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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-31918
IDERA PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
505 Eagleview Blvd., Suite 212
Exton, Pennsylvania
(Address of principal executive offices)
04-3072298
(I.R.S. Employer
Identification No.)
19341
(Zip Code)
(484) 348-1600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of Each Class:
Common Stock, $.001 par value
Trading Symbol
IDRA
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 ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐
☒
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☒
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $63.8 million based on the last sale
price of the registrant’s common stock as reported on the Nasdaq Capital Market on June 30, 2021 (the last business day of the registrant’s most recently
completed second fiscal quarter).
As of March 31, 2022, the registrant had 52,924,870 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2022 annual meeting of stockholders are incorporated by reference into Part III of this Form
10-K where indicated. Such definitive proxy statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the year ended
December 31, 2021.
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IDERA PHARMACEUTICALS, INC.
FORM 10-K
TABLE OF CONTENTS
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Properties
Item 2.
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. Reserved
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.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Financial Statements and Supplementary Data
PART III.
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
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
__________________________________
PART IV.
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Unless the context otherwise indicates, references in this Annual Report on Form 10-K to “Idera”, the “Company”,
“we,” “us,” and “our” refer to Idera Pharmaceuticals, Inc.
IMO® and Idera® are our trademarks. All other trademarks and service marks appearing in this Annual Report on
Form 10-K are the property of their respective owners.
Website addresses referenced in this Annual Report on Form 10-K are provided for convenience only, and the
content on the referenced websites does not constitute a part of this Annual Report on Form 10-K.
All share and per share amounts, including the exercise or conversion price of any of our securities, reflect, as
applicable, the occurrence of a 1-for-8 reverse split of our common stock that occurred on July 27, 2018.
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (“Form 10-K”) and the documents we incorporate by reference contain forward-
looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than
statements of historical fact, included or incorporated in this report regarding our strategy, future operations, clinical trials,
collaborations, intellectual property, cash resources, financial position, future revenues, projected costs, prospects, plans
and objectives of management are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “plans,”
“expects,” “intends,” “may,” “could,” “should,” “potential,” “likely,” “projects,” “continue,” “will,” “schedule,” “would”
and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements
contain these identifying words. We cannot guarantee that we will achieve the plans, intentions or expectations disclosed in
our forward-looking statements and you should not place undue reliance on our forward-looking statements. These
forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may be beyond our
control, and which may cause the actual results, performance, or achievements of the Company to be materially different
from future results, performance, or achievements expressed or implied by such forward-looking statements.
There are several important factors that could cause our actual results to differ materially from those indicated or
implied by forward-looking statements. These important factors include those set forth below under Part I, Item 1A “Risk
Factors” and in our other disclosures and filings with the Securities and Exchange Commission (“SEC”). These factors and
the other cautionary statements made in this Annual Report on Form 10-K and the documents we incorporate by reference
should be read as being applicable to all related forward-looking statements whenever they appear in this Form 10-K and
the documents we incorporate by reference.
In addition, any forward-looking statements represent our estimates only as of the date that this Annual Report on
Form 10-K is filed with the SEC and should not be relied upon as representing our estimates as of any subsequent date. All
forward-looking statements included in this Form 10-K are made as of the date hereof and are expressly qualified in their
entirety by this cautionary notice. We disclaim any intention or obligation to update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise, except as may be required by law.
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Item 1. Business.
Overview
PART I.
We are a biopharmaceutical company with a business strategy focused on the clinical development, and ultimately
the commercialization, of drug candidates for rare disease indications characterized by small, well-defined patient
populations with serious unmet medical needs. Our current focus is to identify and acquire rights to novel development and
commercial stage rare disease programs through new business development opportunities, including additional strategic
alternatives. We have in the past and may in the future explore collaborative alliances to support development and
commercialization of any of our drug candidates.
Until May 2021, we were developing intratumoral tilsotolimod for the treatment of anti-PD1 refractory metastatic
melanoma in combination with ipilimumab, an anti-CTLA4 antibody marketed as Yervoy® by Bristol Myers Squibb
Company (“BMS”), in a Phase 3 registration trial (ILLUMINATE-301). During the first quarter of 2021, we announced
that ILLUMINATE-301 did not meet its primary endpoint of Objective Response Rate (“ORR”). Based on subsequent
evaluation of the full data set, in May 2021 we announced that we would not continue the trial to its Overall Survival
(“OS”) primary endpoint.
