects
Total Project Costs
Internal Research and Development Costs
Total Research and Development
Year Ended
December 31,
2015
$ 3,025
3,617
152
1,313
165
3,387
38
11,697
5,329
$17,026
2014
$
57
1,709
—
7,540
978
1,279
61
11,624
4,199
$15,823
Our external research and development costs consist primarily of:
•
•
•
expenses incurred under agreements with contract research organizations, investigative sites and consultants that conduct our
clinical trials and a substantial portion of our preclinical activities;
the cost of acquiring and manufacturing clinical trial and other materials; and
other costs associated with development activities, including additional studies
Internal research and development costs consist primarily of salaries and related fringe benefits costs for our employees (such as
workers compensation and health insurance premiums), stock-based compensation charges, travel costs, lab supplies and overhead
expenses. Internal costs generally benefit multiple projects and are not separately tracked per project.
Research and development expenses increased $1.2 million, from $15.8 million to $17.0 million for the years ended December 31,
2014 and 2015, respectively. Total project costs increased by $0.1 million for the year
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ended December 31, 2015, as compared to December 31, 2014, primarily due to increases in drug manufacturing costs related to
registration batch production and other manufacturing process development activities for arhalofenate as well as costs incurred for
toxicology studies and clinical trial development activities associated with MBX-8025. These increased expenses were offset by a decrease
in clinical development costs of arhalofenate as our Phase 2b gout clinical trial was substantially completed in the second quarter of 2015.
Internal research and development cost increased by $1.1 million for year ended December 31, 2015, as compared to December 31, 2014,
due to increased employee compensation expenses incurred in 2015 primarily to support the expansion of our clinical development
activities.
We expect to continue to incur substantial expenses related to our development activities for the foreseeable future as we continue
product development and initiate additional clinical studies for arhalofenate and MBX-8025. Since product candidates in later stages of
clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the
increased size and duration of later stage clinical trials, we expect that our research and development expenses will increase in the future.
General and Administrative Expenses
General and administrative expenses consist principally of personnel-related costs, professional fees for legal, consulting, audit
services, rent and other general operating expenses not otherwise included in research and development. General and administrative
expenses increased by $0.7 million, from $8.2 million to $8.9 million, for the years ended December 31, 2014 and 2015, respectively,
primarily due to higher employee stock-based compensation and consulting expenses. For the next several quarters, we anticipate general
and administrative expenses will remain relatively consistent with current levels, given that we have completed a substantial portion of the
effort required to expand our infrastructure and we have secured the professional services necessary to support us as a public reporting
company under the Exchange Act.
Other Income (Expense), Net
Other income (expense), net reflected a gain of $11.1 million for the year ended December 31, 2015, as compared to a loss of $7.2
million for the year ended December 31, 2014, due primarily to the re-measurement of our warrant liabilities at fair value as of
December 31, 2015, as compared to the fair value re-measurement of our warrants at December 31, 2014. At each reporting date, we use a
binomial lattice option pricing model to value warrants we issued in connection with equity and debt financings that occurred in 2013
through 2015. The warrant valuation in 2015 changed primarily due to a decrease in the price of our common stock which is one of several
inputs to our valuation model. Specifically, the $11.1 million warrant revaluation gain recognized during the year ended December 31,
2015, was due primarily to a decrease in the value of our common stock from $9.83 at December 31, 2014, to $1.69 at December 31, 2015.
The warrant valuation in 2014 also changed primarily due to an increase in the price of our common stock. Specifically, the $7.2 million
warrant revaluation loss recognized during the year ended December 31, 2014, was due primarily to an increase in the value of our
common stock from $5.00 at December 31, 2013, to $9.83 at December 31, 2014.
Income Taxes
As of December 31, 2015, we had federal net operating loss carryforwards of $205.7 million and state net operating loss
carryforwards of $172.0 million to offset future taxable income, if any. In addition, we had federal research and development tax credit
carry forwards of $7.2 million and state research and development tax credit carryforwards of $3.5 million. If not utilized, the federal net
operating loss and tax credit carryforwards will expire beginning in 2024 through 2035 and the state net operating loss carryforwards will
expire beginning in 2016 through 2035. The state tax credit will carry forward indefinitely. Current federal and state tax laws include
substantial restrictions on the utilization of net operating losses and tax credits in the event of an ownership change. Even if the
carryforwards are available, they may be subject to annual limitations, lack of future taxable income, or future ownership changes that
could result in the expiration of the carryforwards before they are
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utilized. At December 31, 2015, we recorded a 100% valuation allowance against our deferred assets of approximately $111.8 million as
our management believes it is more likely than not that they will not be fully realized. If we determine in the future that we will be able to
realize all or a portion of our net operating loss carryforwards, an adjustment to our net operating loss carryforwards would increase net
income in the period in which we make such a determination.
Liquidity and Capital Resources
We have financed our operations primarily through the sale of equity securities, licensing fees, issuance of debt and collaborations
with third parties. At December 31, 2015, we had cash, cash equivalents and marketable securities of $41.5 million, primarily as a result of
the aggregate proceeds received in our series of financings described in the next paragraph, which we refer to collectively as the “2013
financing,” and our 2014 public offering and 2015 public offering.
Specifically, on September 30, 2013, we issued common stock and warrants to purchase our common stock and we secured a term
loan facility which together enabled us to raise aggregate net proceeds of $28.8 million. On September 30, 2013, all of the shares of our
outstanding redeemable convertible preferred stock converted to common stock, and we sold shares of our common stock and warrants to
purchase shares of our common stock in a private placement for aggregate gross proceeds of $26.8 million, and raised an additional $5.0
million in venture debt financing pursuant to a $10.0 million loan agreement which we entered into simultaneously with the private
placement, resulting in aggregate net proceeds to us of $28.8 million after deducting placement agent fees and offering expenses. At the
same time we issued shares of our common stock in cancellation of approximately $16.9 million of debt owed to the holder of that debt and
on October 31, 2013, we issued common stock and warrants to purchase our common stock to raise additional net proceeds of $2.2 million.
Furthermore, on November 22, 2013, we entered into an agreement with investors to purchase shares of our common stock and warrants to
purchase our common stock as part of the private placement for net proceeds of $2.7 million, which sales occurred shortly after our listing
of our common stock on the over-the-counter market on January 24, 2014.
On July 25, 2014, we completed a public offering of 4.6 million shares of our common stock at $5.50 per share. Net proceeds to us in
connection with the 2014 public offering were approximately $23.0 million after deducting underwriting discounts, commissions and
offering expenses.
On November 7, 2014, we filed a $100 million registration statement on Form S-3 with the SEC, which registration statement
includes an at-the-market facility to sell up to $25 million of common stock under the registration statement. In January and February 2015,
we sold additional shares of our common stock under this facility for net proceeds to us of $4.3 million.
On July 27, 2015, pursuant to our shelf registration statement on Form S-3, we completed the issuance of 8,188,000 shares of our
common stock at $2.81 per share in an underwritten public offering. Net proceeds to us in connection with this offering were approximately
$21.1 million after deducting underwriting discounts, commissions and other offering expenses.
2013 Term Loan Facility
In the 2013 financing, we entered into a term loan facility with Silicon Valley Bank and Oxford Finance LLC, collectively referred to
as the lenders, for an aggregate amount of $10 million, the first $5 million tranche of which was made available to us as of September 30,
2013 bearing interest at a rate equal to 8.75% per annum. The remaining $5 million, referred to as the second tranche, became available to
us for draw down upon our February 24, 2015, announcement of the achievement of positive Phase 2b study data in arhalofenate and
remained available to us until June 30, 2015. We did not draw down on the $5 million second tranche before that portion of the loan
facility expired on June 30, 2015.
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Index to Financial Statements
2015 Term Loan Facility
On August 7, 2015, we entered into a new Loan and Security Agreement pursuant to which we refinanced our 2013 term loan facility
with Oxford Finance LLC and Silicon Valley Bank for an aggregate amount of up to $15 million, which we refer to as the 2015 term loan
facility. The first $10 million tranche of this new loan facility was made available to us immediately upon the closing and was used in part
to retire all $4.1 million of our existing term loan debt outstanding on the closing date, and to settle closing costs with the lenders. The
remaining $5 million, referred to as the second tranche, will be made available to us until March 31, 2016, for draw down upon the
announcement of a qualified out-license or co-development arrangement for arhalofenate, our gout therapy drug candidate, which includes
an upfront payment of not less than $35,000,000 (the “second draw milestone”). As of the filing date of this Form 10-K, management does
not expect to be able to draw down on the second tranche before its expiration on March 31, 2016.
The first loan tranche bears interest at 8.77%, a rate determined on the advance date as being the greater of (i) 8.75% and (ii) the sum
of 8.47% and the 90 day U.S. LIBOR rate reported in the Wall Street Journal three business days prior to the funding date of the first
tranche. Under the first tranche, we are required to make 12 monthly interest only payments after the funding date followed by a repayment
schedule equal to 36 equal monthly payments of interest and principal. If drawn, the second tranche would bear interest using the same rate
formula as the first tranche and will amortize pursuant to a repayment schedule that is coterminous with the amortization period of the first
tranche. Upon maturity of each tranche, the remaining balance of such tranche and a final payment equal to 6.50% of the original principal
amount advanced of the applicable tranche are payable.
We are permitted to make voluntary prepayments of the term loans with a prepayment fee equal to 3% of the principal amount of any
term loans prepaid. We are required to make mandatory prepayments of the outstanding term loans upon the acceleration by the lenders of
such loans following the occurrence of an event of default, along with a payment of the final payment, the prepayment fee and any all other
obligations that are due and payable at the time of the prepayment.
Our obligations under the term loan facility are secured, subject to customary permitted liens and other agreed upon exceptions, by a
perfected first priority interest in all of our tangible and intangible assets, excluding our intellectual property. We also entered into a
negative pledge agreement with the lenders pursuant to which we have agreed not to encumber any of our intellectual property.
The 2015 term loan facility contains customary representations and warranties and customary affirmative and negative covenants
applicable to us, including, among other things, restrictions on dispositions, changes in business, management, ownership or business
locations, mergers or acquisitions, indebtedness, encumbrances, distributions, investments, transactions with affiliates and subordinated
debt. The representations and warranties contained in the 2015 loan facility were made only for purposes of such agreement and as of
specific dates, were solely for the benefit of the parties to such agreement to allocate risk and may be subject to limitations agreed upon by
the parties; accordingly, they should not be relied upon by investors as to assertions of factual matters. The 2015 term loan facility also
includes customary events of default, including but not limited to the nonpayment of principal or interest, violations of covenants, material
adverse change, attachment, levy, restraint on business, bankruptcy, material judgments and misrepresentations. Upon an event of default,
the lenders may, among other things, accelerate the loans and foreclose on the collateral. As of December 31, 2015, we were in compliance
with the terms of the term loan covenants and there were no identified events of default.
At the closing of the 2015 term loan facility, we also agreed to pay a facility fee of 1.00% of the 2015 term loan facility commitment.
In addition, we issued warrants exercisable for a total of 114,436 shares of our common stock to the lenders at an exercise price of $2.84 per
share, and with a term of ten years.
66
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Index to Financial Statements
Cash Flows
The following table sets forth a summary of the net cash flow activity for each of the periods indicated below:
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net decrease in cash and cash equivalents
Year Ended December 31,
2015
$ (23,324)
(11,083)
30,527
$ (3,880)
2014
$ (21,114)
(16,938)
25,237
$ (12,815)
Operating Activities: Cash used in operating activities for the years ended December 31, 2015, and December 31, 2014, was
$23.3 million and $21.1 million, respectively. The increase of $2.2 million in cash used in operating activities is due primarily to our
incurrence of research and development expenses as a result of our expanded clinical trial and drug development activities, and increased
general and administrative expenses.
Investing Activities: Net cash used in investing activities was $11.1 million for the year ended December 31, 2015 and $16.9 million
for the year ended December 31, 2014, and was primarily due to the net purchase of marketable securities as we sought to invest funds
raised in our equity and debt financings.
Financing Activities: Net cash provided by financing activities was $30.5 million for the year ended December 31, 2015, primarily as
a result of $4.3 million in net proceeds received from sales of our common stock in January and February 2015 pursuant to a $25 million at-
the-market facility, $21.1 million in net proceeds received from our 2015 public offering, and $9.5 million in net proceeds from our 2015
term loan facility negotiated in August 2015, offset in part primarily by $4.8 million in principal repayments on our 2013 term loan facility.
Net cash provided by financing activities was $25.2 million in the year ended December 31, 2014, primarily due to $25.4 million of
proceeds received from our 2014 public offering, offset by $0.2 million in principal repayments on our venture debt facility.
Capital Requirements
We have incurred operating losses since inception and had an accumulated deficit of $396.3 million at December 31,
2015. Management expects operating losses and negative cash flows to continue for the foreseeable future. As of December 31, 2015, we
had $41.5 million in cash and cash equivalents and marketable securities, which is available to fund future operations and service our
existing debt obligations through at least the next twelve months, after which we will be required to seek additional equity or debt financing
and/or non-dilutive funding from potential licensing, partnering or other strategic collaborative arrangements to fund future operations. It is
unclear if or when any such transactions will occur, on satisfactory terms or at all.
Off Balance Sheet Arrangements
As of December 31, 2015, we had no off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K under the
Exchange Act) that create potential material risks for us and that are not recognized on our balance sheets.
67
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Index to Financial Statements
Contractual Obligations
The following table summarizes our long-term contractual obligations as of December 31, 2015:
(In thousands)
Contractual Obligations
Operating lease obligations
Facility term loan, including interest
Contractual Commitments
Payments Due by Period
Less than
1-
Total
1 Year
3 Years
666
12,644
$13,310
216
1,852
$ 2,068
450
10,792
$11,242
3-
5 Years
—
—
$ —
In addition, we rely on contract research organizations and other research support providers to perform clinical and preclinical studies
for us and we contract with firms to supply our drug compounds for use in our development activities. As of December 31, 2015, under the
terms of our agreements with these organizations, we are obligated to make future payments as services are provided of approximately
$10.0 million. These agreements are terminable by us upon written notice. Generally, we are only liable for actual effort expended or cost
incurred by the organizations at any point in time during the contract period through the notice period.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
The disclosure required in this Item 8 is included in Item 15, which information is incorporated by reference here.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, and the rules and regulations thereunder, is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and
communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely
decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that
any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired
control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and
procedures
Based on the evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act), our chief executive officer and chief financial officer have concluded that, as of the end of the period covered by this report, our
disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and
maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under
the supervision of, our Chief Executive Officer and
68
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Index to Financial Statements
Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures
that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our
assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Under the
supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we
conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in “Internal
Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Our management concluded that our internal control over financial reporting was effective as of December 31, 2015.
Limitations on the Effectiveness of Controls. A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the controls are met. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, our
disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control
system are met.
Changes in Internal Controls. There were no changes in our internal control over financial reporting that occurred during the quarter
ended December 31, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
Identification of Executive Officers and Directors
PART III
Reference is made to the information regarding executive officers appearing under the heading “Business — Executive Officers of
Registrant” in Part I Item 1 of this Annual Report on Form 10-K, which information is hereby incorporated by reference. Reference is
made to the information regarding our directors and nominees for director appearing under the heading “Proposal 1 — Election of
Directors” to be included in our proxy statement for our 2016 annual meeting of stockholders, or 2016 Proxy Statement, which information
is hereby incorporated by reference.
Identification of Audit Committee and Audit Committee Financial Expert
Reference is made to the information regarding directors to be included under the headings “Information Regarding the Board of
Directors and Corporate Governance — Information Regarding Committees of the Board of Directors — Audit Committee” in our 2016
Proxy Statement, which information is hereby incorporated by reference.
69
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Index to Financial Statements
Material Changes to Procedures for Recommending Directors
Reference is made to the information regarding directors to be included under the heading “Information Regarding the Board of
Directors and Corporate Governance — Information Regarding Committees of the Board of Directors — Nominating and Corporate
Governance Committee” in our 2016 Proxy Statement, which information is hereby incorporated by reference.
Compliance with Section 16(a) of the Exchange Act
Reference is made to the information to be included under the heading “Section 16(a) Beneficial Ownership Reporting Compliance”
in our 2016 Proxy Statement, which information is hereby incorporated by reference.
Code of Conduct
Reference is made to the information to be included under the heading “Information Regarding the Board of Directors and Corporate
Governance — Code of Business Conduct and Ethics” in our 2016 Proxy Statement, which information is hereby incorporated by
reference. A copy of our code of business conduct and ethics can be found on our website, http://ir.cymabay.com/governance-docs. The
contents of our website are not a part of this Annual Report on Form 10-K.
We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision
of this Code of Business Conduct and Ethics by posting such information on our website, at the address and location specified above.
Item 11. Executive Compensation
Reference is made to the information to be included under the heading “Executive Compensation” in our 2016 Proxy Statement,
which information is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership
The information required by this item will be set forth in our 2016 Proxy Statement under the caption “Security Ownership of Certain
Beneficial Owners and Management” and is incorporated herein by reference.
Equity Compensation Plan Information
Information concerning our equity compensation plans will be set forth in our 2016 Proxy Statement under the caption “Securities
Authorized for Issuance under Equity Compensation Plans — Equity Compensation Plan Information” and is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be set forth in our 2016 Proxy Statement under the captions “Transactions with Related
Persons” and “Information Regarding the Board of Directors and Corporate Governance — Independence of the Board of Directors” and is
incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this item will be set forth in our 2016 Proxy Statement under the caption “Principal Accountant Fees and
Services” in the proposal under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” and is
incorporated herein by reference.
70
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Index to Financial Statements
Item 15. Exhibits, Financial Statement Schedules
(a) Documents filed as part of this report
1. Financial Statements
2. Financial Statement Schedules
PART IV
Financial statement schedules have been omitted in this report because they are not applicable, not required under the instructions, or
the information requested is set forth in the financial statements or related notes thereto.
(b). List of Exhibits
See the Exhibit Index which follows the signature page of this Annual Report on Form 10-K, which is incorporated herein by
reference.
71
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Index to Financial Statements
CymaBay Therapeutics, Inc.
Index to Financial Statements
Report of Independent Registered Public Accounting Firm
Balance Sheets as of December 31, 2015 and 2014
Statements of Operations and Comprehensive Loss for the years ended December 31, 2015 and 2014
Statements of Stockholders’ Equity for the years ended December 31, 2015and 2014
Statements of Cash Flows for the years ended December 31, 2015 and 2014
Notes to Financial Statements
72
Page
73
74
75
76
77
78
Table of Contents
Index to Financial Statements
To the Board of Directors and Stockholders of CymaBay Therapeutics Inc.
Report of Independent Registered Public Accounting Firm
We have audited the accompanying balance sheets of CymaBay Therapeutics Inc. as of December 31, 2015 and 2014, and the related
statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended
December 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CymaBay
Therapeutics Inc. at December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the two years in the period
ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Redwood City, California
March 29, 2016
73
CymaBay Therapeutics, Inc.
Balance Sheets
(In thousands, except share and per share amounts)
Table of Contents
Index to Financial Statements
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Contract receivables
Accrued interest receivable
Prepaid expenses
Other current assets
Total current assets
Property and equipment, net
Other assets
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
Accrued liabilities
Warrant liability
Facility loan
Accrued interest payable
Total current liabilities
Facility loan, less current portion
Other liabilites
Total liabilities
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value: 10,000,000 shares authorized; no shares issued and
outstanding
Common stock, $0.0001 par value: 100,000,000 shares authorized; 23,447,003 and 14,696,108
shares issued and outstanding as of December 31, 2015 and December 31, 2014, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes.
74
December 31,
2015
2014
$
7,706
33,774
—
186
1,128
—
42,794
64
221
$ 43,079
$
1,008
3,336
1,220
509
73
6,146
8,799
19
14,964
$ 11,586
23,209
211
136
1,991
96
37,229
86
159
$ 37,474
$
2,085
3,388
13,596
1,355
35
20,459
3,152
13
23,624
—
—
2
424,422
(21)
(396,288)
28,115
$ 43,079
1
394,622
(14)
(380,759)
13,850
$ 37,474
Table of Contents
Index to Financial Statements
CymaBay Therapeutics, Inc.
Statements of Operations and Comprehensive Loss
(In thousands, except share and per share information)
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Interest income
Interest expense
Other income (expense), net
Net loss
Net loss
Other comprehensive loss:
Unrealized loss on marketable securities
Other comprehensive loss
Comprehensive loss
Basic net loss per common share
Diluted net loss per common share
Year Ended December 31,
2015
2014
$
$
$
$
$
17,026
8,871
25,897
(25,897)
160
(913)
11,121
(15,529)
(15,529)
(7)
(7)
(15,536)
(0.82)
(0.83)
$
$
$
$
$
15,823
8,185
24,008
(24,008)
74
(755)
(7,228)
(31,917)
(31,917)
(16)
(16)
(31,933)
(2.65)
(2.65)
Weighted average common shares outstanding used to calculate basic net loss per common share
Weighted average common shares outstanding used to calculate diluted net loss per common
share
18,900,473
12,048,985
18,917,213
12,048,985
See accompanying notes.
75
Table of Contents
Index to Financial Statements
CymaBay Therapeutics, Inc.
Statements of Stockholders’ Equity
(In thousands, except share and per share information)
Balances as of December 31, 2013
Issuance of common stock upon
exercise of warrants
Issuance of common stock upon
exercise of employee stock
options
Non-employee stock-based
compensation expense
Employee and director stock-based
compensation expense
Conversion of incentive award from
liability to equity accounting
Issuance of common stock, net of
$3,034 issuance costs
Net loss
Net unrealized loss on marketable
securities
Balances as of December 31, 2014
Issuance of common stock upon
exercise of warrants
Non-employee stock-based
compensation expense
Employee and director stock-based
compensation expense
Issuance of common stock, net of
$2,028 issuance costs
Net loss
Net unrealized loss on marketable
securities
Balances as of December 31, 2015
Common Stock
Shares
9,455,064
Amount
1
$
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
$367,435
$
2
$ (348,842)
$
18,596
36,613
—
595
—
—
595
431
—
—
—
4
8
—
—
1,173
—
—
121
5,204,000
—
—
—
25,286
—
—
—
—
—
—
—
—
—
—
—
4
8
1,173
121
—
(31,917)
25,286
(31,917)
—
14,696,108
—
1
$
—
$394,622
$
(16)
(14)
—
$ (380,759)
$
(16)
13,850
132,295
—
1,939
—
—
21
—
—
2,466
8,618,600
—
1
—
25,374
—
—
—
—
—
—
—
—
—
1,939
21
2,466
—
(15,529)
25,375
(15,529)
—
23,447,003
—
2
$
—
$424,422
$
(7)
(21)
—
$ (396,288)
$
(7)
28,115
See accompanying notes.
76
Table of Contents
Index to Financial Statements
CymaBay Therapeutics, Inc.
Statements of Cash Flows
(In thousands)
Operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Non-employee stock-based compensation expense
Employee and director stock-based compensation expense
Amortization of premium on marketable securities
Non-cash interest associated with debt discount accretion
Change in fair value of warrant liability
Loss on sale of property and equipment
Changes in assets and liabilities:
Contract receivables
Accrued interest receivable
Prepaid expenses
Other assets
Accounts payable
Accrued liabilities
Accrued interest payable
Other liabilities
Net cash used in operating activities
Investing activities
Purchases of property and equipment
Purchases of marketable securities
Proceeds from sales and maturities of marketable securities
Net cash used in investing activities
Financing activities
Proceeds from facility loan
Repayment of facility loan principal
Proceeds from issuance of common stock and warrants, net of issuance costs
Proceeds from issuance of common stock upon exercise of warrants
Proceeds from issuance of common stock upon exercise of stock options
Net cash provided by financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information
Cash paid for interest
Issuance of common stock warrants to lenders
Issuance of common stock upon warrant exercises
Noncash issuance costs incurred in common stock financing
Reclassification of incentive awards to equity
See accompanying notes.
77
Year Ended December 31,
2015
2014
$ (15,529)
$ (31,917)
22
21
2,466
511
228
(11,121)
—
211
(50)
863
34
(1,077)
(52)
143
6
(23,324)
—
(42,788)
31,705
(11,083)
9,482
(4,756)
25,375
426
—
30,527
(3,880)
11,586
7,706
535
258
1,513
—
—
$
$
18
8
1,284
453
198
7,236
2
(101)
(68)
(1,627)
3
1,388
1,889
107
13
(21,114)
(103)
(27,334)
10,499
(16,938)
—
(244)
25,430
46
5
25,237
(12,815)
24,401
11,586
435
443
549
453
121
$
$
Table of Contents
Index to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. Organization and Description of Business
CymaBay Therapeutics, Inc. (The Company) is focused on developing therapies to treat metabolic diseases with high unmet medical
need, including serious rare and orphan disorders. The Company’s two key clinical development candidates are MBX-8025 and
arhalofenate. MBX-8025 is currently being developed for the treatment of various orphan lipid and liver diseases. Arhalofenate is being
developed for the treatment of gout.
The Company is an emerging growth company. Under the JOBS Act emerging growth companies can delay adopting new or revised
accounting standards until such time of those standards apply to private companies. The Company has adopted this exemption from new or
revised accounting standards, and therefore, it may not be subject to the same new or revised accounting standards as other public
companies that are not “emerging growth companies.”
Liquidity
The Company has incurred net operating losses and negative cash flows from operations since its inception. During the year ended
December 31, 2015, the Company incurred a net loss of $15.5 million and used $23.3 million of cash in operations. At December 31, 2015,
the Company had an accumulated deficit of $396.3 million. CymaBay expects to incur substantial research and development expenses as it
continues to study its product candidates in clinical trials. To date, none of the Company’s product candidates have been approved for
marketing and sale, and the Company has not recorded any revenue from product sales. As a result, management expects operating losses to
continue in future years. The Company’s ability to achieve profitability is dependent primarily on its ability to successfully develop, acquire
or in-license additional product candidates, continue clinical trials for product candidates currently in clinical development, obtain
regulatory approvals, and support commercialization activities for partnered product candidates. Products developed by the Company will
require approval of the U.S. Food and Drug Administration (FDA) or a foreign regulatory authority prior to commercial sale. The
regulatory approval process is expensive, time-consuming, and uncertain, and any denial or delay of approval could have a material adverse
effect on the Company. Even if approved, the Company’s products may not achieve market acceptance and will face competition from both
generic and branded pharmaceutical products.
As of December 31, 2015, the Company’s cash, cash equivalents and marketable securities totaled $41.5 million. These funds are
expected to satisfy the Company’s liquidity requirements through at least the next 12 months. The Company expects to incur substantial
expenditures in the future for the development and potential commercialization of its product candidates. Because of this, the Company
expects its future liquidity and capital resource needs will be impacted by numerous factors, including but not limited to, the timing of
initiation of planned clinical trials, including phase 2 trials to study the therapeutic benefits of MBX-8025 on patients with certain orphan
diseases as well as a phase 3 clinical trial to study the therapeutic benefits of arhalofenate on patients with gout. The Company will
therefore continue to require additional financing to develop its products and fund future operating losses and will seek funds through equity
financings, debt, collaborative or other arrangements with corporate sources, or through other sources of financing. It is unclear if or when
any such financing transactions will occur, on satisfactory terms or at all. The Company’s failure to raise capital as and when needed could
have a negative impact on its financial condition and its ability to pursue its business strategies. If adequate funds are not available, the
Company may be required to reduce current development activities or to close its business which could have an adverse impact on its
ability to achieve its business objectives.
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2. Summary of Significant Accounting Policies
Basis of Presentation and Use of Estimates
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (U.S. GAAP), which requires management to make informed estimates and assumptions that impact the amounts
and disclosures reported in the financial statements and accompanying notes. Accounting estimates and assumptions are inherently
uncertain. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances.
The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must
select an amount that falls within that range of reasonable estimates. Actual results could differ materially from those estimates and
assumptions. The Company believes significant judgment is involved in determining and in estimating the valuation of stock-based
compensation, accrued clinical trial expenses, and equity instrument valuations. These estimates form the basis for making judgments about
the carrying values of assets and liabilities when these values are not readily apparent from other sources. Estimates are assessed each
reporting period and updated to reflect current information and any changes in estimates will generally be reflected in the period first
identified.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, marketable securities, accounts payable, accrued expenses
and warrant liabilities. Fair value estimates of these instruments are made at a specific point in time, based on relevant market information.
These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be
determined with precision. The carrying amounts of cash and cash equivalents, accounts payable and accrued expenses are generally
considered to be representative of their respective fair values because of the short-term nature of those instruments. Based on prevailing
borrowing rates available to the Company for loans with similar terms, the Company believes that the fair value of long-term debt
approximates its carrying value.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement
date. Assets and liabilities that are measured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used
to measure fair value. This hierarchy maximizes the use of observable inputs and maximizes the use of unobservable inputs and is as
follows:
Level 1—Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the
measurement date.
Level 2—Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly.
Level 3—Inputs that are significant to the fair value measurement and are unobservable (i.e. supported by little market activity), which
requires the reporting entity to develop its own valuation techniques and assumptions.
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The following tables present the fair value of the Company’s financial assets and liabilities using the above input categories (in
thousands):
(In thousands)
Description
Money market funds
Corporate debt and asset backed securities
Total assets measured at fair value
Warrant liability
Total liabilities measured at fair value
(In thousands)
Description
Money market funds
Corporate debt and asset backed securities
Total assets measured at fair value
Warrant liability
Total liabilities measured at fair value
Level 1
$6,942
—
$6,942
$ —
$ —
Level 1
$9,941
—
$9,941
$ —
$ —
As of December 31, 2015
Level 2
$ —
33,774
$33,774
$ —
$ —
Level 3
$ —
—
$ —
$ 1,220
$ 1,220
As of December 31, 2014
Level 2
$ —
23,209
$23,209
$ —
$ —
Level 3
$ —
—
$ —
$13,596
$13,596
Fair Value
$
6,942
33,774
$ 40,716
1,220
$
1,220
$
Fair Value
$
9,941
23,209
$ 33,150
$ 13,596
$ 13,596
Marketable securities consist of available-for-sale securities that are reported at fair value, with the related unrealized gains and losses
included in accumulated other comprehensive income (loss), a component of stockholders’ equity. The Company values cash equivalents
and marketable securities using quoted market prices or alternative pricing sources and models utilizing observable market inputs and, as
such, classifies cash equivalents and marketable securities within Level 1 or Level 2.
As of December 31, 2015 and 2014, the Company held a Level 3 liability associated with warrants, issued in connection with the
Company’s financings completed in September and October 2013, January 2014, and August 2015. The warrants are considered liabilities
and are valued using a binomial option-pricing model, the significant inputs for which include exercise price of the warrants, market price
of the underlying common shares, expected term, expected volatility, the risk-free rate, and the expected changes in stock price that follow
announcements of the Company’s clinical trial results and other strategic initiatives. Changes to any of the inputs to the option-pricing
models used by the Company can have a significant impact to the estimated fair value of the warrants.
The following tables set forth a summary of the changes in the fair value of our Level 3 financial instruments (in thousands):
Balance as of December 31, 2013
Issuance of financial instrument
Change in fair value
Settlement of financial instrument
Balance as of December 31, 2014
80
Warrant
Liability
$ 6,466
443
7,236
(549)
$13,596
Forward
Contract
$
453
—
(10)
(443)
$ —
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Balance as of December 31, 2014
Issuance of financial instrument
Change in fair value
Settlement of financial instrument
Balance as of December 31, 2015
Warrant
Liability
$ 13,596
258
(11,121)
(1,513)
$ 1,220
Forward
Contract
$ —
—
—
—
$ —
Cash, Cash Equivalents, and Marketable Securities
The Company considers all highly liquid investments with a remaining maturity of 90 days or less at the time of purchase to be cash
equivalents. Cash and cash equivalents consist of deposits with commercial banks in checking, interest-bearing, and demand money market
accounts. The Company invests excess cash in marketable securities with high credit ratings which are classified in Level 1 and Level 2 of
the fair value hierarchy. These securities consist primarily of corporate debt and asset-backed securities and are classified as “available-for-
sale.” Management may liquidate any of these investments in order to meet the Company’s liquidity needs in the next year. Accordingly,
any investments with contractual maturities greater than one year from the balance sheet date are classified as short-term in the
accompanying balance sheets.
Realized gains and losses from the sale of marketable securities, if any, are calculated using the specific-identification method.
Realized gains and losses and declines in value judged to be other-than- temporary are included in interest income or expense in the
statements of operations and comprehensive loss. Unrealized holding gains and losses are reported in accumulated other comprehensive
loss in the balance sheet. To date, the Company has not recorded any impairment charges on its marketable securities related to other-than-
temporary declines in market value. In determining whether a decline in market value is other-than-temporary, various factors are
considered, including the cause, duration of time and severity of the impairment, any adverse changes in the investees’ financial condition,
and the Company’s intent and ability to hold the security for a period of time sufficient to allow for an anticipated recovery in market value.
Restricted Cash
The Company is required to maintain compensating cash balances with financial institutions that provide the Company with its
corporate credit cards. As of December 31, 2015 and 2014, cash restricted under these arrangements was $170,000 and $100,000,
respectively. These amounts are presented in other assets on the accompanying balance sheets.
Concentration of Credit Risk
Cash, cash equivalents, and marketable securities consist of financial instruments that potentially subject the Company to a
concentration of credit risk to the extent of the fair value recorded in the balance sheet. The Company invests cash that is not required for
immediate operating needs primarily in highly liquid instruments that bear minimal risk. The Company has established guidelines relating
to the quality, diversification, and maturities of securities to enable the Company to manage its credit risk.
Property and Equipment
Property and equipment is recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization is
calculated using the straight-line method, and the cost is amortized over the estimated useful lives of the respective assets, generally three
to seven years. Leasehold improvements are amortized over the shorter of the useful lives or the non-cancelable term of the related lease.
Maintenance and repair costs are charged as expense in the statements of operations and comprehensive loss as incurred.
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Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the
carrying amount of the assets may not be fully recoverable. An impairment loss is recognized if the estimated undiscounted future cash
flow expected to result from the use and eventual disposition of an asset is less than the carrying amount. While the Company’s current and
historical operating losses and cash flows are indicators of impairment, the Company believes the future cash flows to be received support
the carrying value of its long-lived assets. Accordingly, the Company has not recognized any impairment losses as of December 31, 2015.
Deferred Rent
The Company records its costs under facility operating lease agreements as rent expense. Rent expense is recognized on a straight-
line basis over the non-cancelable term of the operating lease. The difference between the actual amounts paid and amounts recorded as
rent expense is recorded as deferred rent in the accompanying balance sheets.
Research and Development Expenses
Research and development expenses consist of costs incurred in identifying, developing, and testing product candidates. These
expenses consist primarily of costs for research and development personnel, including related stock-based compensation; contract research
organizations and other third parties that assist in managing, monitoring, and analyzing clinical trials; investigator and site fees; laboratory
services; consultants; contract manufacturing services; non-clinical studies, including materials; and allocated expenses, such as
depreciation of assets, and facilities and information technology that support research and development activities. Research and
development costs are expensed as incurred, including expenses that may or may not be reimbursed under research and development
funding arrangements. Research and development expenses under collaboration agreements approximate the revenue recognized under
such agreements.
The expenses related to clinical trials are based upon estimates of the services received and efforts expended pursuant to contracts
with research institutions and clinical research organizations (CROs) that conduct and manage clinical trials on behalf of the Company. The
Company’s objective is to reflect the appropriate trial expenses in its financial statements by matching those expenses with the period in
which services and efforts are incurred. Expenses related to clinical trials are accrued based upon the level of activity incurred under each
contract as indicated by such factors as progress made against specified milestones or targets in each period, patient enrollment levels, and
other trial activities as reported by CROs. Accordingly, the Company’s clinical trial accrual is dependent upon the timely and accurate
reporting of expenses by clinical research organizations and other third-party vendors. Payments made to third parties under these clinical
trial arrangements in advance of the receipt of the related services are recorded as prepaid assets, depending on the terms of the agreement,
until the services are rendered. We base our estimates on the best information available at the time. However, additional information may
become available to us which may allow us to make a more accurate estimate in future periods. In this event, we may be required to record
adjustments to research and development expenses in future periods when the actual level of activity becomes more certain. Such increases
or decreases in cost are generally considered to be changes in estimates and will be reflected in research and development expenses in the
period first identified.
Stock-Based Compensation
Employee and director stock-based compensation is measured at the grant date, based on the fair-value-based measurements of the
stock awards, and the portion that is ultimately expected to vest is recognized as an expense over the related vesting periods, net of
estimated forfeitures. The Company calculates the fair-value-based measurements of options using the Black-Scholes valuation model and
recognizes expense using the straight-line attribution method. The determination of fair value for stock-based awards on the date of grant
using an option-pricing model requires management to make certain assumptions regarding subjective variables.
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Equity awards granted to non-employees are accounted for on the grant date using the Black-Scholes valuation model to determine
the fair value-based measurements of such instruments. The fair value-based measurements of options and warrants granted to non-
employees are re-measured over the related vesting period and amortized to expense as earned.
Common Stock Warrants
The Company’s outstanding common stock warrants issued in connection with certain equity and debt financings that occurred in
2013 through 2015 are classified as liabilities in the accompanying balance sheets as they contain provisions that could require the
Company to settle the warrants in cash. The warrants were recorded at fair value using either the Black-Scholes option pricing model, or a
probability weighted expected return model or a binomial model, depending on the characteristics of the warrants. The fair value of these
warrants is re-measured at each financial reporting period with any changes in fair value recognized as a component of other income
(expense) in the accompanying statements of operations and comprehensive loss until such time as the warrants are no longer outstanding.
Income Taxes
The Company utilizes the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and the tax bases of assets and liabilities and are measured using enacted
tax rates and laws that will be in effect when the differences are expected to reverse. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is recorded when it is
more likely than not that all or part of a deferred tax asset will not be realized. When we establish or reduce the valuation allowance related
to the deferred tax assets, our provision for income taxes will increase or decrease, respectively, in the period such determination is made.
The accounting guidance for uncertainty in income taxes prescribes a recognition threshold and measurement attribute criteria for the
financial recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a
tax position must be more likely than not to be sustained upon examination based on the technical merits of the position.
The Company is required to file federal and state income tax returns in the United States. The preparation of these income tax returns
requires the Company to interpret the applicable tax laws and regulations in effect which could affect the amount of tax paid to these
jurisdictions.
The Company records interest related to income taxes, if any, as interest, and any penalties would be recorded as other expense in the
statements of operations and comprehensive loss. There was no interest or penalties related to income taxes recorded during the years
ended December 31, 2015 and 2014.
Comprehensive Loss
Comprehensive loss includes net loss and net unrealized gains and losses on marketable securities, which are presented in a single
continuous statement. Comprehensive loss is disclosed in the statements of stockholders’ equity, and is stated net of related tax effects, if
any.
Net Income (Loss) Per Common Share
Basic net loss per share of common stock is based on the weighted average number of shares of common stock outstanding
equivalents during the period. Diluted net loss per share of common stock is calculated as the weighted average number of shares of
common stock outstanding adjusted to include the assumed exercises of stock options and warrants, if dilutive.
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The calculation of diluted loss per share also requires that, to the extent the average market price of the underlying shares for the
reporting period exceeds the exercise price of the warrants and the presumed exercise of such securities are dilutive to earnings (loss) per
share for the period, adjustments to net income or net loss used in the calculation are required to remove the change in fair value of the
warrants for the period. Likewise, corresponding adjustments to the denominator are required to reflect the related dilutive shares.
In all periods presented, the Company’s outstanding stock options were excluded from the calculation of earnings (loss) per
share because the effect would be antidilutive.
The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share
amounts):
Numerator:
Net loss allocated to common stock—basic
Adjustment for revaluation of warrants
Net loss allocated to common stock—diluted
Denominator:
Weighted average number of common stock shares outstanding—
basic
Dilutive common stock warrants
Weighted average number of common stock shares outstanding—
diluted
Net loss per share—basic
Net loss per share—diluted
Year Ended December 31,
2014
2015
$
$
(15,529)
(94)
(15,623)
$
$
(31,917)
—
(31,917)
18,900,473
16,740
12,048,985
—
18,917,213
(0.82)
$
12,048,985
(2.65)
$
$
(0.83)
$
(2.65)
The following table shows the total outstanding securities considered anti-dilutive and therefore excluded from the computation of
diluted net loss per share (in thousands):
Common stock warrants
Common stock options
Incentive awards
Recent Accounting Pronouncements
Accounting Standards Update 2014-15
Year Ended
December 31,
2015
1,553
1,804
245
3,602
2014
1,768
991
247
3,006
In August 2014, the FASB issued guidance codified in ASC 205, Presentation of Financial Statements — Going Concern. Accounting
Standards Update 2014-15 requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate,
that raise substantial doubt about the entity’s ability to continue as a going concern and if those conditions exist, to make the required
disclosures. The standard is effective for annual periods ending after December 15, 2016, and interim periods therein. The Company does
not expect that the adoption of this standard will have a significant impact on its financial statements.
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Accounting Standards Update 2015-03
In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation
of Debt Issuance Costs, which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a
direct deduction from the corresponding debt liability rather than as an asset. This ASU will be effective for the Company in fiscal year
2016. The Company does not expect that the adoption of this standard will have a significant impact on its financial statements.
Accounting Standards Update 2015-17
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Subtopic 740): Balance Sheet Classification of Deferred
Taxes, The ASU requires entities to classify deferred tax liabilities and assets as noncurrent in a classified statement of financial position.
The standard is effective for annual periods ending after December 15, 2016, and interim periods therein with early adoption permitted. The
Company elected to early adopt this accounting standard for the year ended December 31, 2015 on a prospective basis and its adoption did
not have a significant impact on the Company’s financial statements.
Accounting Standards Update 2016-02
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU requires management to recognize lease assets
and lease liabilities by lessees for all operating leases. The ASU is effective for periods ending on December 15, 2018 and interim periods
therein on a modified retrospective basis. The Company is currently evaluating the impact this guidance will have on our financial
statements.
3. Marketable Securities
Marketable available-for-sale securities as of December 31, 2015 and 2014 consist of the following (in thousands):
As of December 31, 2015:
Government debt securities
Corporate debt securities
Asset-backed securities
As of December 31, 2014:
Corporate debt securities
Asset-backed securities
Amortized
Cost
$ 1,509
27,663
4,623
$ 33,795
Amortized
Cost
$ 19,706
3,516
$ 23,222
Gross
Unrealized
Gains
$ —
—
—
$ —
Gross
Unrealized
Losses
$
$
$
(2)
(17)
(2)
(21)
Gross
Unrealized
Gains
Gross
Unrealized
Losses
$
$
1
—
1
$
$
(14)
—
(14)
Estimated
Fair Value
$ 1,507
27,646
4,621
$ 33,774
Estimated
Fair Value
$ 19,693
3,516
$ 23,209
As of December 31, 2015 and 2014, the Company’s government and corporate debt marketable securities had contractual maturities of
less than one year and asset-backed securities had contractual maturities between 2-5 years. Realized gains and losses were immaterial for
the years ended December 31, 2015 and 2014. None of these investments have been in a continuous unrealized loss position for more than
12 months as of December 31, 2015 and 2014.
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4. Certain Balance Sheet Items
Property and equipment consist of the following (in thousands):
Office and computer equipment
Purchased software
Furniture and fixtures
Leasehold improvements
Total
Less accumulated depreciation and amortization
Property and equipment, net
Accrued liabilities consist of the following (in thousands):
Accrued compensation
Accrued pre-clinical and clinical trial expenses
Accrued professional fees
Other accruals
Total accrued liabilities
December 31,
2015
December 31,
2014
$
$
176
46
33
66
321
(257)
64
$
$
176
46
33
66
321
(235)
86
December 31,
2015
December 31,
2014
$
$
1,010
2,015
283
28
3,336
$
$
1,504
1,732
73
79
3,388
5. Collaboration and License Agreements
In June 2006, the Company entered into an exclusive worldwide, royalty-bearing license to MBX-8025 and certain other PPARd
compounds (the “PPARd Products”) with Janssen Pharmaceutical NV (Janssen NV), with the right to grant sublicenses to third parties to
make, use and sell such PPARd Products. Under the terms of the agreement, the Company has full control and responsibility over the
research, development and registration of any PPARd Products and is required to use diligent efforts to conduct all such activities. Janssen
NV has the sole responsibility for the preparation, filing, prosecution, maintenance of, and defense of the patents with respect to, the
PPARd Products. Janssen NV has a right of first negotiation under the agreement to license a particular PPARd Product from the Company
in the event that the Company elects to seek a third party corporate partner for the research, development, promotion, and/or
commercialization of such PPARd Products. Under the terms of the agreement Janssen NV is entitled to receive up to an 8% royalty on net
sales of PPARd Products. No payments were made and no royalties were received under this agreement during the years ended
December 31, 2015 and 2014.