Through December 2021, we were also evaluating intratumoral tilsotolimod in combination with nivolumab, an
anti-PD1 antibody marketed as Opdivo® by BMS, and ipilimumab for the treatment of multiple solid tumors in a
multicohort Phase 2 trial. In December 2021, we announced that preliminary data from the second 10 patients dosed in the
safety cohort of ILLUMINATE-206 showed a safety profile consistent with the first 10 patients in ILLUMINATE-206 and
with prior studies. No further enrollment in ILLUMINATE-206 is planned at this time.
While our clinical trials with tilsotolimod have not yet translated into a new treatment alternative for patients, data
supporting tilsotolimod’s mechanism of action and encouraging safety profile from across the array of pre-clinical and
clinical work to date, together with its intellectual property protection, are noteworthy. As a result, in December 2021, we
announced that we will consider an out-licensing arrangement so that tilsotolimod’s full potential may continue to be
explored on behalf of patients who do not respond to traditional immunotherapy.
Recent Events and Updates
Reduction-in-Force
In April 2021, we began to implement a reduction-in-force, which affected approximately 50% of our workforce.
The decision was made to align our workforce to our needs considering the topline data results from ILLUMINATE-301’s
ORR endpoint and the subsequent decision not to continue to the study’s OS endpoint. In connection with these actions, we
incurred termination costs during the second and third quarters of 2021, which included severance, benefits, and related
costs, totaling approximately $1.3 million. No further reduction in force was taken related to the decision to stop
enrollment in ILLUMINATE-206.
We are actively evaluating other novel therapeutic assets, including developmental and potentially commercial-stage
assets, which may represent an opportunity to expand our pipeline.
Nasdaq Compliance
As previously disclosed, on November 26, 2021, we received a deficiency letter (the “Nasdaq Letter”) from the
Nasdaq Listing Qualifications Department, notifying us that we are not in compliance with Nasdaq Listing Rule 5550(a)
(2), which requires us to maintain a minimum bid price of at least $1 per share for continued listing on The Nasdaq Capital
Market (the “Minimum Bid Requirement”). The Company’s failure to comply with the Minimum Bid Requirement was
based on the Company’s common stock per share price being below the $1 threshold for a period of 30 consecutive
business days. In accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the “Compliance Period Rule”), the Company has
been provided an initial period of 180 calendar days (the “Compliance Date”), to regain compliance with the Minimum Bid
Requirement. If, at any time before the Compliance Date, the bid price for the Company’s common stock closes at $1.00
or more per share for a minimum of 10 consecutive business
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days, as required under Nasdaq requirements, the Staff will provide written notification to the Company that it complies
with the Minimum Bid Requirement, unless the Staff exercises its discretion to extend this 10-day period pursuant to
Nasdaq Listing Rule 5810(c)(3)(H).
If the Company does not regain compliance with the Minimum Bid Requirement by the Compliance Date, the
Company may be eligible for an additional 180 calendar day compliance period (the “Second Compliance Period”). To
qualify, the Company would need to meet the continued listing requirement for the market value of publicly held shares
and all other initial listing standards of the Nasdaq Capital Market, with the exception of the Minimum Bid Requirement,
and provide written notice to the Staff of its intention to cure the deficiency during the Second Compliance Period.
Neither the Nasdaq Letter nor the Company’s noncompliance with the Minimum Bid Requirement have an
immediate effect on the listing or trading of the Company’s common stock, which continues to trade on The Nasdaq
Capital Market under the symbol “IDRA.”
Clinical Development
Tilsotolimod (IMO-2125)
Tilsotolimod is a synthetic phosphorothioate oligonucleotide that acts as a direct agonist of TLR9 to stimulate the
innate and adaptive immune systems. It was developed for administration via intratumoral injection in combination with
systemically administered checkpoint inhibitors and costimulation therapies for the treatment of various solid tumors. We
referred to our tilsotolimod development program as the ILLUMINATE development program. See additional information
under the heading “Collaborative Alliances” for information on the development of tilsotolimod in collaboration with
AbbVie Inc. (“AbbVie”) for patients with head and neck squamous cell carcinoma (“HNSCC”).
ILLUMINATE-206 - Phase 2 Trial of Tilsotolimod (IMO-2125) in Combination with Nivolumab and Ipilimumab
for the treatment of Solid Tumors
In September 2019, we initiated a Phase 2, open-label, global, multicohort study to evaluate the safety and
effectiveness of tilsotolimod administered intratumorally in combination with nivolumab and ipilimumab for the treatment
of solid tumors. We refer to this study as ILLUMINATE-206.