In June 2010, the Company entered into two development and license agreements with Janssen Pharmaceuticals, Inc. (Janssen), a
subsidiary of Johnson and Johnson, to further develop and discover undisclosed metabolic disease target agonists for the treatment of
T2DM and other disorders and received a one-time nonrefundable technology access fee related to the agreements. The Company is also
eligible to receive up to $228 million in contingent payments if certain development and commercial events are achieved as well as
royalties on worldwide net sales of products. No such payments have been made to date. Under the terms of the agreements, Janssen has
full control and responsibility over the research, development and registration of any products developed and/or discovered from the
metabolic disease targets and is required to use diligent efforts to conduct all such activities. The Company received a termination notice
from Janssen, effectively ending these development and licensing agreements in early April 2015. In December 2015, CymaBay exercised
an option pursuant to the terms of one of the original agreements to continue to work to research, develop and commercialize compounds
with activity against an undisclosed metabolic disease target. Janssen granted
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CymaBay an exclusive, worldwide license (with rights to sublicense) under the Janssen know-how and patents to research, develop, make,
have made, import, use, offer for sale and sell such compounds. CymaBay has full control and responsibility over the research,
development and registration of any products developed and/or discovered from the metabolic disease target and is required to use diligent
efforts to conduct all such activities.
In June 1998, the Company entered into a license agreement with DiaTex, Inc. (DiaTex) relating to products containing halofenate, its
enantiomers, derivatives, and analogs (the licensed products). The license agreement provides that DiaTex and the Company are joint
owners of all of the patents and patent applications covering the licensed products and methods of producing or using such compounds, as
well as certain other know-how (the covered IP). As part of the license agreement, the Company received an exclusive worldwide license,
including as to DiaTex, to use the covered IP to develop and commercialize the licensed products. The Company also retained the right to
sub-license the covered IP. The license agreement contains a $2,000 per month license fee as well as a requirement to make additional
payments for development achievements and royalty payments on any sales of licensed products. Pursuant to the license agreement, all of
the Company’s patents and patent applications related to arhalofenate, its use, and production are jointly owned with DiaTex. DiaTex is
entitled to up to $0.8 million for the future development of arhalofenate, as well as royalty payments on any sales of products containing
arhalofenate. No development payments were made in the years ended December 31, 2015 and 2014 and no royalties have been paid to
date.
6. Debt
2013 Term Loan Facility
On September 30, 2013, the Company entered into a facility loan agreement with Silicon Valley Bank and Oxford Finance LLC
(referred to herein as the lenders) for a total loan amount of $10.0 million of which the first tranche of $5.0 million was drawn as part of the
Company’s September 2013 financing, referred to here as the 2013 Term Loan Facility. The loan had a fixed interest rate of 8.75% payable
as interest only for twelve months and a thirty-six month loan amortization period thereafter, with a final interest payment of $0.3 million at
the end of the loan period. The second tranche of $5.0 million became available to the Company upon its February 24, 2015 announcement
of the achievement of positive Phase 2b data for the Company’s product candidate arhalofenate and remained available to the Company
until June 30, 2015. Loans under the second tranche incurred interest at a rate fixed at the time of borrowing equal to the greater of
(i) 8.75% per annum and (ii) the sum of the Wall Street Journal prime rate plus 4.25% per annum. On June 30, 2015, the second tranche
portion of the loan facility expired unused by the Company.
At the time the first $5 million tranche of the facility loan was drawn down, the Company issued warrants exercisable for a total of
121,739 shares of the Company’s common stock to the lenders at an exercise price of $5.00 per share. Upon issuance, the fair value of a
warrant liability was recorded and is being revalued at each balance sheet date until the warrants are exercised or expire.
2015 Term Loan Facility
On August 7, 2015, the Company entered into a Loan and Security Agreement pursuant to which it refinanced its existing 2013 Term
Loan Facility with Oxford Finance LLC and Silicon Valley Bank, for an aggregate amount of up to $15 million, referred to here as the
2015 Term Loan Facility. The first $10 million tranche of this new loan facility was made available to the Company immediately upon the
closing and was used in part to retire all $4.1 million of the Company’s existing debt outstanding under the 2013 Term Loan Facility, and
to settle accrued interest and closing costs with the lenders. The remaining $5 million, referred to as the second tranche, will be made
available to the Company until March 31, 2016, for draw down upon the announcement of a qualified out-license or co-development
arrangement for arhalofenate, the Company’s gout therapy drug candidate, which includes an upfront payment of not less than $35.0
million (the “second draw milestone”). Because the present value of the future cash flows under the modified loan terms did not exceed the
present value of the future cash flows under the previous loan terms by more than 10%, the Company treated this
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refinancing as a modification. The remaining debt discount costs will be amortized over the remaining term of the Loan and Security
Agreement using the effective interest rate method. As of December 31, 2015, the Company has not drawn down on the second tranche.
The first loan tranche bears interest at 8.77%, a rate which was determined on the advance date as being the greater of (i) 8.75% and
(ii) the sum of 8.47% and the 90 day U.S. LIBOR rate reported in the Wall Street Journal three business days prior to the funding date of
the first tranche. Under the first tranche, the Company is required to make 12 monthly interest only payments after the funding date
followed by a repayment schedule equal to 36 equal monthly payments of interest and principal. If drawn, the second tranche will bear
interest using the same rate formula as the first tranche and will amortize pursuant to a repayment schedule that is coterminous with the
amortization period of the first tranche. Upon maturity of each tranche, the remaining balance of such tranche and a final payment equal to
6.50% of the original principal amount advanced of the applicable tranche are payable.
The Company is permitted to make voluntary prepayments of the term loans with a prepayment fee equal to 3% of the principal
amount of any term loans prepaid. The Company is required to make mandatory prepayments of the outstanding term loans upon the
acceleration by the lenders of such loans following the occurrence of an event of default, along with a payment of the final payment, the
prepayment fee and any all other obligations that are due and payable at the time of the prepayment.
The Company’s obligations under the 2015 Term Loan Facility are secured, subject to customary permitted liens and other agreed
upon exceptions, by a perfected first priority interest in all of the Company’s tangible and intangible assets, excluding its intellectual
property. The Company also entered into a negative pledge agreement with the lenders pursuant to which it has agreed not to encumber any
of its intellectual property.
The 2015 Term Loan Facility contains customary representations and warranties and customary affirmative and negative covenants
applicable to the Company, including, among other things, restrictions on dispositions, changes in business, management, ownership or
business locations, mergers or acquisitions, indebtedness, encumbrances, distributions, investments, transactions with affiliates and
subordinated debt. The 2015 Term Loan Facility also includes customary events of default, including but not limited to the nonpayment of
principal or interest, violations of covenants, material adverse change, attachment, levy, restraint on business, bankruptcy, material
judgments and misrepresentations. Upon an event of default, the lenders may, among other things, accelerate the loans and foreclose on the
collateral. As of December 31, 2015, the Company was in compliance with the terms of the term loan covenants and there were no
identified events of default.
At the closing, the Company also agreed to pay a facility fee of 1.00% of the 2015 Term Loan Facility commitment. In addition, the
Company issued warrants exercisable for a total of 114,436 shares of its common stock to the lenders at an exercise price of $2.84 per
share, and with a term of ten years. Upon issuance, the fair value of a warrant liability of $0.3 million was recorded in the accompanying
balance sheet and will be revalued at each balance sheet date until the warrants are exercised or expire.
The term loan facility, debt discounts and final payment balances as of December 31, 2015 and 2014 are as follows:
Principal payments due under the loan facility
Less: unamortized debt discount
Plus: accreted value of final payment
Term loan facility, net
88
December 31,
2015
$10,000
(929)
237
$ 9,308
2014
$4,755
(380)
132
$4,507
Table of Contents
Index to Financial Statements
Future principal payments due under the loan facility are as follows (in thousands):
Year ending December 31:
2016
2017
2018
2019
Total future principal payments due under loan agreement
Principal
Payments
$
986
3,137
3,423
2,454
$ 10,000
7. Commitments and Contingencies
Operating Lease Commitments
Rent expense was $0.3 million and $0.4 million for the years ended December 31, 2015 and 2014. The Company leases 8,894 square
feet of office space in Newark, California pursuant to a lease which commenced January 16, 2014 and expires on December 31, 2018.
Future minimum lease payments under operating lease commitments are as follows (in thousands):
Year ending December 31:
2016
2017
2018
Total future minimum payments
Lease
Payments
$
$
216
222
228
666
Indemnification
In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and
warranties and provide for general indemnification, including indemnification associated with product liability or infringement of
intellectual property rights. The Company’s exposure under these agreements is unknown because it involves future claims that may be
made against the Company that may be, but have not yet been, made. To date, the Company has not paid any claims or been required to
defend any action related to these indemnification obligations, and no amounts have been accrued in the accompanying balance sheets
related to these indemnification obligations.
The Company has agreed to indemnify its executive officers and directors for losses and costs incurred in connection with certain
events or occurrences, including advancing money to cover certain costs, subject to certain limitations. The maximum potential amount of
future payments the Company could be required to make under this indemnification is unlimited; however, the Company maintains
insurance policies that may limit its exposure and may enable it to recover a portion of any future amounts paid. Assuming the applicability
of coverage, the willingness of the insurer to assume coverage, and subject to certain retention, loss limits, and other policy provisions, the
Company believes the fair value of these indemnification obligations is not material. Accordingly, the Company has not recognized any
liabilities relating to these obligations as of December 31, 2015 and 2014. No assurances can be given that the covering insurers will not
attempt to dispute the validity, applicability, or amount of coverage without expensive litigation against these insurers, in which case the
Company may incur substantial liabilities as a result of these indemnification obligations.
89
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Index to Financial Statements
8. Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock as of December 31, 2015 and 2014, respectively.
9. Common Stock
The Company is authorized to issue 100,000,000 shares of common stock as of December 31, 2015 and 2014, respectively.
Common Stock Issuances
On July 25, 2014, the Company completed a public offering of 4,600,000 shares of common stock at $5.50 per share, which the
Company refers to as the 2014 public offering. Net proceeds to the Company in connection with the 2014 public offering were
approximately $23.0 million after deducting underwriting discounts, commissions and offering expenses.
On November 7, 2014, the Company filed a $100 million registration statement on Form S-3 with the SEC and also entered into an
at-the-market facility (ATM) to sell up to $25 million of common stock under the registration statement, under which, as of December 31,
2015, the Company has sold shares of common stock with aggregate net proceeds of $4.3 million.
On July 27, 2015, pursuant to a shelf registration statement on Form S-3, the Company completed the issuance of 8,188,000 shares of
its common stock at $2.81 per share in an underwritten public offering, which the Company refers to as the 2015 public offering. Net
proceeds to the Company in connection with this offering were approximately $21.1 million after deducting underwriting discounts,
commissions and other offering expenses.
Common Stock Warrants
In connection with a 2013 financing and the Company’s private placement of common stock and warrants in September 2013, October
2013 and January 2014, the Company issued five-year warrants to purchase 1,741,788 shares of CymaBay’s common stock at an exercise
price of $5.75 per share which the Company refers to here as the 2013 financing warrants. The Company also issued seven-year warrants to
purchase 121,739 shares of CymaBay’s common stock to its lenders at an exercise price of $5.00 per share in September 2013. In August
2015, the Company issued ten-year warrants to purchase 114,436 shares of CymaBay’s common stock to its lenders at an exercise price of
$2.84 per share. The 2013 financing warrants contain provisions that are contingent on the occurrence of a change in control, which would
conditionally obligate the Company to repurchase the warrants for cash in an amount equal to their fair value using the Black-Scholes
Option Pricing Model (the “Black-Scholes Model”) on the date of such change in control. Due to these provisions, the Company is required
to account for the 2013 financing warrants issued in September 2013, October 2013 and January 2014 and all the lender warrants as a
liability at fair value. In addition, the estimated liability related to these warrants is required to be revalued at each reporting period until the
earlier of the exercise of the warrants, at which time the liability will be revalued and reclassified to stockholders’ equity, or expiration of
the warrants. These warrants were recorded at fair value upon issuance and were revalued at fair value as of December 31, 2015 and 2014
using a binomial lattice model. The resulting decrease in fair value of $11.1 million for the year ended December 31, 2015 was recorded as
a revaluation gain and the increase in fair value of $7.2 million for the year ended December 31, 2014 was recorded as a revaluation loss in
other income (expense), net in the Company’s Statement of Operations and Comprehensive Loss.
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Index to Financial Statements
Shares of Common Stock Authorized for Issuance
As of December 31, 2015 and December 31, 2014, the Company had reserved shares of authorized but unissued common stock as
follows:
Common stock warrants
Equity incentive plans
Total reserved shares of common stock
10. Stock Plans and Stock-Based Compensation
Stock Plans
December 31,
2015
1,667,398
2,284,421
3,951,819
December 31,
2014
1,768,347
1,549,616
3,317,963
In September 2013, the Company’s stockholders approved the 2013 Equity Incentive Plan (“2013 Plan”), under which shares of
common stock are reserved for the granting of options, stock bonuses, and restricted stock awards by the Company. These awards may be
granted to employees, members of the Board of Directors, and consultants to the Company. The 2013 Plan has a term of ten years and
replaced the 2003 Equity Incentive Plan, which had similar terms. The 2013 Plan permits the Company to (i) grant incentive stock options
to directors and employees at not less than 100% of the fair value of common stock on the date of grant; (ii) grant nonqualified options to
employees, directors, and consultants at not less than 85% of fair value; (iii) award stock bonuses; and (iv) grant rights to acquire restricted
stock at not less than 85% of fair value. Options generally vest over a four- or five-year period and have a term of ten years. Options
granted to 10% stockholders have a maximum term of five years and require an exercise price equal to at least 110% of the fair value on
the date of grant. The exercise price of all options granted to date has been at least equal to the fair value of common stock on the date of
grant. The share reserve under the 2013 Plan will automatically increase on January 1st of each year, for a period of not more than ten
years, in an amount equal to 5% of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year,
unless the Board determines otherwise prior to December 31st of such calendar year. In June 2014, the Company’s stockholders approved a
proposal to increase the share reserve by an additional 500,000 shares.
Stock Plan Activity
As of December 31, 2015, there were 235,367 shares available for issuance under the 2013 Plan. In accordance with the provisions of
the 2013 Plan, the number of shares available for issuance under the plan automatically increased by 1,172,350 shares on January 1, 2016.
The following table summarizes stock option activity:
Outstanding as of December 31, 2014
Options granted
Options exercised
Options forfeited
Options expired
Outstanding as of December 31, 2015
Vested and expected to vest as of December 31, 2015
Exercisable as of December 31, 2015
Weighted-
Average
Exercise
Price of
Options
6.09
$
9.00
0
4.75
12.31
7.41
$
$
$
7.38
6.28
Shares
Subject to
Outstanding
Options
991,010
845,703
—
(15,631)
(16,999)
1,804,083
1,757,991
783,856
91
Weighted-
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic
Value (in
thousands)
8.24
8.22
7.81
$ —
$ —
$ —
Table of Contents
Index to Financial Statements
The following table summarizes information about stock options outstanding as of December 31, 2015:
Exercise Price
$1.98 – $4.77
$5.00
$5.23
$5.90
$6.85
$7.00
$7.99
$10.00 – $10.49
$238.50
Options Outstanding
Options Exercisable
Weighted-
Average
Remaining
Contractual
Term
(Years)
8.95
7.57
8.65
9.29
8.73
8.28
8.36
8.93
0.73
8.24
Number
of
Shares
108,483
858,442
10,000
18,000
12,000
77,000
6,500
710,203
3,455
1,804,083
Number of Shares
65,800
617,070
3,333
18,000
4,500
32,083
2,594
37,021
3,455
783,856
Grant Date Fair Value
The following table presents the weighted-average assumptions the Company used in the Black-Scholes valuation model to derive the
grant date fair value-based measurements of employee and director stock options and the resulting estimated weighted-average grant date
fair-value-based measurements per share:
Weighted-average assumptions:
Expected term
Expected volatility
Risk-free interest rate
Expected dividend yield
Weighted-average grant date fair value per share
Year Ended December 31,
2015
2014
6.1 yrs
6.0 yrs
78%
1.65%
0%
6.13
$
90%
2.02%
0%
4.06
$
Expected Term
The Company does not believe it can currently place reliance on its historical exercise and post-vesting termination activity to provide
accurate data for estimating the expected term. Therefore, for stock option grants made during the years ended December 31, 2015 and
2014, the Company has opted to use the simplified method for estimating the expected term which is an average of the contractual term of
the options and its ordinary vesting period. The expected term represents the period of time that options are expected to be outstanding.
Expected Volatility
As the Company has limited trading history for its common stock, the expected stock price volatility for the Company’s common
stock was estimated by considering the volatility rates of similar publicly traded peer entities within the life sciences industry. The
Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock
price becomes available.
Risk-Free Interest Rate
The risk-free interest rate assumption was based on U.S. Treasury instruments with constant maturities whose term was consistent
with the expected term of stock options granted by the Company.
92
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Index to Financial Statements
Expected Dividend Yield
The Company has never declared or paid cash dividends and does not plan to pay cash dividends in the foreseeable future.
Consequently, the Company uses an expected dividend yield of zero.
Forfeitures
The Company estimates forfeitures at the time of grant and revises these estimates in subsequent periods if actual forfeitures differ
from those estimates. Changes in forfeiture estimates impact compensation in the period in which the change occurs.
The total intrinsic value of options exercised was not significant for the years ended December 31, 2015 and 2014.
Vested and Unvested Awards
The total fair value of options vested for the years ended December 31, 2015 and 2014, was $2.2 million and $1.0 million,
respectively.
As of December 31, 2015, and 2014 the total compensation expense related to unvested employee stock options to be recognized in
future periods, excluding estimated forfeitures, was $4.8 million and $1.9 million, respectively. The weighted-average periods over which
this compensation expense is expected to be recognized are 2.6 years and 3.0 years as of December 31, 2015 and 2014, respectively.
Incentive Awards
In December 2013, January 2014, and April 2014, as permitted by the 2013 Plan, the Company issued certain incentive awards to
directors, employees and a consultant which are subject to 252,752 shares of the Company’s common stock and are exercisable at a
weighted average price of $5.21 per share when vested. The Company may determine at its option whether to settle exercised awards in
shares of common stock or in cash. Each recipient’s incentive award defines the number of common shares that may be acquired upon
exercise provided the Company chooses to settle in shares. For awards settled in cash, the Company must pay the recipient the excess of the
fair market value of the Company’s common stock on the date of exercise over the exercise price paid by the recipient multiplied by the
number of shares the recipient would be entitled to receive had the award been settled in shares of the Company’s common stock.
Pursuant to their terms, the incentive awards have a term of 10 years and were initially scheduled to vest 100% on the second
anniversary of their grant date. However, as a result of the approval by Company’s shareholders of a 500,000 share increase to the 2013
Plan’s share reserve in June 2014, the incentive awards were automatically modified to vest monthly over four years effective from their
grant date.
The incentive award is a stock based compensation arrangement. From the grant date of each award through June 3, 2014, the
Company did not have sufficient shares available for issuance to settle the incentive awards in stock. Since during this period settlement in
cash was deemed more likely, the Company accounted for these cash settled awards as a liability to be remeasured at fair value at each
reporting date until settled. Through June 3, 2014, compensation expense and the related incentive award liability were recognized over the
initial two year vesting period of the incentive awards. On June 3, 2014, once sufficient shares became available to settle the incentive
awards in stock, this settlement method was deemed more likely and accordingly, the Company began to account for the incentives awards
using the equity accounting method. Specifically, on June 3, 2014, the Company revalued the incentive award liability at fair value,
adjusted the expense recognition period to reflect the modified vesting term, and reclassified the resulting $121,000 incentive award
liability balance to additional paid in capital. Subsequent to June 3, 2014, the Company recognized the fixed equity value of each incentive
award over the remainder of its four year vest period.
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Index to Financial Statements
The Company recorded $323,000 and $285,000 of stock based compensation expense in the years ended December 31, 2015 and
2014, respectively pertaining to its incentive awards.
Stock-Based Compensation Expense
Employee and Director Expense
Employee and director stock-based compensation expense recorded was as follows (in thousands):
Research and development
General and administrative
Total
Non-Employee Expense
Year Ended
December 31,
2015
$ 823
1,643
$2,466
2014
$ 332
952
$1,284
The Company has issued options to purchase shares of common stock to certain scientific advisors and consultants. The stock options
have various exercise prices, a term of ten years, and vest over periods up to sixty months. The Company granted to these advisors and
consultants options to purchase 10,000 and 10,000 shares of common stock, in 2015 and 2014, respectively. As of December 31, 2015,
options to purchase 18,945 shares of common stock remained unvested, and compensation related to these stock options is subject to
periodic adjustment as the shares vest. In 2013, the Company also issued an incentive award for 2,335 shares to a scientific advisor, of
which 1,167 shares remained unvested as of December 31, 2015. The Company recorded $21,000 and $8,000 of expense in the years ended
December 31, 2015 and 2014, respectively, related to these options and awards.
11. 401(k) Plan
The Company provides a qualified 401(k) savings plan for its employees. All employees are eligible to participate, provided they
meet the requirements of the plan. While the Company may elect to match employee contributions, no such matching contributions have
been made through December 31, 2015 and 2014.
12. Income Taxes
No provision for U.S. income taxes exists due to tax losses incurred in all periods presented. Deferred income taxes reflect the tax
effects of net operating loss and tax credit carryforwards and the net temporary differences between the carrying amounts of assets and
liabilities for financial reporting and the amounts used for income tax purposes. Significant components of the Company’s deferred tax
assets are as follows (in thousands):
Deferred tax assets:
Federal and state net operating loss carryforwards
Capitalized research and development
Federal and state tax credit carryforwards
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
December 31
2015
2014
$ 79,966
22,287
7,571
2,012
111,836
(111,836)
—
$
$ 71,153
22,314
7,083
1,470
102,020
(102,020)
—
$
Realization of the net deferred tax assets is dependent upon future taxable income, if any, the amount and timing of which is
uncertain. Based on the weight of available positive and negative objective evidence,
94
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Index to Financial Statements
management believes it more likely than not that the Company’s deferred tax assets are not realizable. Accordingly, the net deferred tax
assets have been fully offset by a valuation allowance. The net valuation allowance increased by $9.8 million during the year ended
December 31, 2015 and increased $11.2 million during the year ended December 31, 2014.