The first solid tumor investigated under ILLUMINATE-206 was relapsed/refractory Microsatellite-Stable Colorectal
Cancer (“MSS-CRC”) in immunotherapy-naïve patients (the “MSS-CRC Study”). To investigate the safety profile of the
combination of tilsotolimod, nivolumab and ipilimumab, ILLUMINATE-206 was designed with a stepwise approach to
ipilimumab dosage. An initial group of ten patients in the safety cohort of the MSS-CRC Study, many of whom were
heavily pre-treated and rapidly progressing, received 8 mg of intratumoral tilsotolimod and 3 mg/kg of intravenous (IV)
nivolumab every two weeks, along with 1 mg/kg of IV ipilumab every eight weeks (the “Low-Dose, Low-Frequency
Cohort”). This regimen was generally well tolerated; no patients discontinued treatment due to adverse events (“AEs”) and
no patients experienced Grade 4 or 5 AEs. As of the response data cutoff date, per Response Evaluation Criteria in Solid
Tumors V1.1 (“RECIST V1.1”) criteria, one patient experienced stable disease (“SD”) and nine patients progressed.
Investigators reported that six of the progressing patients had stability or reduction in size of injected lesions and six had
stability or reduction in overall size of uninjected lesions.
Based on these results, we enrolled an additional ten patients in the MSS-CRC Study. Changes in the study design
intended to improve potential outcomes in the targeted patient population included increasing the frequency of ipilimumab
dosing to every three weeks and limiting the number of allowed prior lines of treatment to two. Accordingly, the second
group of ten patients enrolled in the MSS-CRC Study received 8 mg of intratumoral tilsotolimod (total of 9 doses over
approximately 28 weeks) and 3 mg/kg of intravenous (IV) nivolumab every three
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weeks followed by 480 mg of IV nivolumab every four weeks, along with 1 mg/kg of IV ipilimumab every three weeks for
four doses (the “Low-Dose, High-Frequency Cohort”).
In December 2021, we announced that preliminary data from the second ten patients dosed in the safety cohort of
ILLUMINATE-206 showed a safety profile consistent with the first ten patients in ILLUMINATE-206 and with prior
studies.
Of the eight patients who had a post-baseline disease assessment evaluated per RECIST v1.1, one experienced SD
with disease control for more than six months; the remaining patients experienced Progressive Disease (“PD”). However,
one of the RECIST v1.1 PD patients was determined to have experienced pseudo-progression, meaning that the initial
increase from baseline in overall tumor burden was followed by a decrease from baseline in overall tumor burden and,
based on the total decrease from baseline, was considered an Immune-Related Partial Response (“irPR”) by Immune-
Related RECIST (“irRECIST”). The patient continued in active treatment, as allowed per protocol, through February 2022,
when they withdrew due to travel constraints. As a result, we are in process of concluding all study-related activities for
ILLUMINATE-206.
As further discussed in this annual report under the caption “Item 1. Business - Collaborative Alliances”, in March
2019 we entered into a clinical trial collaboration and supply agreement with BMS, under which BMS agreed to
manufacture and supply ipilimumab and nivolumab, at its cost and for no charge to us, for use in ILLUMINATE-206.
ILLUMINATE-301 - Phase 3 Trial of Tilsotolimod (IMO-2125) in Combination with Ipilimumab in Patients with
Anti-PD1 Refractory Melanoma
In the first quarter of 2018, we initiated a Phase 3 trial of intratumoral tilsotolimod in combination with ipilimumab
in patients with anti-PD-1 refractory melanoma, which we referred to as ILLUMINATE-301. This trial compared the
results of the tilsotolimod–ipilimumab combination to those of ipilimumab alone in a 1:1 randomization. The family of
primary endpoints of the trial consisted of ORR by blinded independent central review RECIST v1.1 and median OS.
As discussed above, in March 2021, we reported that ILLUMINATE-301 did not meet its primary endpoint of ORR.
In May 2021, following evaluation of the full data set, we announced we would not continue ILLUMINATE-301 to its OS
primary endpoint.
Collaborative Alliances
Our current alliances include collaborations with Scriptr Global, Inc. (“Scriptr”), AbbVie, and BMS. We may seek to
enter into new collaborative alliances to support development and commercialization of additional drug candidates.