The following is a reconciliation of the expected statutory federal income tax provision to the actual income tax provision (in
thousands):
Expected income tax benefit at federal statutory tax rate
Net operating loss adjustments
Change in valuation allowance
State income taxes, net of federal benefit
Permanent items
Research credits
Other, net
Income tax (benefit) expense
December 31
2015
$(5,280)
1
9,815
(618)
(3,543)
(375)
—
$ —
2014
$(10,851)
(1,703)
11,189
(783)
2,595
(446)
(1)
$ —
Pursuant to Internal Revenue Code (“IRC”), Section 382 and 383, use of the Company’s U.S. federal and state net operating loss and
research and development income tax credit carryforwards may be limited in the event of a cumulative change in ownership of more than
50.0% within a three-year period. The Company completed an analysis under IRC Sections 382 and 383 through December 21, 2007 and
determined that the Company’s net operating losses and research and development credits were subject to limitations due to changes in
ownership through December 31, 2007. The net operating loss carryforwards reflected in the deferred tax assets at December 31, 2015 have
been adjusted to reflect Section 382 limitations resulting from the ownership change. As the Company was in a net operating loss position
for the years 2008-2015, the Company has not performed any additional analysis for IRC Sections 382 and 383 and there is a risk that
additional changes in ownership could have occurred since December 31, 2007. If a change in ownership were to have occurred, additional
net operating loss and tax credit carryforwards could be eliminated or restricted. If eliminated, the related asset would be removed from the
deferred tax asset schedule with a corresponding reduction in the valuation allowance.
As of December 31, 2015, we had federal net operating loss carryforwards of $205.7 million and state net operating loss
carryforwards of $172.0 million to offset future taxable income, if any. In addition, we had federal research and development tax credit
carry forwards of $7.2 million and state research and development tax credit carryforwards of $3.5 million. If not utilized, the federal net
operating loss and tax credit carryforwards will expire beginning in 2024 through 2035 and the state net operating loss carryforwards will
expire beginning in 2016 through 2035. The state tax credit will carry forward indefinitely.
The following table summarizes activity related to the Company’s gross unrecognized tax benefits (in thousands):
Balances as of December 31, 2013
Increases related to prior year tax positions
Increases related to 2014 tax positions
Balances as of December 31, 2014
Increases related to prior year tax positions
Increases related to 2015 tax positions
Balances as of December 31, 2015
95
Total
$1,865
—
126
$1,991
—
136
$2,127
Table of Contents
Index to Financial Statements
The unrecognized tax benefits, if recognized, would not have an impact on the Company’s effective tax rate. The Company does not
expect a significant change to its unrecognized tax benefits over the next twelve months. The unrecognized tax benefits may increase or
change during the next year for items that arise in the ordinary course of business.
The Company files income tax returns in the U.S. federal and California jurisdiction and is not currently under examination by
federal, state, or local taxing authorities for any open tax years. The tax years 1998 through 2015 remain open to examination by the major
taxing authorities.
13. Related-Party Transactions
The Company paid a former member of its Board of Directors, who is also a member of its Scientific and Clinical Advisory Boards, a
total of $60,000 in each of the years ended December 31, 2015 and 2014 in monthly cash retainers.
14. Subsequent Events
On January 1, 2016, the share reserve of the Company’s 2013 Equity Incentive Plan, or 2013 Plan, automatically increased by
1,172,350 shares.
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Index to Financial Statements
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SIGNATURES
March 29, 2016
Date
CymaBay Therapeutics, Inc.
Registrant
/s/ Harold Van Wart
Harold Van Wart
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Harold
Van Wart and Sujal Shah, as his true and lawful attorney-in-fact and agent, with full power of substitution for him, and in his name in any
and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and necessary to be done therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, and any of them or his
or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the
Registrant in the capacities indicated on the date set forth below:
Name and Signature
/s/ Harold Van Wart
Harold Van Wart
/s/ Sujal Shah
Sujal Shah
/s/ Robert J. Wills
Robert J. Wills, Ph.D.
/s/ Carl Goldfischer
Carl Goldfischer, M.D.
/s/ Hari Kumar
Hari Kumar, Ph.D.
/s/ Kurt von Emster
Kurt von Emster, CFA
Title
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
97
Date
March 29, 2016
March 29, 2016
March 28, 2016
March 28, 2016
March 24, 2016
March 28, 2016
Table of Contents
Index to Financial Statements
Exhibit
No.
3.1
3.2
4.1
4.2
4.3
4.4
10.1*
10.2*
10.3*
10.4
10.5#
10.6#
10.7#
10.8#
10.9#
EXHIBIT INDEX
Description of Document
Amended and Restated Certificate of Incorporation. (Filed with the SEC as Exhibit 3.1 to our Amendment No. 2 to
Registration Statement on Form 10, filed with the SEC on October 17, 2013, SEC File No. 000-55021.)
Amended and Restated By-Laws. (Filed with the SEC as Exhibit 3.2 to our Amendment No. 2 to Registration Statement on
Form 10, filed with the SEC on October 17, 2013, SEC File No. 000-55021.)
Reference is made to Exhibits 3.1 and 3.2.
Form of Registration Rights Agreement. (Filed with the SEC as Exhibit 4.2 to our Amendment No. 2 to Registration
Statement on Form 10, filed with the SEC on October 17, 2013, SEC File No. 000-55021.)
Form of 2013 Financing Warrant. (Filed with the SEC as Exhibit 4.3 to our Amendment No. 2 to Registration Statement on
Form 10, filed with the SEC on October 17, 2013, SEC File No. 000-55021.)
Amendment No. 1 to Registration Rights Agreement. (Filed with the SEC as Exhibit 4.4 to our Form 10-K, filed with the
SEC on March 31, 2014, SEC File No. 000-55021.)
2003 Equity Incentive Plan. (Filed with the SEC as Exhibit 10.1 to our Registration Statement on Form 10, filed with the
SEC on August 12, 2013, SEC File No. 000-55021.)
Form of 2003 Equity Incentive Plan Stock Option Agreement. (Filed with the SEC as Exhibit 10.2 to our Registration
Statement on Form 10, filed with the SEC on August 12, 2013, SEC File No. 000-55021.)
Form of 2003 Equity Incentive Plan Early Exercise Stock Option Agreement. (Filed with the SEC as Exhibit 10.2 to our
Registration Statement on Form 10, filed with the SEC on August 12, 2013, SEC File No. 000-55021.)
Form of CymaBay Indemnity Agreement. (Filed with the SEC as Exhibit 10.4 to our Amendment No. 2 to Registration
Statement on Form 10, filed with the SEC on October 17, 2013, SEC File No. 000-55021.)
Development and Clinical Manufacture Agreement, dated June 5, 2012, between Metabolex, Inc. and Patheon Inc. (Filed
with the SEC as Exhibit 10.14 to our Amendment No. 3 to Registration Statement on Form 10, filed with the SEC on
November 8, 2013, SEC File No. 000-55021.)
Standard Development Agreement, dated October 31, 2006, between Metabolex, Inc. and Metrics, Inc. (Filed with the SEC
as Exhibit 10.15 to our Amendment No. 3 to Registration Statement on Form 10, filed with the SEC on November 8, 2013,
SEC File No. 000-55021.)
License and Development Agreement, dated June 30, 1998, between Metabolex, Inc. and DiaTex, Inc. (Filed with the SEC
as Exhibit 10.16 to our Amendment No. 3 to Registration Statement on Form 10, filed with the SEC on November 8, 2013,
SEC File No. 000-55021.)
First Amendment to License and Development Agreement, dated April 15, 1999, between Metabolex, Inc. and DiaTex, Inc.
(Filed with the SEC as Exhibit 10.17 to our Amendment No. 3 to Registration Statement on Form 10, filed with the SEC on
November 8, 2013, SEC File No. 000-55021.)
Development and Clinical Manufacture Agreement, dated April 30, 2012, between Metabolex, Inc. and Siegfried AG. (Filed
with the SEC as Exhibit 10.18 to our Amendment No. 3 to Registration Statement on Form 10, filed with the SEC on
November 8, 2013, SEC File No. 000-55021.)
10.10*
2013 Equity Incentive Plan. (Filed with the SEC as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on
June 6, 2014, SEC File No. 000-55021.)
98
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Index to Financial Statements
Exhibit
No.
10.11*
10.12*
10.13
10.14*
10.15*
10.16*
10.17*
10.18#
10.19*
10.20#
10.21#
10.22
Description of Document
Form of Option Grant Notice and Option Agreement under the 2013 Equity Incentive Plan. (Filed with the SEC as Exhibit
10.26 to our Amendment No. 2 to Registration Statement on Form 10, filed with the SEC on October 17, 2013, SEC File
No. 000-55021.)
Form of Incentive Award Grant Notice under the 2013 Equity Incentive Plan (Filed with the SEC as Exhibit 10.22 to our
Form 10-K, filed with the SEC on March 31, 2014, SEC File No. 000-55021.)
Lease, dated November 8, 2013, between CymaBay Therapeutics, Inc. and BMR-Pacific Research Center, L.P. (Filed with
the SEC as Exhibit 10.27 to our Form 10-Q, filed with the SEC on November 25, 2013, SEC File No. 000-55021.)
Offer Letter, dated December 6, 2013, between CymaBay Therapeutics, Inc. and Sujal Shah. (Filed with the SEC as Exhibit
10.24 to our Form 10-K, filed with the SEC on March 31, 2014, SEC File No. 000-55021.)
Amendment to Offer Letter, dated November 21, 2013, between CymaBay Therapeutics, Inc. and Harold Van Wart. (Filed
with the SEC as Exhibit 10.25 to our Form 10-K, filed with the SEC on March 31, 2014, SEC File No. 000-55021.)
Amendment to Offer Letter, dated November 21, 2013, between CymaBay Therapeutics, Inc. and Charles A. McWherter.
(Filed with the SEC as Exhibit 10.26 to our Form 10-K, filed with the SEC on March 31, 2014, SEC File No. 000-55021.)
Offer Letter, dated February 28, 2014, between CymaBay Therapeutics, Inc. and Pol Boudes. (Filed with the SEC as
Exhibit 10.27 to our Form S-1, filed with the SEC on April 8, 2014, SEC File No. 333-195127.)
Master Services Agreement, dated February 17, 2014, between CymaBay Therapeutics, Inc. and INC Research, LLC. (Filed
with the SEC as Exhibit 10.28 to our Form S-1, filed with the SEC on April 8, 2014, SEC File No. 333-195127.)
Non-Employee Director Compensation Policy (Filed with the SEC as Exhibit 10.20 to our Form 10-K, filed with the SEC
on March 23, 2015, SEC File No. 001-36500.).
PPARd License Agreement, dated June 20, 2006, by and between Metabolex, Inc. and Janssen Pharmaceutical NV (Filed
with the SEC as Exhibit 10.1 to our Form 10-Q, filed with the SEC on November 14, 2014, SEC File No. 001-36500.)
Master Services Agreement, dated September 2, 2015, between CymaBay Therapeutics, Inc. and Pharmaceutical Research
Associates, Inc. (Filed with the SEC as Exhibit 10.1 to our Form 10-Q, filed with the SEC on November 12, 2015, SEC File
No. 001-36500.)
Loan and Security Agreement, dated August 7, 2015, by and among CymaBay Therapeutics, Inc., Oxford Finance LLC,
and Silicon Valley Bank (Filed with the SEC as Exhibit 10.2 to our Form 10-Q, filed with the SEC on November 12, 2015,
SEC File No. 001-36500.)
10.23*
Amendment to Offer Letter, dated February 23, 2016, between Cymabay Therapeutics, Inc. and Kirk Rosemark.
10.24*
Amendment to Offer Letter, dated January 27, 2016, between Cymabay Therapeutics, Inc. and Robert Martin.
10.25*
Amendment to Offer Letter, dated February 23, 2016, between Cymabay Therapeutics, Inc. and Patrick O’Mara.
23.1
24.1
Consent of Independent Registered Public Accounting Firm
Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K).
99
Table of Contents
Index to Financial Statements
Exhibit
No.
31.1
31.2
32.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)
Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a)/15d-14(a)
Description of Document
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as Adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Document
*
#
Indicates management contract or compensatory plan.
Portions of this exhibit have been omitted pursuant to a request for confidential treatment, which portions were omitted and filed
separately with the Securities and Exchange Commission.
100
Exhibit 10.23
February 23, 2016
Kirk Rosemark
Dear Kirk:
CymaBay Therapeutics (the “Company”) is pleased to offer you employment as Vice President of Business Development on the following
terms:
1. Position, Duties and Responsibilities. Subject to the terms set forth herein, the Company agrees to employ you in the position of
as Vice President of Business Development and you hereby accept such employment effective immediately. You will report to the
Company’s Chief Executive Officer (“CEO”) and will perform the duties customarily associated with this position and such other duties as
are assigned to you by the CEO. You will devote your full business time and attention to the business affairs of the Company, except for
reasonable vacations and periods of illness or incapacity permitted by the Company’s general employment policies. The employment
relationship between you and the Company shall also be governed by the general employment policies and practices of the Company,
including those relating to protection of confidential information and assignment of inventions, except that when the terms of this letter
agreement differ from or are in conflict with the Company’s general employment policies or practices, this letter agreement shall control.
2. Compensation and Employee Benefits.
2.1 Base Salary. Your base salary will be $304,093 on an annualized basis, less payroll deductions and required withholdings,
paid according to the Company’s regular payroll schedule and procedures. Subject to the other terms of this letter agreement, your base
salary may be modified by the Company in its sole discretion. Your salary will be effective as of January 1, 2016.
2.2 Discretionary Bonus. You will be eligible to participate in the Company’s annual bonus program pursuant to the terms of
that program and you will be eligible to receive a bonus of up to thirty percent (30%) of your annual base salary. Your actual bonus, if any,
will be determined by the Company’s Board of Directors, or the Compensation subcommittee thereof (the “Board”), in its sole discretion,
based upon its evaluation of your performance, the Company’s performance, and any other considerations it deems relevant. You must be
employed through the bonus payment date to be eligible for, and to earn, any such bonus. Any bonus payment will be subject to payroll
deductions and required withholdings.
2.3 Employee Benefits. You will be entitled to all employee benefits, including vacation accrual of twenty (20) days per year
and health and disability benefits for which you are eligible under the terms and conditions of the standard Company benefit plans which
may be in effect from time to time and provided by the Company to its senior executive-level employees generally. Currently, such benefits
include twelve paid holidays, as well as paid sick leave of up to ten days per year. Notwithstanding the foregoing, the Company reserves
the right to adopt, amend or discontinue any employee benefit plan or policy, including changes required by applicable law.
1.
2.4 Stock Options. Subject to the approval of the Board pursuant to the Company’s equity incentive plan you may from time to
time be granted stock options of shares of Company common stock at a per share exercise price equal to the per share fair market value of
the Company’s common stock on the date of grant as determined by the Board. Option grants are made at regular Board meetings held
approximately once each calendar quarter. Such stock options will vest as determined by the Board, as long as you remain in continuous
service with the Company and a portion of the shares subject to your outstanding options may vest on an accelerated basis pursuant to
Sections 7 or 8. Except as provided herein, such stock option will be subject to the provisions of the equity incentive plan of the Company
under which the options are granted and the applicable form of stock option agreement there under (the “Plan Documents”).
3. Other Activities During Employment.
3.1 Activities. Except with the prior written consent of the CEO, you will not, during your employment with the Company,
undertake or engage in any other employment, occupation or business enterprise, other than ones in which you are a passive investor. You
may engage in civic and not-for-profit activities so long as such activities do not interfere with the performance of your job duties for the
Company.
3.2 Investments and Interests. Except as permitted by the first sentence of Section 3.1 and by Section 3.3, during your
employment you agree not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by you to
be adverse or antagonistic to the Company, or its business or prospects, financial or otherwise.
3.3 Noncompetition. During the term of your employment by the Company, except on behalf of the Company, you will not
directly or indirectly, whether as an officer, director, stockholder, partner, proprietor, associate, representative, consultant, or in any
capacity whatsoever engage in, become financially interested in, be employed by or have any business connection with any other person,
corporation, firm, partnership or other entity whatsoever that competes with the Company anywhere in the world, in any line of business
engaged in (or planned to be engaged in) by the Company; provided, however, that anything above to the contrary notwithstanding, you
may own, as a passive investor, securities of any entity, so long as your direct holdings in any one such corporation do not in the aggregate
constitute more than one percent (1%) of the voting stock of such corporation.
4. Company Policies; Confidential Information and Inventions Agreement. You acknowledge your obligations under the
Company’s Employee Agreement on Confidential Information and Inventions, a copy of which is attached as Exhibit A. You further
acknowledge your obligation to abide by the Company’s rules, policies and procedures.
5. Immigration. The Immigration Reform and Control Act of 1986 requires that every person present proof to the Company of their
identity and eligibility and/or authorization to accept employment with the Company. In order to comply with this law you must provide
appropriate documentation to prove both your identity and legal eligibility to be employed at the Company.
2.
6. Your Representations and Warranties.
6.1 No Breach of Contract. You represent and warrant that the execution and delivery of this letter agreement by you and the
performance of your obligations hereunder will not conflict with or breach any agreement, order or decree to which you are a party or by
which you are bound. You warrant that you are subject to no employment agreement or restrictive covenant preventing full performance of
your duties under this letter agreement.
6.2 No Conflict of Interest. You warrant that you are not, to the best of your knowledge and belief, involved in any situation
that might create, or appear to create, a conflict of interest with your loyalty to or duties for the Company.
6.3 Notification of Materials or Documents from Other Employers. You further warrant that you have not brought and will
not bring to the Company or use in the performance of your responsibilities at the Company any materials or documents of a former
employer that are not generally available to the public, unless you have obtained express written authorization from the former employer
for their possession and use.
6.4 Notification of Other Post-Employment Obligations. You also understand that, as part of your employment with the
Company, you are not to breach any obligation of confidentiality that you have to former employers, and you agree to honor all such
obligations to former employers during your employment with the Company.
7. Termination of Employment.
7.1 At-Will Employment Relationship. Your employment with the Company shall be at-will. Either you or the Company may
terminate the employment relationship at any time, with or without Cause, and with or without advance notice.
7.2 Termination for Cause.
(a) If the Company terminates your employment at any time for Cause (as defined below), your salary shall cease on the
date of termination and you shall not be entitled to severance pay, COBRA premium payments, pay in lieu of notice or any other such
compensation other than payment of accrued salary and vacation and such other benefits as expressly required by applicable law or the
terms of applicable benefit plans. The continued vesting of any stock options held by you shall cease on your employment termination date,
and your right to exercise vested options shall be governed by the Plan Documents.
(b) Definition of Cause. For purposes of this agreement, “Cause” means the occurrence of any one or more of the
following: (i) your conviction of, or plea of no contest, with respect to any felony or any crime involving fraud, dishonesty or moral
turpitude; (ii) your participation in a fraud or act of dishonesty that results in material harm to the Company; (iii) your intentional material
violation of any contract or agreement between you and the Company, including but not limited to this letter agreement or your Employee
Agreement on Confidential Information and Inventions, or your violation of any statutory duty that you owe to the Company, but only if
you do not correct any such violation within thirty (30) days after written notice thereof has been provided to you (if such notice is
reasonably practicable); or (iv) your gross negligence or willful neglect of your job duties, as determined by the Board in good faith, but
only if you do not correct such violation within thirty (30) days after written notice thereof has been provided to you (if such notice is
reasonably practicable).
3.
7.3 Severance Benefits For Termination Without Cause or Resignation for Good Reason.
(a) If the Company terminates your employment without Cause and other than as a result of your death or disability, or if
you resign your employment for Good Reason (defined below), and provided such termination constitutes a “separation from service” (as
defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “Separation from
Service”), you will be eligible to receive the severance benefits described in this Section 7.3.
(b) You will be eligible to receive, subject to payroll deductions and required withholdings and net of any amounts
earned by you pursuant to any employment or consulting arrangements obtained by you following such termination (other than the
activities described in the last sentence of Section 3.1), continuation for nine (9) months of the greater of: (i) your base salary in effect as of
such termination date; or (ii) your base salary as set forth in Section 2.1. In addition, you will be eligible to receive your potential annual
discretionary bonus amount set forth in Section 2.2, determined as if all performance targets established by the Board have been satisfied,
pro-rated for the number of months elapsed in the year in which your employment terminates, but in no event will you receive a bonus pro-
rated for greater than nine (9) months. You agree to notify the Company promptly of any amount earned by you from other employment or
a consulting engagement while you are receiving severance payments under this letter agreement.
(c) If you timely elect and remain eligible for continued coverage of your group health insurance under COBRA, the
Company will pay your premiums for COBRA coverage for up to nine (9) months following your Separation from Service, provided that
such payments shall cease if you obtain full-time employment, or cease to be eligible for COBRA, within such period. You agree to notify
the Company promptly if you obtain full-time employment while the Company is paying your COBRA premiums under this letter
agreement. On the 60th day following your Separation from Service, the Company will make the first payment under this clause equal to
the aggregate amount of payments that the Company would have paid through such date had such payments commenced on the Separation
from Service through such 60th day, with the balance of the payments paid thereafter on the schedule described above. If you become
eligible for coverage under another employer’s group health plan or otherwise cease to be eligible for COBRA during the period provided
in this clause, you must immediately notify the Company of such event, and all payments and obligations under this clause will cease.
(d) You will receive acceleration of vesting of all of your then-outstanding and then-unvested stock option grants as of
the date of termination as to the number of shares that would have vested in their vesting schedules as if you had been in service for an
additional nine (9) months as of your Separation from Service.
(e) Your receipt of any severance benefits under this Section 7.3 is contingent upon your signing and making effective
within sixty (60) days after the termination date, a full, general release of all claims against the Company in a form acceptable to the
Company containing the language set forth in the Release Agreement attached as Exhibit B on or after the termination date. The base salary
and bonus severance will be paid in substantially equal installments over the nine (9) month period following your Separation in Service
according to the Company’s payroll procedures; provided, however, that no payments will be made to you prior to the 60th day following
your Separation from Service. On the first payroll pay day
4.
following the 60th day after your Separation from Service, the Company will pay you the cash severance amounts you would have received
on or prior to such date in a lump sum in compliance with Code Section 409A and the effectiveness of the release, with the balance of the
cash payments being made as originally scheduled.