Collaboration with Scriptr
In February 2021, we entered into a collaboration and option agreement with Scriptr, pursuant to which (i) Scriptr
and Idera will conduct a research collaboration utilizing Scriptr Platform Technology (“SPT”) to identify, research and
develop gene therapy candidates (each, a “Collaboration Candidate”) for the treatment, palliation, diagnosis or prevention
of (a) myotonic dystrophy type 1 (“DM1 Field”) and (b) Friedreich’s Ataxia (“FA Field”) on a Research Program-by-
Research Program basis, as applicable, and (ii) we were granted an exclusive option, in our sole discretion, to make
effective the Scriptr License Agreement, as defined below, for a given Research Program, as defined below, to make use of
Collaboration Candidates and related intellectual property (collectively, the “Scriptr Agreement”).
Pursuant to the Scriptr Agreement, Scriptr will use commercially reasonable efforts to carry out research activities
set forth in accordance with the applicable DM1 Field and FA Field research plans, including certain pre-clinical proof of
concept studies, to identify research Collaboration Candidates utilizing SPT (each, a “Research Program”). Following the
completion of activities under a given Research Program, Scriptr will prepare and submit
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to us a comprehensive data package (each, a “Data Package”) that summarizes, on a Research Program-by-Research
Program basis, any Collaboration Candidates researched under the Research Program, including any data and results. Upon
receipt of a Data Package, we have, in our sole discretion, up to two-hundred seventy (270) calendar days to make effective
the exclusive license agreement entered into by and between Scriptr and us, pursuant to which, among other things, Scriptr
grants us exclusive rights and licenses with respect to the development, manufacture and commercialization of licensed
candidates and products, subject to certain conditions and limitations (the “Scriptr License Agreement”), for a given
Research Program (each licensed Research Program, a “Licensed Program”). The Scriptr License Agreement provides for
customary development milestones on candidates developed under a Licensed Program and royalties on licensed products,
if any.
In partial consideration of the rights granted by Scriptr to us under the Scriptr Agreement, we made a one-time, non-
creditable and non-refundable payment to Scriptr during the first quarter of 2021. In order to fund the Research Programs,
we will reimburse Scriptr for costs incurred by or on behalf of Scriptr in connection with the conduct of each Research
Program during the research term in accordance with the applicable Research Program budget and payment schedule. We
incurred approximately $2.1 million in research and development expenses under the Scriptr Agreement during the year
ended December 31, 2021.
Collaboration with AbbVie
Effective August 27, 2019, we entered into a clinical trial collaboration and supply agreement (the “AbbVie
Agreement”) with AbbVie, a global, research-based biopharmaceutical company, to conduct a clinical study to evaluate the
efficacy and safety of combinations of an OX40 agonist (ABBV-368), tilsotolimod, nab-paclitaxel and/or an anti-
programmed cell death 1 (PD-1) antagonist (ABBV-181). Under the AbbVie Agreement, we agreed to provide a clinical
trial supply of tilsotolimod to AbbVie and AbbVie will sponsor, fund and conduct the study entitled “A Phase 1b,
Multicenter, Open-Label Study to Determine the Safety, Tolerability, Pharmacokinetics, and Preliminary Efficacy of
ABBV-368 plus Tilsotolimod and Other Therapy Combinations in Subjects with Recurrent/Metastatic Head and Neck
Squamous Cell Carcinoma” (the “AbbVie Study”).
In December 2021, AbbVie announced the discontinuation of further patient enrollment in the AbbVie Study. The
decision to discontinue the AbbVie Study was not related to safety concerns. Current patient treatment and follow-up is
ongoing.
Collaboration with Bristol-Meyers Squibb
We entered into two clinical collaboration agreements with BMS, the first in May 2018 and the second in March
2019, to support ILLUMINATE-301 and ILLUMINATE-206, respectively.
Under the May 2018 BMS Agreement, BMS granted us a non-exclusive, non-transferrable, royalty-free license
(with a right to sublicense) under its intellectual property to use ipilimumab in ILLUMINATE-301 and agreed to
manufacture and supply ipilimumab, at its cost and for no charge to us, for use in ILLUMINATE-301.
Under the March 2019 BMS Agreement, BMS granted us a non-exclusive, non-transferrable, royalty-free license
(with a right to sublicense) under its intellectual property to use ipilimumab and nivolumab in ILLUMINATE-206 and
agreed to manufacture and supply both ipilimumab and nivolumab, at its cost and for no charge to us, for use in
ILLUMINATE-206.