(f) Definition of Good Reason. For purposes of this letter agreement, “Good Reason” shall mean any one of the
following events that occurs without your consent: (i) the material reduction in your responsibilities, authorities or functions as an
employee of the Company (but not merely a change in reporting relationships); (ii) a material reduction in your level of compensation
(including base salary, fringe benefits and target bonus under any corporate-performance based bonus or incentive programs); (iii) a
material change of your place of employment that results in an increase to your round trip commute of more than fifty (50) miles; or (iv) the
Company’s material breach of this letter agreement. Notwithstanding the foregoing, you must provide written notice to the Chief Financial
Officer of the Company within thirty (30) days after the date on which such event first occurs, and allow the Company thirty (30) days
thereafter (the “Cure Period”) during which the Company may attempt to rescind or correct the matter giving rise to Good Reason. If the
Company does not rescind or correct the conduct giving rise to Good Reason to your reasonable satisfaction by the expiration of the Cure
Period, your employment will then terminate with Good Reason as of such thirtieth day.
7.4 Voluntary or Mutual Termination. You may voluntarily terminate your employment with the Company at any time
without Good Reason. If you terminate without Good Reason or if your employment terminates as a result of your death or disability, your
salary shall cease on the date of termination and you shall not be entitled to severance, pay in lieu of notice or any other such compensation
other than payment of accrued salary and vacation and such other benefits as expressly required in such event by applicable law or the
terms of applicable benefit plans. The continued vesting of any compensatory equity awards held by you shall cease on the termination
date, and your right to exercise vested awards (or be issued shares under such vested awards) shall be governed by the terms of the
Company’s applicable compensatory equity plans and the corresponding award agreements.
7.5 Application of Section 409A. If the Company (or, if applicable, the successor entity thereto) determines that the severance
payments and benefits provided for in this letter agreement (the “Agreement Payments”) constitute “deferred compensation” under
Section 409A of the Internal Revenue Code (together, with any state law of similar effect, “Section 409A”) and you are a “specified
employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) (a “Specified Employee”),
then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the
Agreement Payments shall be delayed as follows: on the earliest to occur of (i) the date that is six months and one day after the termination
date or (ii) the date of your death (such earliest date, the “Delayed Initial Payment Date”), the Company (or the successor entity thereto, as
applicable) shall (A) pay to you a lump sum amount equal to the sum of the Agreement Payments that you would otherwise have received
through the Delayed Initial Payment Date if the commencement of the payment of the Agreement Payments had not been delayed pursuant
to this Section 7.5 and (B) commence paying the balance of the Agreement Payments in accordance with the applicable payment schedules
set forth in this letter agreement. For the avoidance of doubt, it is intended that (1) each installment of the Agreement Payments provided in
this letter agreement is a separate “payment” for purposes of Section 409A, (2) all Agreement Payments satisfy, to the greatest extent
possible, the exemptions from the application of Section 409A provided under of Treasury Regulation 1.409A-1(b)(4) and 1.409A-1(b)(9)
(iii), and (3) the Agreement Payments consisting of COBRA premiums also satisfy, to the greatest extent possible, the exemptions from the
application of Section 409A provided under Treasury Regulation 1.409A-1(b)(9)(v).
5.
8. Change in Control.
8.1 Definitions.
(a) “Change in Control” shall mean an Ownership Change Event (as defined below) or a series of related Ownership
Change Events (collectively, a “Transaction”) wherein the stockholders of the Company immediately before the Transaction do not retain
direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities of
the Company or, in the case of a Transaction described in Section 8.1(b)(iii), the corporation or other business entity to which the assets of
the Company were transferred (the “Transferee”), as the case may be. For purposes of the preceding sentence, indirect beneficial
ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or
other business entities that own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary
corporations or other business entities.
(b) An “Ownership Change Event” shall be deemed to have occurred if any of the following occurs with respect to the
Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more
than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; or (iii) the
sale, exchange or transfer of all or substantially all of the assets of the Company.
8.2 Severance. On the consummation of any Change in Control (i) any remaining unvested portion of your stock options will
be accelerated such that fifty percent (50%) of your outstanding and then-unvested options become fully vested and exercisable as of the
date of the Change in Control (the “Acceleration”) and (ii) 100% of the shares subject to the Incentive Award shall accelerate and be fully
exercisable immediately prior to the consummation of any Change of Control. If on or within twelve (12) months following a Change in
Control, the Company or a successor corporation terminates your employment without Cause and other as a result of your death or
disability, or you resign for Good Reason (a “Change in Control Termination”), and provided that such termination constitutes a Separation
from Service, then subject to your obligations below, and in lieu of any severance benefits set forth in Section 7.3 herein, you will be
entitled to receive (collectively, the “Change in Control Severance Benefits”):
(a) Subject to payroll deductions and required withholdings and net of any amounts earned by you pursuant to any
employment or consulting arrangements obtained by you following such termination (other than the activities described in the last sentence
of Section 3.1), continuation for twelve (12) months of the greater of: (i) your base salary in effect as of such termination date; or (ii) your
base salary as set forth in Section 2.1. In addition, you will be eligible to receive 100% of your potential annual discretionary bonus amount
set forth in Section 2.2, determined as if all performance targets established by the Board have been satisfied.
(b) You will receive acceleration of vesting of all of your then-outstanding and then-unvested stock option grants as of
the date of termination such that the remaining fifty percent (50%) of your unvested options following the Acceleration become fully
vested and exercisable.
6.
(c) If you timely elect and remain eligible for continued coverage of your group health insurance under COBRA, the
Company will pay your premiums for COBRA coverage for up to twelve (12) months following your Separation from Service, provided
that such payments shall cease if you obtain full-time employment, or cease to be eligible for COBRA, within such period. You agree to
notify the Company promptly if you obtain full-time employment while the Company is paying your COBRA premiums under this letter
agreement. On the 60th day following your Separation from Service, the Company will make the first payment under this clause equal to
the aggregate amount of payments that the Company would have paid through such date had such payments commenced on the Separation
from Service through such 60th day, with the balance of the payments paid thereafter on the schedule described above. If you become
eligible for coverage under another employer’s group health plan or otherwise cease to be eligible for COBRA during the period provided
in this clause, you must immediately notify the Company of such event, and all payments and obligations under this clause will cease.
(d) As a precondition of receiving the Change in Control Severance Benefits, you must first sign and make effective on
or after the termination date a full, general release of claims against the Company in a form acceptable to the Company containing the
language set forth in the Release Agreement attached as Exhibit B.
8.3 Parachute Payments.
(a) If any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code)
to you or for your benefit, whether under this letter agreement or otherwise (a “Payment”), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (together with any interest or penalties imposed with respect
to such excise tax, the “Excise Tax”), then you will be entitled to receive from the Company an additional payment (the “Gross-Up
Payment”) in an amount equal to (i) all Excise Taxes (including any interest or penalties imposed with respect to such taxes) on the
Payment (the “First Reimbursement Payment”), (ii) all federal, state and local income taxes and employment taxes on the First
Reimbursement Payment, and (iii) all Excise Taxes (including any interest or penalties imposed with respect to such taxes) on the First
Reimbursement Payment.
(b) All determinations required to be made under this Section 8.3 including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by
the nationally recognized certified public tax accounting firm used by the Company or, if such firm declines to serve, such other nationally
recognized certified public tax accounting firm as you may designate (the “Accounting Firm”). The Accounting Firm may make reasonable
assumptions and approximations concerning applicable taxes and may rely on reasonable, good-faith interpretations concerning the
application of Sections 280G and 4999 of the Code. The Accounting Firm shall provide its calculations, together with detailed supporting
documentation, to the Company and you within thirty (30) calendar days after the date on which your right to a Payment is triggered (if
requested at that time by the Company or you) and/or at such other times as requested by the Company or you. If the Accounting Firm
determines that no Excise Tax is payable with respect to a Payment, it shall furnish the Company and you with an opinion reasonably
acceptable to you that no Excise Tax will be imposed with respect to such Payment. If the Accounting Firm determines that an Excise Tax
is payable with respect to a Payment, it shall furnish to the Company and you an opinion reasonably acceptable to you of the amount of
Excise Tax payable with respect to the Payments and the amount of Gross-Up Payment due to
7.
you. The Company will pay the Gross-Up Payment to you within thirty (30) days of the date the Company receives the Accounting Firm’s
opinion, but in no event later than the end of your tax year following your tax year in which you pay the Excise Tax. The Company shall
bear all reasonable expenses with respect to the determinations by the Accounting Firm required to be made hereunder. Any determination
by the Accounting Firm shall be binding upon the Company and you.
9. General Provisions.
9.1 Dispute Resolution. To aid in the rapid and economical resolution of any disputes which may arise under this Agreement,
the parties agree that any and all claims, disputes or controversies of any nature whatsoever arising from or regarding the interpretation,
performance, negotiation, execution, enforcement or breach of this Agreement, or your relationship with the Company, including statutory
claims, shall be resolved by confidential, final and binding arbitration conducted before a single arbitrator with Judicial Arbitration and
Mediation Services, Inc. (“JAMS”) in San Francisco, California, in accordance with JAMS’ then-applicable employment arbitration rules
(which may be reviewed at www.jamsadr.com/rules-employment-arbitration/). The parties acknowledge that by agreeing to this
arbitration procedure, they waive the right to resolve any such dispute through a trial by jury, judge or administrative proceeding.
The parties will have the right to be represented by legal counsel at any arbitration proceeding. The arbitrator shall: (i) have the authority to
compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be available under applicable law
in a court proceeding; and (ii) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any,
awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based.
The Company shall bear all JAMS’ arbitration fees and administrative costs in excess of the amount of administrative fees (e.g., filing fees)
that you would otherwise be required to pay if the dispute were decided in a court of law. Nothing in this Agreement shall prevent any party
from obtaining injunctive or other provisional relief in court to prevent irreparable harm pending the conclusion of any arbitration
proceeding.
9.2 Severability. Whenever possible, each provision of this letter agreement will be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this letter agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any
other jurisdiction, but such invalid, illegal or unenforceable provision will be reformed, construed and enforced in such jurisdiction so as to
render it valid, legal, and enforceable consistent with the intent of the parties insofar as possible.
9.3 Notices. Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of personal
delivery (including personal delivery by fax) or the next day after sending by overnight courier, to the Company at its primary office
location and to you at your address as listed on the Company payroll.
9.4 Waiver. If either party should waive any breach of any provisions of this letter agreement, you or the Company shall not
thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this letter agreement.
9.5 Entire Agreement. This letter agreement, together with its exhibits, constitutes the entire and exclusive agreement between
you and the Company, and it supersedes any prior agreement, promise, representation, or statement, written or otherwise, between you
8.
and the Company with regard to this subject matter. It is entered into without reliance on any promise, representation, statement or
agreement other than those expressly contained or incorporated herein, and it cannot be modified or amended except in a writing signed by
you and a duly authorized officer of the Company.
9.6 Counterparts. This letter agreement may be executed in separate counterparts, any one of which need not contain signatures
of more than one party, but all of which taken together will constitute one and the same letter agreement.
9.7 Headings. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part
hereof nor to affect the meaning thereof.
9.8 Successors and Assigns. This letter agreement is intended to bind and inure to the benefit of and be enforceable by you, the
Company and your and its respective successors, assigns, heirs, executors and administrators, except that you may not assign any of your
duties hereunder and you may not assign any of your rights hereunder without the written consent of the Company.
9.9 Governing Law. All questions concerning the construction, validity and interpretation of this letter agreement will be
governed by the law of the State of California as applied to contracts made and to be performed entirely within California.
9.10 Attorneys’ Fees. If either party hereto brings any action to enforce your or its rights hereunder, the prevailing party in such
action shall be entitled to be paid by the other party such prevailing party’s reasonable attorneys’ fees and costs incurred in such action.
Enclosed is your Employee Agreement on Confidential Information and Inventions, which you should read carefully.
To indicate your acceptance of the Company’s offer, please sign this letter agreement in the space provided below and return it to me.
Sincerely,
CYMABAY THERAPEUTICS
By:
/s/ Harold Van Wart
Harold Van Wart
Chief Executive Officer
9.
Accepted and agreed:
/s/ Kirk Rosemark
Kirk Rosemark
EXHIBIT A - Employee Agreement on Confidential Information and Inventions
EXHIBIT B - Release Agreement
10.
EXHIBIT A
CymaBay Therapeutics, Inc.
7999 Gateway Blvd., Suite 130
Newark, CA 94560-1144
Phone 510 293-8800 Fax 510 293-9090
February 23, 2016
EMPLOYEE AGREEMENT ON CONFIDENTIAL
INFORMATION AND INVENTIONS
THIS AGREEMENT is between CymaBay Therapeutics, Inc. a Delaware Corporation (“the Company”), and Kirk Rosemark, (the
“Employee”).
PURPOSE OF AGREEMENT
I want to be employed by the Company, and the Company wants to employ me, provided that, in so doing, it can protect its trade
secrets and inventions, ideas, information, business, and good will.
In consideration of this purpose, and the mutual promises in this Agreement, I agree with the Company as follows:
1. Term
(A) My employment with the Company is an at-will relationship that may be terminated by either the Company or me with or
without cause for any reason whatsoever at any time upon notice to the other party.
(b) If my employment is terminated for any reason, I will be entitled only to the compensation earned by me as of the date of
termination.
2. Confidential Information. I will hold in confidence and use only for the benefit of the Company during the term of my employment
and for five years after the termination of my employment all Confidential Information of the Company, its Affiliates, and all Confidential
Information of companies or persons other than the Company given to the Company under an agreement prohibiting its disclosure.
“Confidential Information” refers to valuable technical or business information that is not known by the public. By way of example,
Confidential Information may include information relating to: inventions or products, including unannounced products; research and
development activities; requirements and specifications of specific customers and potential customers; nonpublic financial information; and
quotations or proposals given to customers.
These restrictions on disclosure do not apply if the information is or becomes publicly known through no wrongful act on my part or
the information is explicitly approved for release under such circumstances by an officer of the Company.
11.
3. Disclosure and Assignment of Inventions. I hereby assign to the Company my entire right, title and interest in all inventions.
“Inventions” refer to (a) all technical or business innovations, whether or not patentable or copyrightable, made by me during the term of
my employment; and (b) all technical or business innovations, whether or not patentable, based upon the Company’s Confidential
Information and made by me after leaving the Company’s employ. I will keep adequate written records of all inventions made by me, such
as notebooks, sketches, program listings and the like, which are the property of the Company. Notwithstanding the foregoing, I am not
required to assign to the Company, although I must disclose, any inventions: (a) for which no equipment, supplies, facilities or Confidential
Information of the Company were used and which was developed entirely on my own time; (b) which at the time of conception or
reduction to practice did not relate directly to the business of the Company or the Company’s actual or demonstrably anticipated research
or development and (c) which did not result from any work I performed for the Company. The disclosure of such inventions must be made
so that the parties can make a determination whether such inventions do in fact qualify for exclusion from assignment to the Company. The
Company will keep confidential any such information I disclose. I will take all steps necessary to assist the Company in securing any
patents, copyrights or other protection for inventions which I am required to assign to the Company as provided above. If I am unable or
unwilling, whether during my employment or after termination, to sign any papers needed to apply for or pursue any patent or copyright
registrations for inventions, I agree that the Company is my attorney-in-fact for that purpose and can sign such papers as my agent and take
any other actions necessary to pursue these registrations.
4. List of Inventions I Own. I have attached as Exhibit A a list of inventions I own, which is a complete list of all technical or
business innovations I own either alone or jointly with others on the date of this Agreement. I agree that I will not incorporate any of these
prior inventions into products being developed for the Company without the prior knowledge and written consent of the Company. Should
the Company wish to use any of my inventions in its business, the Company will negotiate with me for a purchase of or license to use such
invention on mutually agreeable terms. If no such list is attached, or if no such inventions are listed thereon, I represent that I do not own
any inventions at the time of signing this Agreement.
5. Tangible Materials. All tangible materials that incorporate Confidential Information are the Company’s property, and I will give all
of these materials and any other documents and materials which are the property of the Company, including but not limited all notes of any
research or other work which I have performed for the Company and all biological materials created, used or held by me in the course of
my work for the Company, back to the Company at the termination of my employment or earlier upon the Company’s request.
6. Solicitation of Employees. I understand that information about the Company’s employees, such as their skills, performance ratings,
and salary histories, constitutes Confidential Information owned by the Company. I agree that, for a period of twelve (12) months after
termination of my employment for any reason, I will not, either directly or indirectly, solicit, induce, recruit or encourage any of the
Company’s employees to leave their employment, or take away such employees, or attempt to do any of these things, whether on my own
behalf or on behalf of any other person, since to do so would necessarily involve using Confidential Information.
12.
8. Termination. In the event of termination of my employment for any reason, I agree that, as requested by the Company, I will sign
and deliver a “Termination Certification” in the form attached to this Agreement as Exhibit B. I also agree that the Company may give
notice to my new employer of my duties under this Agreement.
9. Duty of Loyalty. During my employment with the Company, I will not engage in any business activity (either for my own profit or
for anyone else) that competes with the Company’s business.
10. Duties to Third Parties. I represent that, to the best of my knowledge, compliance with the terms of this Agreement will not violate
any duty that I may have to anyone other than the Company (such as a former employer) to keep such person’s proprietary information in
confidence or to refrain from using that person’s patents or copyrights. If at any time during my employment with the Company, I am asked
by the Company to perform work which I believe may cause me to violate a duty I have to someone other than the Company, I will
immediately inform an officer of the Company so that an assessment of the situation may be made. I also agree that I will not, during my
employment with the Company, bring onto the Company’s premises, use or disclose to the Company any proprietary information or trade
secrets of any former employer or any other person without that person’s consent.
11. Miscellaneous. This is the only agreement between the Company and myself about confidential information and the ownership of
inventions, and may not be modified, amended or terminated, in whole or in part, except in a writing signed by me and by an officer of the
Company. Any later change in my title, compensation or duties will not affect this Agreement. This Agreement will survive termination of
my employment for any reason, and will continue for the benefit of and will be binding upon the successors, assigns, heirs and legal
representatives of the Company and myself. Any waiver by the Company of a breach of any of the obligations of this Agreement by me
will not operate or be construed as a waiver of any other or subsequent breach by me. In the event any provision of this Agreement is held
to be invalid, void or unenforceable, the remaining provisions will nevertheless continue in full force and effect without being impaired or
invalidated in any way. The prevailing party in any legal action brought by one party against the other and arising out of this Agreement
shall be entitled, in addition
13.
to any other rights and remedies it may have, to reimburse for its expenses, including court costs and reasonable attorney’s fees. This
Agreement will be governed by the laws of the State of California governing contracts between residents to be performed in the State of
California.
CymaBay Therapeutics, Inc.
By:
/s/ Harold Van Wart
Harold Van Wart
Chief Executive Officer
Date
Employee
/s/ Kirk Rosemark
Signature
Kirk Rosemark
March 22, 2016
Date
By:
14.
EXHIBIT A
List of Inventions I Own (see para. 4.)
15.
EXHIBIT B
Termination Certificate
This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals,
lists, equipment, computer programs or listings, other documents or property or any reproductions of any of these materials belonging to
CymaBay Therapeutics, Inc., a Delaware corporation, its subsidiaries, successors or assigns (collectively, the “Company”).
I further certify that I have complied with all the terms of the Company’s Employee Confidential Information and Inventions
Agreement signed by me, including the reporting of any inventions and original works of authorship (as defined in that agreement)
conceived or made buy me (solely or jointly with others) covered by that agreement.
I further agree that, in compliance with the Employee Confidential Information and Inventions Agreement, I will preserve as
confidential all trade secrets, confidential knowledge, data or other proprietary information relating to inventions or products, including but
not limited to unannounced products, research and development activities, requirements and specifications of specific customers and
potential customers, nonpublic financial information, and quotations or proposals given to customers, including any information disclosed
to the Company in confidence by any third party.
I further agree that for twelve (12) months from this date, I will not solicit, induce, recruit or encourage any of the Company’s
employees to leave their employment.
Signature
Kirk Rosemark
Date
16.
EXHIBIT B
RELEASE AGREEMENT
(To be signed on or after the Separation Date)
I understand that my employment with CymaBay Therapeutics (the “Company”) terminated effective , (the
“Separation Date”). The Company has agreed that if I choose to sign this Release Agreement (“Release”), the Company will provide
certain severance benefits (minus the required withholdings and deductions) pursuant to the terms of the employment agreement dated
(as amended, the “Letter Agreement”). I understand that I am not entitled to such severance benefits unless I sign this Release,
and it becomes fully effective.
I understand that this Release, together with the Letter Agreement, constitutes the complete, final and exclusive embodiment of the
entire agreement between the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation
by the Company that is not expressly stated therein.
I hereby confirm my obligations under my Employee Agreement on Confidential Information and Inventions with the Company.
I hereby represent that I have been paid all compensation owed and for all hours worked, have received all the leave and leave
benefits and protections for which I am eligible, pursuant to the Family and Medical Leave Act or otherwise, and have not suffered any on-
the-job injury for which I have not already filed a claim.
In exchange for the consideration provided to me by this Release that I am not otherwise entitled to receive, I hereby generally and
completely release Company and its current and former directors, officers, employees, shareholders, partners, agents, attorneys,
predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and obligations,
both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing
this Release. This general release includes, but is not limited to: (a) all claims arising out of or in any way related to my employment with
the Company or the termination of that employment; (b) all claims related to my compensation or benefits from the Company, including
salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other
ownership interests in the Company; (c) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good
faith and fair dealing; (d) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public
policy; and (e) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or
other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the
federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), and the California Fair Employment and Housing Act (as
amended).
Nothing in this Release shall prevent me from filing, cooperating with, or participating in any proceeding before the Equal
Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except
that I hereby acknowledge and agree that I shall not recover any monetary benefits in connection with any such proceeding.
17.
I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA (“ADEA Waiver”).
I also acknowledge that the consideration given for the ADEA Waiver is in addition to anything of value to which I was already entitled. I
further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my ADEA Waiver does not apply to any
rights or claims that arise after the date I sign this Release; (b) I should consult with an attorney prior to signing this Release; (c) I have
twenty-one (21) days to consider this Release (although I may choose to voluntarily sign it sooner); (d) I have seven (7) days following the
date I sign this Release to revoke the ADEA Waiver; and (e) the ADEA Waiver will not be effective until the date upon which the
revocation period has expired unexercised, which will be the eighth day after I sign this Release.
I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads 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.” I hereby expressly waive
and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any
claims hereunder.
I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than twenty-
one (21) days following the date it is provided to me.
I accept and agree to the terms and conditions stated above:
Date
Kirk Rosemark
18.
Exhibit 10.24
January 27, 2016
Robert Martin
Dear Rob:
CymaBay Therapeutics (the “Company”) is pleased to offer you employment as Senior Vice-President of Manufacturing and Non-clinical
Development on the following terms:
1. Position, Duties and Responsibilities. Subject to the terms set forth herein, the Company agrees to employ you in the position of
Senior Vice-President of Manufacturing and Non-clinical Development and you hereby accept such employment effective immediately.
You will report to the Company’s Chief Executive Officer (“CEO”) and will perform the duties customarily associated with this position
and such other duties as are assigned to you by the CEO. You will devote your full business time and attention to the business affairs of the
Company, except for reasonable vacations and periods of illness or incapacity permitted by the Company’s general employment policies.
The employment relationship between you and the Company shall also be governed by the general employment policies and practices of
the Company, including those relating to protection of confidential information and assignment of inventions, except that when the terms of
this letter agreement differ from or are in conflict with the Company’s general employment policies or practices, this letter agreement shall
control.
2. Compensation and Employee Benefits.
2.1 Base Salary. Your base salary will be two hundred fifty seventy thousand, five hundred eighteen dollars ($257,518) on an
annualized basis, less payroll deductions and required withholdings, paid according to the Company’s regular payroll schedule and
procedures. Subject to the other terms of this letter agreement, your base salary may be modified by the Company in its sole discretion.
Your salary will be effective as of January 1, 2016.
2.2 Discretionary Bonus. You will be eligible to participate in the Company’s annual bonus program pursuant to the terms of
that program and you will be eligible to receive a bonus of up to thirty-five percent (35%) of your annual base salary. Your actual bonus, if
any, will be determined by the Company’s Board of Directors, or the Compensation subcommittee thereof (the “Board”), in its sole
discretion, based upon its evaluation of your performance, the Company’s performance, and any other considerations it deems relevant.
You must be employed through the bonus payment date to be eligible for, and to earn, any such bonus. Any bonus payment will be subject
to payroll deductions and required withholdings.
2.3 Employee Benefits. You will be entitled to all employee benefits, including vacation accrual of twenty (20) days per year
and health and disability benefits for which you are eligible under the terms and conditions of the standard Company benefit plans which
may be in effect from time to time and provided by the Company to its senior executive-level employees generally. Currently, such benefits
include twelve paid holidays, as well as paid sick leave of up to ten days per year. Notwithstanding the foregoing, the Company reserves
the right to adopt, amend or discontinue any employee benefit plan or policy, including changes required by applicable law.
1.
2.4 Stock Options. Subject to the approval of the Board pursuant to the Company’s equity incentive plan you may from time to
time be granted stock options of shares of Company common stock at a per share exercise price equal to the per share fair market value of
the Company’s common stock on the date of grant as determined by the Board. Option grants are made at regular Board meetings held
approximately once each calendar quarter. Such stock options will vest as determined by the Board, as long as you remain in continuous
service with the Company and a portion of the shares subject to your outstanding options may vest on an accelerated basis pursuant to
Sections 7 or 8. Except as provided herein, such stock option will be subject to the provisions of the equity incentive plan of the Company
under which the options are granted and the applicable form of stock option agreement there under (the “Plan Documents”).
3. Other Activities During Employment.
3.1 Activities. Except with the prior written consent of the CEO, you will not, during your employment with the Company,
undertake or engage in any other employment, occupation or business enterprise, other than ones in which you are a passive investor. You
may engage in civic and not-for-profit activities so long as such activities do not interfere with the performance of your job duties for the
Company.
3.2 Investments and Interests. Except as permitted by the first sentence of Section 3.1 and by Section 3.3, during your
employment you agree not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by you to
be adverse or antagonistic to the Company, or its business or prospects, financial or otherwise.
3.3 Noncompetition. During the term of your employment by the Company, except on behalf of the Company, you will not
directly or indirectly, whether as an officer, director, stockholder, partner, proprietor, associate, representative, consultant, or in any
capacity whatsoever engage in, become financially interested in, be employed by or have any business connection with any other person,
corporation, firm, partnership or other entity whatsoever that competes with the Company anywhere in the world, in any line of business
engaged in (or planned to be engaged in) by the Company; provided, however, that anything above to the contrary notwithstanding, you
may own, as a passive investor, securities of any entity, so long as your direct holdings in any one such corporation do not in the aggregate
constitute more than one percent (1%) of the voting stock of such corporation.
4. Company Policies; Confidential Information and Inventions Agreement. You acknowledge your obligations under the
Company’s Employee Agreement on Confidential Information and Inventions, a copy of which is attached as Exhibit A. You further
acknowledge your obligation to abide by the Company’s rules, policies and procedures.
5. Immigration. The Immigration Reform and Control Act of 1986 requires that every person present proof to the Company of
their identity and eligibility and/or authorization to accept employment with the Company. In order to comply with this law you must
provide appropriate documentation to prove both your identity and legal eligibility to be employed at the Company.
2.
6. Your Representations and Warranties.
6.1 No Breach of Contract. You represent and warrant that the execution and delivery of this letter agreement by you and the
performance of your obligations hereunder will not conflict with or breach any agreement, order or decree to which you are a party or by
which you are bound. You warrant that you are subject to no employment agreement or restrictive covenant preventing full performance of
your duties under this letter agreement.
6.2 No Conflict of Interest. You warrant that you are not, to the best of your knowledge and belief, involved in any situation
that might create, or appear to create, a conflict of interest with your loyalty to or duties for the Company.
6.3 Notification of Materials or Documents from Other Employers. You further warrant that you have not brought and will
not bring to the Company or use in the performance of your responsibilities at the Company any materials or documents of a former
employer that are not generally available to the public, unless you have obtained express written authorization from the former employer
for their possession and use.
6.4 Notification of Other Post-Employment Obligations. You also understand that, as part of your employment with the
Company, you are not to breach any obligation of confidentiality that you have to former employers, and you agree to honor all such
obligations to former employers dining your employment with the Company.
7. Termination of Employment.
7.1 At-Will Employment Relationship. Your employment with the Company shall be at-will. Either you or the Company may
terminate the employment relationship at any time, with or without Cause, and with or without advance notice.
7.2 Termination for Cause.
(a) If the Company terminates your employment at any time for Cause (as defined below), your salary shall cease on the
date of termination and you shall not be entitled to severance pay, COBRA premium payments, pay in lieu of notice or any other such
compensation other than payment of accrued salary and vacation and such other benefits as expressly required by applicable law or the
terms of applicable benefit plans. The continued vesting of any Equity Awards held by you shall cease on your employment termination
date, and your right to exercise vested Equity Awards shall be governed by the Plan Documents.
(b) Definition of Cause. For purposes of this agreement, “Cause” means the occurrence of any one or more of the
following: (i) your conviction of, or plea of no contest, with respect to any felony or any crime involving fraud, dishonesty or moral
turpitude; (ii) your participation in a fraud or act of dishonesty that results in material harm to the Company; (iii) your intentional material
violation of any contract or agreement between you and the Company, including but not limited to this letter agreement or your Employee
Agreement on Confidential Information and Inventions, or your violation of any statutory duty that you owe to the Company, but only if
you do not correct any such violation within thirty (30) days after written notice thereof has been provided to you (if such notice is
reasonably practicable); or (iv) your gross negligence or willful neglect of your job duties, as determined by the Board in good faith, but
only if you do not correct such violation within thirty (30) days after written notice thereof has been provided to you (if such notice is
reasonably practicable).
3.
7.3 Severance Benefits For Termination Without Cause or Resignation for Good Reason.
(a) If the Company terminates your employment without Cause and other than as a result of your death or disability, or if
you resign your employment for Good Reason (defined below), and provided such termination constitutes a “separation from service” (as
defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “Separation from
Service”), you will be eligible to receive the severance benefits described in this Section 7.3.
(b) You will be eligible to receive, subject to payroll deductions and required withholdings and net of any amounts
earned by you pursuant to any employment or consulting arrangements obtained by you following such termination (other than the
activities described in the last sentence of Section 3.1), continuation for twelve (12) months of the greater of: (i) your base salary in effect as
of such termination date; or (ii) your base salary as set forth in Section 2.1. In addition, you will be eligible to receive your potential annual
discretionary bonus amount set forth in Section 2.4, determined as if all performance targets established by the Board have been satisfied,
pro-rated for the number of months elapsed in the year in which your employment terminates, but in no event will you receive a bonus pro-
rated for less than nine (9) months. You agree to notify the Company promptly of any amount earned by you from other employment or a
consulting engagement while you are receiving severance payments under this letter agreement.
(c) If you timely elect and remain eligible for continued coverage of your group health insurance under COBRA, the
Company will pay your premiums for COBRA coverage for up to twelve (12) months following your Separation from Service, provided
that such payments shall cease if you obtain full-time employment, or cease to be eligible for COBRA, within such period. You agree to
notify the Company promptly if you obtain full-time employment while the Company is paying your COBRA premiums under this letter
agreement. On the 60th day following your Separation from Service, the Company will make the first payment under this clause equal to
the aggregate amount of payments that the Company would have paid through such date had such payments commenced on the Separation
from Service through such 60th day, with the balance of the payments paid thereafter on the schedule described above. If you become
eligible for coverage under another employer’s group health plan or otherwise cease to be eligible for COBRA during the period provided
in this clause, you must immediately notify the Company of such event, and all payments and obligations under this clause will cease.
(d) You will receive acceleration of vesting of all of your then-outstanding and then-unvested stock Option grants as of
the date of termination as to the number of shares that would have vested in their vesting schedules as if you had been in service for an
additional nine (9) months as of your Separation from Service.
(e) Your receipt of any severance benefits under this Section 7.3 is contingent upon your signing and making effective
within sixty (60) days after the termination date, a full, general release of all claims against the Company in a form acceptable to the
Company containing the language set forth in the Release Agreement attached as Exhibit B on or after the termination date. The base salary
and bonus severance will be paid in substantially equal installments over the nine (9) month period following your Separation in Service
according to the Company’s payroll procedures; provided, however, that no payments will be made to you prior to the 60th day following
your Separation from Service. On the first payroll pay day following the 60th day after your Separation from Service, the Company will
pay you the cash severance amounts you would have received on or prior to such date in a lump sum in compliance with Code
Section 409A and the effectiveness of the release, with the balance of the cash payments being made as originally scheduled.
4.
(f) Definition of Good Reason. For purposes of this letter agreement, “Good Reason” shall mean any one of the
following events that occurs without your consent: (i) the material reduction in your responsibilities, authorities or functions as an
employee of the Company (but not merely a change in reporting relationships); (ii) a material reduction in your level of compensation
(including base salary, fringe benefits and target bonus under any corporate-performance based bonus or incentive programs); (iii) a
material change of your place of employment that results in an increase to your round trip commute of more than twenty (20) miles; or
(iv) the Company’s material breach of this letter agreement. Notwithstanding the foregoing, you must provide written notice to the General
Counsel of the Company within thirty (30) days after the date on which such event first occurs, and allow the Company thirty (30) days
thereafter (the “Cure Period”) during which the Company may attempt to rescind or correct the matter giving rise to Good Reason. If the
Company does not rescind or correct the conduct giving rise to Good Reason to your reasonable satisfaction by the expiration of the Cure
Period, your employment will then terminate with Good Reason as of such thirtieth day.
7.4 Voluntary or Mutual Termination. You may voluntarily terminate your employment with the Company at any time
without Good Reason. If you terminate without Good Reason or if your employment terminates as a result of your death or disability, your
salary shall cease on the date of termination and you shall not be entitled to severance, pay in lieu of notice or any other such compensation
other than payment of accrued salary and vacation and such other benefits as expressly required in such event by applicable law or the
terms of applicable benefit plans. The continued vesting of any compensatory equity awards held by you shall cease on the termination
date, and your right to exercise vested awards (or be issued shares under such vested awards) shall be governed by the terms of the
Company’s applicable compensatory equity plans and the corresponding award agreements.
7.5 Application of Section 409A. If the Company (or, if applicable, the successor entity thereto) determines that the severance
payments and benefits provided for in this letter agreement (the “Agreement Payments”) constitute “deferred compensation” under
Section 409A of the Internal Revenue Code (together, with any state law of similar effect, “Section 409A”) and you are a “specified
employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) (a “Specified Employee”),
then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the
Agreement Payments shall be delayed as follows: on the earliest to occur of (i) the date that is six months and one day after the termination
date or (ii) the date of your death (such earliest date, the “Delayed Initial Payment Date”), the Company (or the successor entity thereto, as
applicable) shall (A) pay to you a lump sum amount equal to the sum of the Agreement Payments that you would otherwise have received
through the Delayed Initial Payment Date if the commencement of the payment of the Agreement Payments had not been delayed pursuant
to this Section 7.5 and (B) commence paying the balance of the Agreement Payments in accordance with the applicable payment schedules
set forth in this letter agreement. For the avoidance of doubt, it is intended that (1) each installment of the Agreement Payments provided in
this letter agreement is a separate “payment” for purposes of Section 409A, (2) all Agreement Payments satisfy, to the greatest extent
possible, the exemptions from the application of Section 409A provided under of Treasury Regulation 1.409A-1(b)(4) and 1.409A-1(b)(9)
(iii), and (3) the Agreement Payments consisting of COBRA premiums also satisfy, to the greatest extent possible, the exemptions from the
application of Section 409A provided under Treasury Regulation 1.409A-1(b)(9)(v).
5.
8. Change in Control.
8.1 Definitions.
(a) “Change in Control” shall mean an Ownership Change Event (as defined below) or a series of related Ownership
Change Events (collectively, a “Transaction”) wherein the stockholders of the Company immediately before the Transaction do not retain
direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities of
the Company or, in the case of a Transaction described in Section 8.1(b)(iii), the corporation or other business entity to which the assets of
the Company were transferred (the “Transferee”), as the case may be. For purposes of the preceding sentence, indirect beneficial
ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or
other business entities that own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary
corporations or other business entities.
(b) An “Ownership Change Event” shall be deemed to have occurred if any of the following occurs with respect to the
Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more
than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; or (iii) the
sale, exchange or transfer of all or substantially all of the assets of the Company.
8.2 Severance. On the consummation of any Change in Control (i) any remaining unvested portion of your stock options will
be accelerated such that fifty percent (50%) of your outstanding and then-unvested options become fully vested and exercisable as of the
date of the Change in Control (the “Acceleration”) and (ii) 100% of the shares subject to the Incentive Award shall accelerate and be fully
exercisable immediately prior to the consummation of any Change of Control. If on or within twelve (12) months following a Change in
Control, the Company or a successor corporation terminates your employment without Cause and other as a result of your death or
disability, or you resign for Good Reason (a “Change in Control Termination”), and provided that such termination constitutes a Separation
from Service, then subject to your obligations below, and in lieu of any severance benefits set forth in Section 7.3 herein, you will be
entitled to receive (collectively, the “Change in Control Severance Benefits”):
(a) Subject to payroll deductions and required withholdings and net of any amounts earned by you pursuant to any
employment or consulting arrangements obtained by you following such termination (other than the activities described in the last sentence
of Section 3.1), continuation for twelve (12) months of the greater of: (i) your base salary in effect as of such termination date; or (ii) your
base salary as set forth in Section 2.1. In addition, you will be eligible to receive 125% of your potential annual discretionary bonus amount
set forth in Section 2.4, determined as if all performance targets established by the Board have been satisfied.
(b) You will receive acceleration of vesting of all of your then-outstanding and then-unvested stock option grants as of
the date of termination such that the remaining fifty percent (50%) of your unvested options following the Acceleration become fully
vested and exercisable.
6.
(c) If you timely elect and remain eligible for continued coverage of your group health insurance under COBRA, the
Company will pay your premiums for COBRA coverage for up to fifteen (15) months following your Separation from Service, provided
that such payments shall cease if you obtain full-time employment, or cease to be eligible for COBRA, within such period. You agree to
notify the Company promptly if you obtain full-time employment while the Company is paying your COBRA premiums under this letter
agreement. On the 60th day following your Separation from Service, the Company will make the first payment under this clause equal to
the aggregate amount of payments that the Company would have paid through such date had such payments commenced on the Separation
from Service through such 60th day, with the balance of the payments paid thereafter on the schedule described above. If you become
eligible for coverage under another employer’s group health plan or otherwise cease to be eligible for COBRA during the period provided
in this clause, you must immediately notify the Company of such event, and all payments and obligations under this clause will cease.
(d) As a precondition of receiving the Change in Control Severance Benefits, you must first sign and make effective on
or after the termination date a full, general release of claims against the Company in a form acceptable to the Company containing the
language set forth in the Release Agreement attached as Exhibit B.
8.3 Parachute Payments.
(a) If any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code)
to you or for your benefit, whether under this letter agreement or otherwise (a “Payment”), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (together with any interest or penalties imposed with respect
to such excise tax, the “Excise Tax”), then you will be entitled to receive from the Company an additional payment (the “Gross-Up
Payment”) in an amount equal to (i) all Excise Taxes (including any interest or penalties imposed with respect to such taxes) on the
Payment (the “First Reimbursement Payment”), (ii) all federal, state and local income taxes and employment taxes on the First
Reimbursement Payment, and (iii) all Excise Taxes (including any interest or penalties imposed with respect to such taxes) on the First
Reimbursement Payment.
(b) All determinations required to be made under this Section 8.3 including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by
the nationally recognized certified public tax accounting firm used by the Company or, if such firm declines to serve, such other nationally
recognized certified public tax accounting firm as you may designate (the “Accounting Firm”). The Accounting Firm may make reasonable
assumptions and approximations concerning applicable taxes and may rely on reasonable, good-faith interpretations concerning the
application of Sections 280G and 4999 of the Code. The Accounting Firm shall provide its calculations, together with detailed supporting
documentation, to the Company and you within thirty (30) calendar days after the date on which your right to a Payment is triggered (if
requested at that time by the Company or you) and/or at such other times as requested by the Company or you. If the Accounting Firm
determines that no Excise Tax is payable with respect to a Payment, it shall furnish the Company and you with an opinion reasonably
acceptable to you that no Excise Tax will be imposed with respect to such Payment. If the Accounting Firm determines that an Excise Tax
is payable with respect to a Payment, it shall furnish to the Company and you an opinion reasonably acceptable to you of the amount of
Excise Tax payable with respect to the Payments and the amount of Gross-Up Payment due to
7.
you. The Company will pay the Gross-Up Payment to you within thirty (30) days of the date the Company receives the Accounting Firm’s
opinion, but in no event later than the end of your tax year following your tax year in which you pay the Excise Tax. The Company shall
bear all reasonable expenses with respect to the determinations by the Accounting Firm required to be made hereunder. Any determination
by the Accounting Firm shall be binding upon the Company and you.
9. General Provisions.
9.1 Dispute Resolution. To aid in the rapid and economical resolution of any disputes which may arise under this Agreement,
the parties agree that any and all claims, disputes or controversies of any nature whatsoever arising from or regarding the interpretation,
performance, negotiation, execution, enforcement or breach of this Agreement, or your relationship with the Company, including statutory
claims, shall be resolved by confidential, final and binding arbitration conducted before a single arbitrator with Judicial Arbitration and
Mediation Services, Inc. (“JAMS”) in San Francisco, California, in accordance with JAMS’ then-applicable employment arbitration rules
(which may be reviewed at www.jamsadr.com/rules-employment-arbitration/). The parties acknowledge that by agreeing to this
arbitration procedure, they waive the right to resolve any such dispute through a trial by jury, judge or administrative proceeding.
The parties will have the right to be represented by legal counsel at any arbitration proceeding. The arbitrator shall: (i) have the authority to
compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be available under applicable law
in a court proceeding; and (ii) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any,
awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based.
The Company shall bear all JAMS’ arbitration fees and administrative costs in excess of the amount of administrative fees (e.g., filing fees)
that you would otherwise be required to pay if the dispute were decided in a court of law. Nothing in this Agreement shall prevent any party
from obtaining injunctive or other provisional relief in court to prevent irreparable harm pending the conclusion of any arbitration
proceeding.
9.2 Severability. Whenever possible, each provision of this letter agreement will be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this letter agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any
other jurisdiction, but such invalid, illegal or unenforceable provision will be reformed, construed and enforced in such jurisdiction so as to
render it valid, legal, and enforceable consistent with the intent of the parties insofar as possible.
9.3 Notices. Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of personal
delivery (including personal delivery by fax) or the next day after sending by overnight courier, to the Company at its primary office
location and to you at your address as listed on the Company payroll.
9.4 Waiver. If either party should waive any breach of any provisions of this letter agreement, you or the Company shall not
thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this letter agreement.
9.5 Entire Agreement. This letter agreement, together with its exhibits, constitutes the entire and exclusive agreement between
you and the Company, and it supersedes any prior agreement, promise, representation, or statement, written or otherwise, between you
8.
and the Company with regard to this subject matter. It is entered into without reliance on any promise, representation, statement or
agreement other than those expressly contained or incorporated herein, and it cannot be modified or amended except in a writing signed by
you and a duly authorized officer of the Company.
9.6 Counterparts. This letter agreement may be executed in separate counterparts, any one of which need not contain signatures
of more than one party, but all of which taken together will constitute one and the same letter agreement.
9.7 Headings. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part
hereof nor to affect the meaning thereof.
9.8 Successors and Assigns. This letter agreement is intended to bind and inure to the benefit of and be enforceable by you, the
Company and your and its respective successors, assigns, heirs, executors and administrators, except that you may not assign any of your
duties hereunder and you may not assign any of your rights hereunder without the written consent of the Company.
9.9 Governing Law. All questions concerning the construction, validity and interpretation of this letter agreement will be
governed by the law of the State of California as applied to contracts made and to be performed entirely within California.
9.10 Attorneys’ Fees. If either party hereto brings any action to enforce your or its rights hereunder, the prevailing party in such
action shall be entitled to be paid by the other party such prevailing party’s reasonable attorneys’ fees and costs incurred in such action.
Enclosed is your Employee Agreement on Confidential Information and Inventions, which you should read carefully.
To indicate your acceptance of the Company’s offer, please sign this letter agreement in the space provided below and return it to me along
with the signed Employee Agreement on Confidential Information and Inventions. This offer shall expire on March 15, 2014 if not accepted
prior to such date. If you have any questions regarding this letter agreement, feel free to contact me.
Sincerely,
CYMABAY THERAPEUTICS
By:
/s/ Harold Van Wart
Harold Van Wart
Chief Executive Officer
9.
Accepted and agreed:
/s/ Robert Martin
Robert Martin
EXHIBIT A - Employee Agreement on Confidential Information and Inventions
EXHIBIT B - Release Agreement
10.
EXHIBIT A
CymaBay Therapeutics, Inc.