Academic and Research Collaborations
We have entered into research collaborations with scientists at leading academic research institutions. These
research collaborations allow us to augment our internal research capabilities and obtain access to specialized knowledge
and expertise. In general, our research collaborations may require us to supply compounds and pay various amounts to
support the research. Under these research agreements, if a collaborator, solely or jointly with us, creates any invention, we
may own exclusively such invention, have an automatic paid-up, royalty-free non-exclusive license or have an option to
negotiate an exclusive, worldwide, royalty-bearing license to such invention. Inventions developed solely by our scientists
in connection with research collaborations are owned exclusively by us. These collaborative agreements are non-exclusive
and may be terminated with limited notice.
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Research and Development Expenses
We are committed to redefining the treatment of certain cancers and rare diseases and have historically dedicated a
significant portion of our resources to our efforts on the discovery and development of our drug candidates. For the years
ended December 31, 2021, 2020, and 2019, we spent approximately $16.4 million, $24.8 million, and $34.9 million,
respectively, on research and development activities. We plan to continue to invest in research and development.
Accordingly, we anticipate a significant portion of our operating expenses will continue to be related to research and
development in 2022 and beyond.
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Patents, Proprietary Rights and Trade Secrets
Our success depends in part on our ability to obtain and maintain proprietary protection for our drug candidates,
technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from
infringing our proprietary rights. We use a variety of methods to seek to protect our proprietary position, including filing
U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important
to the development of our business. We also rely on trade secrets, know-how, continuing technological innovation, and in-
licensing opportunities to develop and maintain our proprietary position.
We have devoted and continue to devote a substantial amount of our resources into establishing intellectual property
protection for:
● Novel chemical entities that function as agonists of TLR3, TLR7, TLR8 or TLR9;
● Novel chemical entities that function as antagonists of TLR7, TLR8 or TLR9; and
● Composition and use of our nucleic acid chemistry compounds to treat and prevent a variety of diseases.
On November 5, 2019, the U.S. Patent and Trademark Office (“USPTO”) issued to us U.S. Patent No. 10,463,686
entitled “Immune Modulation With TLR9 Agonists For Cancer Treatment,” which includes tilsotolimod. The patent
includes 24 claims directed to methods of treating melanoma with intratumoral administration of tilsotolimod in
combination with certain immune checkpoint inhibitor therapies, including inhibitors of the CTLA-4 and PD-1/PD-L1
pathways. The patent is expected to expire in September 2037.
On September 15, 2020, the USPTO issued U.S. Patent No. 10,772,907 (the “‘907 Patent”) to us, entitled “Immune
Modulation with TLR9 Agonists for Cancer Treatment,” which includes our investigational therapy tilsotolimod. The ‘907
Patent includes 26 claims directed to methods of treating colorectal cancer (“CRC”) with intratumoral administration of
tilsotolimod in combination with certain immune checkpoint inhibitor therapies, including CTLA-4, PD-1 or PD-L1
inhibitors.
On November 17, 2020, the USPTO issued to us U.S. Patent No. 10,835,550 (the “‘550 Patent”) entitled “Immune
Modulation with TLR9 Agonists for Cancer Treatment,” which includes our investigational therapy tilsotolimod. The ‘550
Patent includes 29 claims directed to methods of treating HNSCC with intratumoral administration of tilsotolimod in
combination with certain immune checkpoint inhibitor therapies, including CTLA-4, PD-1 or PD-L1 inhibitors.
On January 18, 2022, the USPTO issued to us U.S. Patent No. 11,224,611 (the “‘611 Patent” and, together with ‘907
Patent and the ‘550 Patent, the “New Patents”) entitled “immune Modulation with TLR9 Agonists for Cancer Treatment,”
which includes our investigational therapy tilsotolimod. The ‘611 Patent includes 30 claims directed to methods of treating
kidney cancer with intratumoral administration of tilsotolimod in combination with certain immune checkpoint inhibitor
therapies, including CTLA-4, PD-1 or PD-L1 inhibitors.
The New Patents expand protection of the first tilsotolimod method-of-use patent, which was directed to methods of
treating metastatic melanoma and was issued in November 2019. The New Patents provide exclusivity for certain uses of
tilsotolimod through September 2037.