7999 Gateway Blvd., Suite 130
Newark, CA 94560-1144
Phone 510 293-8800 Fax 510 293-9090
January 27, 2016
EMPLOYEE AGREEMENT ON CONFIDENTIAL
INFORMATION AND INVENTIONS
THIS AGREEMENT is between CymaBay Therapeutics, Inc. a Delaware Corporation (“the Company”), and Robert Martin, (the
“Employee”).
PURPOSE OF AGREEMENT
I want to be employed by the Company, and the Company wants to employ me, provided that, in so doing, it can protect its trade
secrets and inventions, ideas, information, business, and good will.
In consideration of this purpose, and the mutual promises in this Agreement, I agree with the Company as follows:
1. Term
(A) My employment with the Company is an at-will relationship that may be terminated by either the Company or me with or
without cause for any reason whatsoever at any time upon notice to the other party.
(b) If my employment is terminated for any reason, I will be entitled only to the compensation earned by me as of the date of
termination.
2. Confidential Information. I will hold in confidence and use only for the benefit of the Company during the term of my employment
and for five years after the termination of my employment all Confidential Information of the Company, its Affiliates, and all Confidential
Information of companies or persons other than the Company given to the Company under an agreement prohibiting its disclosure.
“Confidential Information” refers to valuable technical or business information that is not known by the public. By way of example,
Confidential Information may include information relating to: inventions or products, including unannounced products; research and
development activities; requirements and specifications of specific customers and potential customers; nonpublic financial information; and
quotations or proposals given to customers.
These restrictions on disclosure do not apply if the information is or becomes publicly known through no wrongful act on my part or
the information is explicitly approved for release under such circumstances by an officer of the Company.
11.
3. Disclosure and Assignment of Inventions. I hereby assign to the Company my entire right, title and interest in all inventions.
“Inventions” refer to (a) all technical or business innovations, whether or not patentable or copyrightable, made by me during the term of
my employment; and (b) all technical or business innovations, whether or not patentable, based upon the Company’s Confidential
Information and made by me after leaving the Company’s employ. I will keep adequate written records of all inventions made by me, such
as notebooks, sketches, program listings and the like, which are the property of the Company. Notwithstanding the foregoing, I am not
required to assign to the Company, although I must disclose, any inventions: (a) for which no equipment, supplies, facilities or Confidential
Information of the Company were used and which was developed entirely on my own time; (b) which at the time of conception or
reduction to practice did not relate directly to the business of the Company or the Company’s actual or demonstrably anticipated research
or development and (c) which did not result from any work I performed for the Company. The disclosure of such inventions must be made
so that the parties can make a determination whether such inventions do in fact qualify for exclusion from assignment to the Company. The
Company will keep confidential any such information I disclose. I will take all steps necessary to assist the Company in securing any
patents, copyrights or other protection for inventions which I am required to assign to the Company as provided above. If I am unable or
unwilling, whether during my employment or after termination, to sign any papers needed to apply for or pursue any patent or copyright
registrations for inventions, I agree that the Company is my attorney-in-fact for that purpose and can sign such papers as my agent and take
any other actions necessary to pursue these registrations.
4. List of Inventions I Own. I have attached as Exhibit A a list of inventions I own, which is a complete list of all technical or
business innovations I own either alone or jointly with others on the date of this Agreement. I agree that I will not incorporate any of these
prior inventions into products being developed for the Company without the prior knowledge and written consent of the Company. Should
the Company wish to use any of my inventions in its business, the Company will negotiate with me for a purchase of or license to use such
invention on mutually agreeable terms. If no such list is attached, or if no such inventions are listed thereon, I represent that I do not own
any inventions at the time of signing this Agreement.
5. Tangible Materials. All tangible materials that incorporate Confidential Information are the Company’s property, and I will give all
of these materials and any other documents and materials which are the property of the Company, including but not limited all notes of any
research or other work which I have performed for the Company and all biological materials created, used or held by me in the course of
my work for the Company, back to the Company at the termination of my employment or earlier upon the Company’s request.
6. Solicitation of Employees. I understand that information about the Company’s employees, such as their skills, performance ratings,
and salary histories, constitutes Confidential Information owned by the Company. I agree that, for a period of twelve (12) months after
termination of my employment for any reason, I will not, either directly or indirectly, solicit, induce, recruit or encourage any of the
Company’s employees to leave their employment, or take away such employees, or attempt to do any of these things, whether on my own
behalf or on behalf of any other person, since to do so would necessarily involve using Confidential Information.
8. Termination. In the event of termination of my employment for any reason, I agree that, as requested by the Company, I will sign
and deliver a “Termination Certification” in the form attached to this Agreement as Exhibit B. I also agree that the Company may give
notice to my new employer of my duties under this Agreement.
12.
9. Duty of Loyalty. During my employment with the Company, I will not engage in any business activity (either for my own profit or
for anyone else) that competes with the Company’s business.
10. Duties to Third Parties. I represent that, to the best of my knowledge, compliance with the terms of this Agreement will not violate
any duty that I may have to anyone other than the Company (such as a former employer) to keep such person’s proprietary information in
confidence or to refrain from using that person’s patents or copyrights. If at any time during my employment with the Company, I am asked
by the Company to perform work which I believe may cause me to violate a duty I have to someone other than the Company, I will
immediately inform an officer of the Company so that an assessment of the situation may be made. I also agree that I will not, during my
employment with the Company, bring onto the Company’s premises, use or disclose to the Company any proprietary information or trade
secrets of any former employer or any other person without that person’s consent.
11. Miscellaneous. This is the only agreement between the Company and myself about confidential information and the ownership of
inventions, and may not be modified, amended or terminated, in whole or in part, except in a writing signed by me and by an officer of the
Company. Any later change in my title, compensation or duties will not affect this Agreement. This Agreement will survive termination of
my employment for any reason, and will continue for the benefit of and will be binding upon the successors, assigns, heirs and legal
representatives of the Company and myself. Any waiver by the Company of a breach of any of the obligations of this Agreement by me
will not operate or be construed as a waiver of any other or subsequent breach by me. In the event any provision of this Agreement is held
to be invalid, void or unenforceable, the remaining provisions will nevertheless continue in full force and effect without being impaired or
invalidated in any way. The prevailing party in any legal action brought by one party against the other and arising out of this Agreement
shall be entitled, in addition
13.
to any other rights and remedies it may have, to reimburse for its expenses, including court costs and reasonable attorney’s fees. This
Agreement will be governed by the laws of the State of California governing contracts between residents to be performed in the State of
California.
CymaBay Therapeutics, Inc.
By:
/s/ Harold Van Wart
Harold Van Wart
Chief Executive Officer
March 28, 2016
Date
Employee
/s/ Robert Martin
Signature
Robert Martin
Printed Name
March 28, 2016
By:
14.
EXHIBIT A
List of Inventions I Own (see para. 4.)
15.
EXHIBIT B
Termination Certificate
This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals,
lists, equipment, computer programs or listings, other documents or property or any reproductions of any of these materials belonging to
CymaBay Therapeutics, Inc., a Delaware corporation, its subsidiaries, successors or assigns (collectively, the “Company”).
I further certify that I have complied with all the terms of the Company’s Employee Confidential Information and Inventions
Agreement signed by me, including the reporting of any inventions and original works of authorship (as defined in that agreement)
conceived or made buy me (solely or jointly with others) covered by that agreement.
I further agree that, in compliance with the Employee Confidential Information and Inventions Agreement, I will preserve as
confidential all trade secrets, confidential knowledge, data or other proprietary information relating to inventions or products, including but
not limited to unannounced products, research and development activities, requirements and specifications of specific customers and
potential customers, nonpublic financial information, and quotations or proposals given to customers, including any information disclosed
to the Company in confidence by any third party.
I further agree that for twelve (12) months from this date, I will not solicit, induce, recruit or encourage any of the Company’s
employees to leave their employment.
Signature
Printed Name
Date
16.
EXHIBIT B
RELEASE AGREEMENT
(To be signed on or after the Separation Date)
I understand that my employment with CymaBay Therapeutics (the “Company”) terminated effective , (the
“Separation Date”). The Company has agreed that if I choose to sign this Release Agreement (“Release”), the Company will provide
certain severance benefits (minus the required withholdings and deductions) pursuant to the terms of the employment agreement dated
(as amended, the “Letter Agreement”). I understand that I am not entitled to such severance benefits unless I sign this Release,
and it becomes fully effective.
I understand that this Release, together with the Letter Agreement, constitutes the complete, final and exclusive embodiment of the
entire agreement between the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation
by the Company that is not expressly stated therein.
I hereby confirm my obligations under my Employee Agreement on Confidential Information and Inventions with the Company.
I hereby represent that I have been paid all compensation owed and for all hours worked, have received all the leave and leave
benefits and protections for which I am eligible, pursuant to the Family and Medical Leave Act or otherwise, and have not suffered any on-
the-job injury for which I have not already filed a claim.
In exchange for the consideration provided to me by this Release that I am not otherwise entitled to receive, I hereby generally and
completely release Company and its current and former directors, officers, employees, shareholders, partners, agents, attorneys,
predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and obligations,
both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing
this Release. This general release includes, but is not limited to: (a) all claims arising out of or in any way related to my employment with
the Company or the termination of that employment; (b) all claims related to my compensation or benefits from the Company, including
salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other
ownership interests in the Company; (c) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good
faith and fair dealing; (d) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public
policy; and (e) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or
other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the
federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), and the California Fair Employment and Housing Act (as
amended).
Nothing in this Release shall prevent me from filing, cooperating with, or participating in any proceeding before the Equal
Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except
that I hereby acknowledge and agree that I shall not recover any monetary benefits in connection with any such proceeding.
I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA (“ADEA Waiver”).
I also acknowledge that the consideration given for the ADEA Waiver is in addition to anything of value to which I was already entitled. I
further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my ADEA Waiver does not apply to any
rights or claims that arise after the date I sign this Release; (b) I should consult with an attorney prior to signing this Release; (c) I have
twenty-one (21)
17.
days to consider this Release (although I may choose to voluntarily sign it sooner); (d) I have seven (7) days following the date I sign this
Release to revoke the ADEA Waiver; and (e) the ADEA Waiver will not be effective until the date upon which the revocation period has
expired unexercised, which will be the eighth day after I sign this Release.
I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads 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.” I hereby expressly waive
and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any
claims hereunder.
I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than twenty-
one (21) days following the date it is provided to me.
I accept and agree to the terms and conditions stated above:
Date
Robert Martin
18.
Exhibit 10.25
February 23, 2016
Patrick O’Mara
Dear Patrick:
CymaBay Therapeutics (the “Company”) is pleased to offer you employment as Vice President of Business Development on the following
terms:
1. Position, Duties and Responsibilities. Subject to the terms set forth herein, the Company agrees to employ you in the position of
as Vice President of Business Development and you hereby accept such employment effective immediately. You will report to the
Company’s Chief Executive Officer (“CEO”) and will perform the duties customarily associated with this position and such other duties as
are assigned to you by the CEO. You will devote your full business time and attention to the business affairs of the Company, except for
reasonable vacations and periods of illness or incapacity permitted by the Company’s general employment policies. The employment
relationship between you and the Company shall also be governed by the general employment policies and practices of the Company,
including those relating to protection of confidential information and assignment of inventions, except that when the terms of this letter
agreement differ from or are in conflict with the Company’s general employment policies or practices, this letter agreement shall control.
2. Compensation and Employee Benefits.
2.1 Base Salary. Your base salary will be $286,727 on an annualized basis, less payroll deductions and required withholdings,
paid according to the Company’s regular payroll schedule and procedures. Subject to the other terms of this letter agreement, your base
salary may be modified by the Company in its sole discretion. Your salary will be effective as of January 1, 2016.
2.2 Discretionary Bonus. You will be eligible to participate in the Company’s annual bonus program pursuant to the terms of
that program and you will be eligible to receive a bonus of up to thirty percent (30%) of your annual base salary. Your actual bonus, if any,
will be determined by the Company’s Board of Directors, or the Compensation subcommittee thereof (the “Board”), in its sole discretion,
based upon its evaluation of your performance, the Company’s performance, and any other considerations it deems relevant. You must be
employed through the bonus payment date to be eligible for, and to earn, any such bonus. Any bonus payment will be subject to payroll
deductions and required withholdings.
2.3 Employee Benefits. You will be entitled to all employee benefits, including vacation accrual of twenty (20) days per year
and health and disability benefits for which you are eligible under the terms and conditions of the standard Company benefit plans which
may be in effect from time to time and provided by the Company to its senior executive-level employees generally. Currently, such benefits
include twelve paid holidays, as well as paid sick leave of up to ten days per year. Notwithstanding the foregoing, the Company reserves
the right to adopt, amend or discontinue any employee benefit plan or policy, including changes required by applicable law.
1.
2.4 Stock Options. Subject to the approval of the Board pursuant to the Company’s equity incentive plan you may from time to
time be granted stock options of shares of Company common stock at a per share exercise price equal to the per share fair market value of
the Company’s common stock on the date of grant as determined by the Board. Option grants are made at regular Board meetings held
approximately once each calendar quarter. Such stock options will vest as determined by the Board, as long as you remain in continuous
service with the Company and a portion of the shares subject to your outstanding options may vest on an accelerated basis pursuant to
Sections 7 or 8. Except as provided herein, such stock option will be subject to the provisions of the equity incentive plan of the Company
under which the options are granted and the applicable form of stock option agreement there under (the “Plan Documents”).
3. Other Activities During Employment.
3.1 Activities. Except with the prior written consent of the CEO, you will not, during your employment with the Company,
undertake or engage in any other employment, occupation or business enterprise, other than ones in which you are a passive investor. You
may engage in civic and not-for-profit activities so long as such activities do not interfere with the performance of your job duties for the
Company.
3.2 Investments and Interests. Except as permitted by the first sentence of Section 3.1 and by Section 3.3, during your
employment you agree not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by you to
be adverse or antagonistic to the Company, or its business or prospects, financial or otherwise.
3.3 Noncompetition. During the term of your employment by the Company, except on behalf of the Company, you will not
directly or indirectly, whether as an officer, director, stockholder, partner, proprietor, associate, representative, consultant, or in any
capacity whatsoever engage in, become financially interested in, be employed by or have any business connection with any other person,
corporation, firm, partnership or other entity whatsoever that competes with the Company anywhere in the world, in any line of business
engaged in (or planned to be engaged in) by the Company; provided, however, that anything above to the contrary notwithstanding, you
may own, as a passive investor, securities of any entity, so long as your direct holdings in any one such corporation do not in the aggregate
constitute more than one percent (1%) of the voting stock of such corporation.
4. Company Policies; Confidential Information and Inventions Agreement. You acknowledge your obligations under the
Company’s Employee Agreement on Confidential Information and Inventions, a copy of which is attached as Exhibit A. You further
acknowledge your obligation to abide by the Company’s rules, policies and procedures.
5. Immigration. The Immigration Reform and Control Act of 1986 requires that every person present proof to the Company of their
identity and eligibility and/or authorization to accept employment with the Company. In order to comply with this law you must provide
appropriate documentation to prove both your identity and legal eligibility to be employed at the Company.
2.
6. Your Representations and Warranties.
6.1 No Breach of Contract. You represent and warrant that the execution and delivery of this letter agreement by you and the
performance of your obligations hereunder will not conflict with or breach any agreement, order or decree to which you are a party or by
which you are bound. You warrant that you are subject to no employment agreement or restrictive covenant preventing full performance of
your duties under this letter agreement.
6.2 No Conflict of Interest. You warrant that you are not, to the best of your knowledge and belief, involved in any situation
that might create, or appear to create, a conflict of interest with your loyalty to or duties for the Company.
6.3 Notification of Materials or Documents from Other Employers. You further warrant that you have not brought and will
not bring to the Company or use in the performance of your responsibilities at the Company any materials or documents of a former
employer that are not generally available to the public, unless you have obtained express written authorization from the former employer
for their possession and use.
6.4 Notification of Other Post-Employment Obligations. You also understand that, as part of your employment with the
Company, you are not to breach any obligation of confidentiality that you have to former employers, and you agree to honor all such
obligations to former employers during your employment with the Company.
7. Termination of Employment.
7.1 At-Will Employment Relationship. Your employment with the Company shall be at-will. Either you or the Company may
terminate the employment relationship at any time, with or without Cause, and with or without advance notice.
7.2 Termination for Cause.
(a) If the Company terminates your employment at any time for Cause (as defined below), your salary shall cease on the
date of termination and you shall not be entitled to severance pay, COBRA premium payments, pay in lieu of notice or any other such
compensation other than payment of accrued salary and vacation and such other benefits as expressly required by applicable law or the
terms of applicable benefit plans. The continued vesting of any stock options held by you shall cease on your employment termination date,
and your right to exercise vested options shall be governed by the Plan Documents.
(b) Definition of Cause. For purposes of this agreement, “Cause” means the occurrence of any one or more of the
following: (i) your conviction of, or plea of no contest, with respect to any felony or any crime involving fraud, dishonesty or moral
turpitude; (ii) your participation in a fraud or act of dishonesty that results in material harm to the Company; (iii) your intentional material
violation of any contract or agreement between you and the Company, including but not limited to this letter agreement or your Employee
Agreement on Confidential Information and Inventions, or your violation of any statutory duty that you owe to the Company, but only if
you do not correct any such violation within thirty (30) days after written notice thereof has been provided to you (if such notice is
reasonably practicable); or (iv) your gross negligence or willful neglect of your job duties, as determined by the Board in good faith, but
only if you do not correct such violation within thirty (30) days after written notice thereof has been provided to you (if such notice is
reasonably practicable).
3.
7.3 Severance Benefits For Termination Without Cause or Resignation for Good Reason.
(a) If the Company terminates your employment without Cause and other than as a result of your death or disability, or if
you resign your employment for Good Reason (defined below), and provided such termination constitutes a “separation from service” (as
defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “Separation from
Service”), you will be eligible to receive the severance benefits described in this Section 7.3.
(b) You will be eligible to receive, subject to payroll deductions and required withholdings and net of any amounts
earned by you pursuant to any employment or consulting arrangements obtained by you following such termination (other than the
activities described in the last sentence of Section 3.1), continuation for nine (9) months of the greater of: (i) your base salary in effect as of
such termination date; or (ii) your base salary as set forth in Section 2.1. In addition, you will be eligible to receive your potential annual
discretionary bonus amount set forth in Section 2.2, determined as if all performance targets established by the Board have been satisfied,
pro-rated for the number of months elapsed in the year in which your employment terminates, but in no event will you receive a bonus pro-
rated for greater than nine (9) months. You agree to notify the Company promptly of any amount earned by you from other employment or
a consulting engagement while you are receiving severance payments under this letter agreement.
(c) If you timely elect and remain eligible for continued coverage of your group health insurance under COBRA, the
Company will pay your premiums for COBRA coverage for up to nine (9) months following your Separation from Service, provided that
such payments shall cease if you obtain full-time employment, or cease to be eligible for COBRA, within such period. You agree to notify
the Company promptly if you obtain full-time employment while the Company is paying your COBRA premiums under this letter
agreement. On the 60th day following your Separation from Service, the Company will make the first payment under this clause equal to
the aggregate amount of payments that the Company would have paid through such date had such payments commenced on the Separation
from Service through such 60th day, with the balance of the payments paid thereafter on the schedule described above. If you become
eligible for coverage under another employer’s group health plan or otherwise cease to be eligible for COBRA during the period provided
in this clause, you must immediately notify the Company of such event, and all payments and obligations under this clause will cease.
(d) You will receive acceleration of vesting of all of your then-outstanding and then-unvested stock option grants as of
the date of termination as to the number of shares that would have vested in their vesting schedules as if you had been in service for an
additional nine (9) months as of your Separation from Service.
(e) Your receipt of any severance benefits under this Section 7.3 is contingent upon your signing and making effective
within sixty (60) days after the termination date, a full, general release of all claims against the Company in a form acceptable to the
Company containing the language set forth in the Release Agreement attached as Exhibit B on or after the termination date. The base salary
and bonus severance will be paid in substantially equal installments over the nine (9) month period following your Separation in Service
according
4.
to the Company’s payroll procedures; provided, however, that no payments will be made to you prior to the 60th day following your
Separation from Service. On the first payroll pay day following the 60th day after your Separation from Service, the Company will pay you
the cash severance amounts you would have received on or prior to such date in a lump sum in compliance with Code Section 409A and the
effectiveness of the release, with the balance of the cash payments being made as originally scheduled.
(f) Definition of Good Reason. For purposes of this letter agreement, “Good Reason” shall mean any one of the
following events that occurs without your consent: (i) the material reduction in your responsibilities, authorities or functions as an
employee of the Company (but not merely a change in reporting relationships); (ii) a material reduction in your level of compensation
(including base salary, fringe benefits and target bonus under any corporate-performance based bonus or incentive programs); (iii) a
material change of your place of employment that results in an increase to your round trip commute of more than fifty (50) miles; or (iv) the
Company’s material breach of this letter agreement. Notwithstanding the foregoing, you must provide written notice to the Chief Financial
Officer of the Company within thirty (30) days after the date on which such event first occurs, and allow the Company thirty (30) days
thereafter (the “Cure Period”) during which the Company may attempt to rescind or correct the matter giving rise to Good Reason. If the
Company does not rescind or correct the conduct giving rise to Good Reason to your reasonable satisfaction by the expiration of the Cure
Period, your employment will then terminate with Good Reason as of such thirtieth day.
7.4 Voluntary or Mutual Termination. You may voluntarily terminate your employment with the Company at any time
without Good Reason. If you terminate without Good Reason or if your employment terminates as a result of your death or disability, your
salary shall cease on the date of termination and you shall not be entitled to severance, pay in lieu of notice or any other such compensation
other than payment of accrued salary and vacation and such other benefits as expressly required in such event by applicable law or the
terms of applicable benefit plans. The continued vesting of any compensatory equity awards held by you shall cease on the termination
date, and your right to exercise vested awards (or be issued shares under such vested awards) shall be governed by the terms of the
Company’s applicable compensatory equity plans and the corresponding award agreements.
7.5 Application of Section 409A. If the Company (or, if applicable, the successor entity thereto) determines that the severance
payments and benefits provided for in this letter agreement (the “Agreement Payments”) constitute “deferred compensation” under
Section 409A of the Internal Revenue Code (together, with any state law of similar effect, “Section 409A”) and you are a “specified
employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) (a “Specified Employee”),
then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the
Agreement Payments shall be delayed as follows: on the earliest to occur of (i) the date that is six months and one day after the termination
date or (ii) the date of your death (such earliest date, the “Delayed Initial Payment Date”), the Company (or the successor entity thereto, as
applicable) shall (A) pay to you a lump sum amount equal to the sum of the Agreement Payments that you would otherwise have received
through the Delayed Initial Payment Date if the commencement of the payment of the Agreement Payments had not been delayed pursuant
to this Section 7.5 and (B) commence paying the balance of the Agreement Payments in accordance with the applicable payment schedules
set forth in this letter agreement.
5.
For the avoidance of doubt, it is intended that (1) each installment of the Agreement Payments provided in this letter agreement is a
separate “payment” for purposes of Section 409A, (2) all Agreement Payments satisfy, to the greatest extent possible, the exemptions from
the application of Section 409A provided under of Treasury Regulation 1.409A-1(b)(4) and 1.409A-1(b)(9)(iii), and (3) the Agreement
Payments consisting of COBRA premiums also satisfy, to the greatest extent possible, the exemptions from the application of Section 409A
provided under Treasury Regulation 1.409A-1(b)(9)(v).
8. Change in Control.
8.1 Definitions.
(a) “Change in Control” shall mean an Ownership Change Event (as defined below) or a series of related Ownership
Change Events (collectively, a “Transaction”) wherein the stockholders of the Company immediately before the Transaction do not retain
direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities of
the Company or, in the case of a Transaction described in Section 8.1(b)(iii), the corporation or other business entity to which the assets of
the Company were transferred (the “Transferee”), as the case may be. For purposes of the preceding sentence, indirect beneficial
ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or
other business entities that own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary
corporations or other business entities.
(b) An “Ownership Change Event” shall be deemed to have occurred if any of the following occurs with respect to the
Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more
than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; or (iii) the
sale, exchange or transfer of all or substantially all of the assets of the Company.
8.2 Severance. On the consummation of any Change in Control (i) any remaining unvested portion of your stock options will
be accelerated such that fifty percent (50%) of your outstanding and then-unvested options become fully vested and exercisable as of the
date of the Change in Control (the “Acceleration”) and (ii) 100% of the shares subject to the Incentive Award shall accelerate and be fully
exercisable immediately prior to the consummation of any Change of Control. If on or within twelve (12) months following a Change in
Control, the Company or a successor corporation terminates your employment without Cause and other as a result of your death or
disability, or you resign for Good Reason (a “Change in Control Termination”), and provided that such termination constitutes a Separation
from Service, then subject to your obligations below, and in lieu of any severance benefits set forth in Section 7.3 herein, you will be
entitled to receive (collectively, the “Change in Control Severance Benefits”):
(a) Subject to payroll deductions and required withholdings and net of any amounts earned by you pursuant to any
employment or consulting arrangements obtained by you following such termination (other than the activities described in the last sentence
of Section 3.1), continuation for twelve (12) months of the greater of: (i) your base salary in effect as of such termination date; or (ii) your
base salary as set forth in Section 2.1. In addition, you will be eligible to receive 100% of your potential annual discretionary bonus amount
set forth in Section 2.2, determined as if all performance targets established by the Board have been satisfied.
6.
(b) You will receive acceleration of vesting of all of your then-outstanding and then-unvested stock option grants as of
the date of termination such that the remaining fifty percent (50%) of your unvested options following the Acceleration become fully
vested and exercisable.
(c) If you timely elect and remain eligible for continued coverage of your group health insurance under COBRA, the
Company will pay your premiums for COBRA coverage for up to twelve (12) months following your Separation from Service, provided
that such payments shall cease if you obtain full-time employment, or cease to be eligible for COBRA, within such period. You agree to
notify the Company promptly if you obtain full-time employment while the Company is paying your COBRA premiums under this letter
agreement. On the 60th day following your Separation from Service, the Company will make the first payment under this clause equal to
the aggregate amount of payments that the Company would have paid through such date had such payments commenced on the Separation
from Service through such 60th day, with the balance of the payments paid thereafter on the schedule described above. If you become
eligible for coverage under another employer’s group health plan or otherwise cease to be eligible for COBRA during the period provided
in this clause, you must immediately notify the Company of such event, and all payments and obligations under this clause will cease.
(d) As a precondition of receiving the Change in Control Severance Benefits, you must first sign and make effective on
or after the termination date a full, general release of claims against the Company in a form acceptable to the Company containing the
language set forth in the Release Agreement attached as Exhibit B.
8.3 Parachute Payments.
(a) If any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code)
to you or for your benefit, whether under this letter agreement or otherwise (a “Payment”), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (together with any interest or penalties imposed with respect
to such excise tax, the “Excise Tax”), then you will be entitled to receive from the Company an additional payment (the “Gross-Up
Payment”) in an amount equal to (i) all Excise Taxes (including any interest or penalties imposed with respect to such taxes) on the
Payment (the “First Reimbursement Payment”), (ii) all federal, state and local income taxes and employment taxes on the First
Reimbursement Payment, and (iii) all Excise Taxes (including any interest or penalties imposed with respect to such taxes) on the First
Reimbursement Payment.
(b) All determinations required to be made under this Section 8.3 including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by
the nationally recognized certified public tax accounting firm used by the Company or, if such firm declines to serve, such other nationally
recognized certified public tax accounting firm as you may designate (the “Accounting Firm”). The Accounting Firm may make reasonable
assumptions and approximations concerning applicable taxes and may rely on reasonable, good-faith
7.
interpretations concerning the application of Sections 280G and 4999 of the Code. The Accounting Firm shall provide its calculations,
together with detailed supporting documentation, to the Company and you within thirty (30) calendar days after the date on which your
right to a Payment is triggered (if requested at that time by the Company or you) and/or at such other times as requested by the Company or
you. If the Accounting Firm determines that no Excise Tax is payable with respect to a Payment, it shall furnish the Company and you with
an opinion reasonably acceptable to you that no Excise Tax will be imposed with respect to such Payment. If the Accounting Firm
determines that an Excise Tax is payable with respect to a Payment, it shall furnish to the Company and you an opinion reasonably
acceptable to you of the amount of Excise Tax payable with respect to the Payments and the amount of Gross-Up Payment due to you. The
Company will pay the Gross-Up Payment to you within thirty (30) days of the date the Company receives the Accounting Firm’s opinion,
but in no event later than the end of your tax year following your tax year in which you pay the Excise Tax. The Company shall bear all
reasonable expenses with respect to the determinations by the Accounting Firm required to be made hereunder. Any determination by the
Accounting Firm shall be binding upon the Company and you.
9. General Provisions.
9.1 Dispute Resolution. To aid in the rapid and economical resolution of any disputes which may arise under this Agreement,
the parties agree that any and all claims, disputes or controversies of any nature whatsoever arising from or regarding the interpretation,
performance, negotiation, execution, enforcement or breach of this Agreement, or your relationship with the Company, including statutory
claims, shall be resolved by confidential, final and binding arbitration conducted before a single arbitrator with Judicial Arbitration and
Mediation Services, Inc. (“JAMS”) in San Francisco, California, in accordance with JAMS’ then-applicable employment arbitration rules
(which may be reviewed at www.jamsadr.com/rules-employment-arbitration/). The parties acknowledge that by agreeing to this
arbitration procedure, they waive the right to resolve any such dispute through a trial by jury, judge or administrative proceeding.
The parties will have the right to be represented by legal counsel at any arbitration proceeding. The arbitrator shall: (i) have the authority to
compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be available under applicable law
in a court proceeding; and (ii) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any,
awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based.
The Company shall bear all JAMS’ arbitration fees and administrative costs in excess of the amount of administrative fees (e.g., filing fees)
that you would otherwise be required to pay if the dispute were decided in a court of law. Nothing in this Agreement shall prevent any party
from obtaining injunctive or other provisional relief in court to prevent irreparable harm pending the conclusion of any arbitration
proceeding.
9.2 Severability. Whenever possible, each provision of this letter agreement will be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this letter agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any
other jurisdiction, but such invalid, illegal or unenforceable provision will be reformed, construed and enforced in such jurisdiction so as to
render it valid, legal, and enforceable consistent with the intent of the parties insofar as possible.
8.
9.3 Notices. Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of personal
delivery (including personal delivery by fax) or the next day after sending by overnight courier, to the Company at its primary office
location and to you at your address as listed on the Company payroll.
9.4 Waiver. If either party should waive any breach of any provisions of this letter agreement, you or the Company shall not
thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this letter agreement.
9.5 Entire Agreement. This letter agreement, together with its exhibits, constitutes the entire and exclusive agreement between
you and the Company, and it supersedes any prior agreement, promise, representation, or statement, written or otherwise, between you and
the Company with regard to this subject matter. It is entered into without reliance on any promise, representation, statement or agreement
other than those expressly contained or incorporated herein, and it cannot be modified or amended except in a writing signed by you and a
duly authorized officer of the Company.
9.6 Counterparts. This letter agreement may be executed in separate counterparts, any one of which need not contain signatures
of more than one party, but all of which taken together will constitute one and the same letter agreement.
9.7 Headings. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part
hereof nor to affect the meaning thereof.
9.8 Successors and Assigns. This letter agreement is intended to bind and inure to the benefit of and be enforceable by you, the
Company and your and its respective successors, assigns, heirs, executors and administrators, except that you may not assign any of your
duties hereunder and you may not assign any of your rights hereunder without the written consent of the Company.
9.9 Governing Law. All questions concerning the construction, validity and interpretation of this letter agreement will be
governed by the law of the State of California as applied to contracts made and to be performed entirely within California.
9.10 Attorneys’ Fees. If either party hereto brings any action to enforce your or its rights hereunder, the prevailing party in such
action shall be entitled to be paid by the other party such prevailing party’s reasonable attorneys’ fees and costs incurred in such action.
Enclosed is your Employee Agreement on Confidential Information and Inventions, which you should read carefully.
To indicate your acceptance of the Company’s offer, please sign this letter agreement in the space provided below and return it to me.
9.
Sincerely,
CYMABAY THERAPEUTICS
By:
/s/ Harold Van Wart
Harold Van Wart
Chief Executive Officer
Accepted and agreed:
/s/ Patrick O’Mara
Patrick O’Mara
EXHIBIT A - Employee Agreement on Confidential Information and Inventions
EXHIBIT B - Release Agreement
10.
EXHIBIT A
CymaBay Therapeutics, Inc.
7999 Gateway Blvd., Suite 130
Newark, CA 94560-1144
Phone 510 293-8800 Fax 510 293-9090
February 23, 2016
EMPLOYEE AGREEMENT ON CONFIDENTIAL
INFORMATION AND INVENTIONS
THIS AGREEMENT is between CymaBay Therapeutics, Inc. a Delaware Corporation (“the Company”), and Patrick O’Mara, (the
“Employee”).
PURPOSE OF AGREEMENT
I want to be employed by the Company, and the Company wants to employ me, provided that, in so doing, it can protect its trade
secrets and inventions, ideas, information, business, and good will.
In consideration of this purpose, and the mutual promises in this Agreement, I agree with the Company as follows:
1. Term
(A) My employment with the Company is an at-will relationship that may be terminated by either the Company or me with or
without cause for any reason whatsoever at any time upon notice to the other party.
(b) If my employment is terminated for any reason, I will be entitled only to the compensation earned by me as of the date of
termination.
2. Confidential Information. I will hold in confidence and use only for the benefit of the Company during the term of my employment
and for five years after the termination of my employment all Confidential Information of the Company, its Affiliates, and all Confidential
Information of companies or persons other than the Company given to the Company under an agreement prohibiting its disclosure.
“Confidential Information” refers to valuable technical or business information that is not known by the public. By way of example,
Confidential Information may include information relating to: inventions or products, including unannounced products; research and
development activities; requirements and specifications of specific customers and potential customers; nonpublic financial information; and
quotations or proposals given to customers.
These restrictions on disclosure do not apply if the information is or becomes publicly known through no wrongful act on my part or
the information is explicitly approved for release under such circumstances by an officer of the Company.
11.
3. Disclosure and Assignment of Inventions. I hereby assign to the Company my entire right, title and interest in all inventions.
“Inventions” refer to (a) all technical or business innovations, whether or not patentable or copyrightable, made by me during the term of
my employment; and (b) all technical or business innovations, whether or not patentable, based upon the Company’s Confidential
Information and made by me after leaving the Company’s employ. I will keep adequate written records of all inventions made by me, such
as notebooks, sketches, program listings and the like, which are the property of the Company. Notwithstanding the foregoing, I am not
required to assign to the Company, although I must disclose, any inventions: (a) for which no equipment, supplies, facilities or Confidential
Information of the Company were used and which was developed entirely on my own time; (b) which at the time of conception or
reduction to practice did not relate directly to the business of the Company or the Company’s actual or demonstrably anticipated research
or development and (c) which did not result from any work I performed for the Company. The disclosure of such inventions must be made
so that the parties can make a determination whether such inventions do in fact qualify for exclusion from assignment to the Company. The
Company will keep confidential any such information I disclose. I will take all steps necessary to assist the Company in securing any
patents, copyrights or other protection for inventions which I am required to assign to the Company as provided above. If I am unable or
unwilling, whether during my employment or after termination, to sign any papers needed to apply for or pursue any patent or copyright
registrations for inventions, I agree that the Company is my attorney-in-fact for that purpose and can sign such papers as my agent and take
any other actions necessary to pursue these registrations.
4. List of Inventions I Own. I have attached as Exhibit A a list of inventions I own, which is a complete list of all technical or
business innovations I own either alone or jointly with others on the date of this Agreement. I agree that I will not incorporate any of these
prior inventions into products being developed for the Company without the prior knowledge and written consent of the Company. Should
the Company wish to use any of my inventions in its business, the Company will negotiate with me for a purchase of or license to use such
invention on mutually agreeable terms. If no such list is attached, or if no such inventions are listed thereon, I represent that I do not own
any inventions at the time of signing this Agreement.
5. Tangible Materials. All tangible materials that incorporate Confidential Information are the Company’s property, and I will give all
of these materials and any other documents and materials which are the property of the Company, including but not limited all notes of any
research or other work which I have performed for the Company and all biological materials created, used or held by me in the course of
my work for the Company, back to the Company at the termination of my employment or earlier upon the Company’s request.
6. Solicitation of Employees. I understand that information about the Company’s employees, such as their skills, performance ratings,
and salary histories, constitutes Confidential Information owned by the Company. I agree that, for a period of twelve (12) months after
termination of my employment for any reason, I will not, either directly or indirectly, solicit, induce, recruit or encourage any of the
Company’s employees to leave their employment, or take away such employees, or attempt to do any of these things, whether on my own
behalf or on behalf of any other person, since to do so would necessarily involve using Confidential Information.
12.
8. Termination. In the event of termination of my employment for any reason, I agree that, as requested by the Company, I will sign
and deliver a “Termination Certification” in the form attached to this Agreement as Exhibit B. I also agree that the Company may give
notice to my new employer of my duties under this Agreement.
9. Duty of Loyalty. During my employment with the Company, I will not engage in any business activity (either for my own profit or
for anyone else) that competes with the Company’s business.
10. Duties to Third Parties. I represent that, to the best of my knowledge, compliance with the terms of this Agreement will not violate
any duty that I may have to anyone other than the Company (such as a former employer) to keep such person’s proprietary information in
confidence or to refrain from using that person’s patents or copyrights. If at any time during my employment with the Company, I am asked
by the Company to perform work which I believe may cause me to violate a duty I have to someone other than the Company, I will
immediately inform an officer of the Company so that an assessment of the situation may be made. I also agree that I will not, during my
employment with the Company, bring onto the Company’s premises, use or disclose to the Company any proprietary information or trade
secrets of any former employer or any other person without that person’s consent.
11. Miscellaneous. This is the only agreement between the Company and myself about confidential information and the ownership of
inventions, and may not be modified, amended or terminated, in whole or in part, except in a writing signed by me and by an officer of the
Company. Any later change in my title, compensation or duties will not affect this Agreement. This Agreement will survive termination of
my employment for any reason, and will continue for the benefit of and will be binding upon the successors, assigns, heirs and legal
representatives of the Company and myself. Any waiver by the Company of a breach of any of the obligations of this Agreement by me
will not operate or be construed as a waiver of any other or subsequent breach by me. In the event any provision of this Agreement is held
to be invalid, void or unenforceable, the remaining provisions will nevertheless continue in full force and effect without being impaired or
invalidated in any way. The prevailing party in any legal action brought by one party against the other and arising out of this Agreement
shall be entitled, in addition
13.
to any other rights and remedies it may have, to reimburse for its expenses, including court costs and reasonable attorney’s fees. This
Agreement will be governed by the laws of the State of California governing contracts between residents to be performed in the State of
California.
CymaBay Therapeutics, Inc.
By:
/s/ Harold Van Wart
Harold Van Wart
Chief Executive Officer
Date
Employee
/s/ Patrick O’Mara
Signature
Patrick O’Mara
March 22, 2016
Date
By:
14.
EXHIBIT A
List of Inventions I Own (see para. 4.)
15.
EXHIBIT B
Termination Certificate
This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals,
lists, equipment, computer programs or listings, other documents or property or any reproductions of any of these materials belonging to
CymaBay Therapeutics, Inc., a Delaware corporation, its subsidiaries, successors or assigns (collectively, the “Company”).
I further certify that I have complied with all the terms of the Company’s Employee Confidential Information and Inventions
Agreement signed by me, including the reporting of any inventions and original works of authorship (as defined in that agreement)
conceived or made buy me (solely or jointly with others) covered by that agreement.
I further agree that, in compliance with the Employee Confidential Information and Inventions Agreement, I will preserve as
confidential all trade secrets, confidential knowledge, data or other proprietary information relating to inventions or products, including but
not limited to unannounced products, research and development activities, requirements and specifications of specific customers and
potential customers, nonpublic financial information, and quotations or proposals given to customers, including any information disclosed
to the Company in confidence by any third party.
I further agree that for twelve (12) months from this date, I will not solicit, induce, recruit or encourage any of the Company’s
employees to leave their employment.
Signature
Patrick O’Mara
Date
16.
EXHIBIT B
RELEASE AGREEMENT
(To be signed on or after the Separation Date)
I understand that my employment with CymaBay Therapeutics (the “Company”) terminated effective , (the
“Separation Date”). The Company has agreed that if I choose to sign this Release Agreement (“Release”), the Company will provide
certain severance benefits (minus the required withholdings and deductions) pursuant to the terms of the employment agreement dated
(as amended, the “Letter Agreement”). I understand that I am not entitled to such severance benefits unless I sign this Release,
and it becomes fully effective.
I understand that this Release, together with the Letter Agreement, constitutes the complete, final and exclusive embodiment of the
entire agreement between the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation
by the Company that is not expressly stated therein.
I hereby confirm my obligations under my Employee Agreement on Confidential Information and Inventions with the Company.
I hereby represent that I have been paid all compensation owed and for all hours worked, have received all the leave and leave
benefits and protections for which I am eligible, pursuant to the Family and Medical Leave Act or otherwise, and have not suffered any on-
the-job injury for which I have not already filed a claim.
In exchange for the consideration provided to me by this Release that I am not otherwise entitled to receive, I hereby generally and
completely release Company and its current and former directors, officers, employees, shareholders, partners, agents, attorneys,
predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and obligations,
both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing
this Release. This general release includes, but is not limited to: (a) all claims arising out of or in any way related to my employment with
the Company or the termination of that employment; (b) all claims related to my compensation or benefits from the Company, including
salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other
ownership interests in the Company; (c) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good
faith and fair dealing; (d) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public
policy; and (e) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or
other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the
federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), and the California Fair Employment and Housing Act (as
amended).
17.
Nothing in this Release shall prevent me from filing, cooperating with, or participating in any proceeding before the Equal
Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except
that I hereby acknowledge and agree that I shall not recover any monetary benefits in connection with any such proceeding.
I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA (“ADEA Waiver”).
I also acknowledge that the consideration given for the ADEA Waiver is in addition to anything of value to which I was already entitled. I
further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my ADEA Waiver does not apply to any
rights or claims that arise after the date I sign this Release; (b) I should consult with an attorney prior to signing this Release; (c) I have
twenty-one (21) days to consider this Release (although I may choose to voluntarily sign it sooner); (d) I have seven (7) days following the
date I sign this Release to revoke the ADEA Waiver; and (e) the ADEA Waiver will not be effective until the date upon which the
revocation period has expired unexercised, which will be the eighth day after I sign this Release.
I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads 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.” I hereby expressly waive
and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any
claims hereunder.
I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than twenty-
one (21) days following the date it is provided to me.
I accept and agree to the terms and conditions stated above:
Date
Patrick O’Mara
18.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statements (Form S-3 File Nos. 333-200006 and 333-192617) of CymaBay Therapeutics, Inc., and
(2) Registration Statements (Form S-8 File Nos. 333-195211, 333-198289 and 333-202941) pertaining to the Metabolex, Inc. 2003 Equity
Incentive Plan, and the CymaBay Therapeutics, Inc. 2013 Equity Incentive Plan,
of our report dated March 29, 2016, with respect to the financial statements of CymaBay Therapeutics, Inc. included in this Annual Report
(Form 10-K) of CymaBay Therapeutics, Inc. for the year ended December 31, 2015.
Exhibit 23.1
/S/ ERNST & YOUNG LLP
Redwood City, California
March 29, 2016
Exhibit 31.1
I, Harold Van Wart, certify that;
1. I have reviewed this Form 10-K of CymaBay Therapeutics, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 29, 2016
/s/ Harold Van Wart
Harold Van Wart
Chief Executive Officer and Director
(Principal Executive Officer)
Exhibit 31.2
I, Sujal Shah, certify that;
1. I have reviewed this Form 10-K of CymaBay Therapeutics, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 29, 2016
/s/ Sujal Shah
Sujal Shah
Chief Financial Officer and Secretary
(Principal Financial Officer)
CERTIFICATION
Exhibit 32.1
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and
Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Harold Van Wart., Chief Executive Officer of
CymaBay Therapeutics, Inc. (the “Company”), and Sujal Shah, Chief Financial Officer of the Company, each hereby certifies that, to the
best of his knowledge:
1.
2.
The Company’s Annual Report on Form 10-K for the period ended December 31, 2015, to which this Certification is attached as
Exhibit 32.1 (the “Annual Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act, and
The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
In Witness Whereof, the undersigned have set their hands hereto as of the 29 th day of March, 2016.
/s/ Harold Van Wart
Harold Van Wart
Chief Executive Officer
/s/ Sujal Shah
Sujal Shah
Chief Financial Officer
This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is
not to be incorporated by reference into any filing of CymaBay Therapeutics, Inc. under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general
incorporation language contained in such filing.