As of March 15, 2022, we owned approximately 56 U.S. patents and patent applications and about 192 patents and
patent applications throughout the rest of the world for our TLR-targeted immune modulation technologies. These patents
and patent applications include claims covering the chemical compositions of matter and methods of use of our IMO
compounds, such as IMO-8400, IMO-9200 and tilsotolimod (IMO-2125), as well as other compounds. These patents and
patent applications (if granted) expire at various dates ranging from 2020 to 2042. With respect to IMO-8400, we have ten
issued U.S. patents that cover the chemical composition of matter of IMO-8400 and certain methods of its use, the latest of
which expires in 2031. With respect to IMO-9200, we have nine issued U.S. patents that cover the chemical composition
for IMO-9200 and methods of its use, the latest of which expires in 2034. With respect to tilsotolimod, we have issued U.S.
patents that cover the chemical composition of matter of tilsotolimod that will expire between 2023 and 2026, and we have
additional U.S. patents
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that cover methods of its use, the latest of which will expire in 2037. We have pending applications in the United States and
outside of the United States that cover methods of treatment or use of tilsotolimod, which, if granted, will expire between
2035 and 2042.
Because patent applications in the United States and many foreign jurisdictions are typically not published until 18
months after filing, or in some cases not at all, and because publications of discoveries in the scientific literature often lag
behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions
claimed in issued patents or pending patent applications, or that we or they were the first to file for protection of the
inventions set forth in these patent applications.
Litigation may be necessary to defend against or assert claims of infringement, to enforce patents issued to us, to
protect trade secrets or know-how owned by us, or to determine the scope and validity of the proprietary rights of others or
to determine the appropriate term for an issued patent. In addition, USPTO may declare interference proceedings to
determine the priority of inventions with respect to our patent applications or reexamination or reissue proceedings to
determine if the scope of a patent should be narrowed. Litigation or any of these other proceedings could result in
substantial costs to and diversion of effort by us, even if the eventual outcome is favorable to us, and could have a material
adverse effect on our business, financial condition and results of operations. These efforts by us may not be successful.
The term of individual patents depends upon the legal term for patents in the countries in which they are obtained. In
most countries, including the United States, the patent term is 20 years from the earliest filing date of a non-provisional
patent application. In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a
patentee for administrative delays by the USPTO in examining and granting a patent. A patent’s term may also be
shortened if a patent is terminally disclaimed over an earlier filed patent. The term of a patent that covers a drug, biological
product, or medical device approved pursuant to a pre-market approval may also be eligible for patent term extension when
U.S. Food and Drug Administration (“FDA”) approval is granted, provided statutory and regulatory requirements are met.
The length of the patent term extension is related to the length of time the drug is under regulatory review and
development. The Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”) permits a
patent term extension of up to five years beyond the expiration date set for the patent. Patent extension cannot extend the
remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent applicable to each
regulatory review period may be granted an extension and only those claims reading on the approved drug are extended.
Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an
approved drug.
We may rely, in some circumstances, on trade secrets and confidentiality agreements to protect our technology.
Although trade secrets are difficult to protect, wherever possible, we use confidentiality agreements to protect the
proprietary nature of our technology. We regularly implement confidentiality agreements with our employees, consultants,
scientific advisors, and other contractors and collaborators. However, there can be no assurance that these agreements will
not be breached, that we will have adequate remedies for any breach, or that our trade secrets and/or proprietary
information will not otherwise become known or be independently discovered by competitors. To the extent that our
employees, consultants or contractors use intellectual property owned by others in their work for us, disputes may also
arise as to the rights in related or resulting know-how and inventions.
Manufacturing
We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities
of any of our drug candidates. We currently rely and expect to continue to rely on other companies to manufacture our drug
candidates for preclinical and clinical development. We source our bulk drug manufacturing requirements from a limited
number of contract manufacturers through the issuance of work orders on an as-needed basis. We currently do not have any
long-term supply contracts. We depend and will continue to depend on our contract manufacturers to manufacture our drug
candidates in accordance with current Good Manufacturing Practices (“cGMP”) regulations for use in clinical trials. We
will ultimately depend on contract manufacturers for the manufacture of our products for commercial sale, if and when our
drug candidates are approved. Contract manufacturers are subject to extensive governmental regulation.
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Competition
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense
competition and a strong emphasis on proprietary products. We recognize that other companies, including large
pharmaceutical companies, may be developing or have plans to develop products and technologies that may compete with
those we may acquire. Many of our competitors have substantially greater financial, technical, and human resources than
we have. In addition, many of our competitors have significantly greater experience than we have in undertaking
preclinical studies and human clinical trials of new pharmaceutical products, obtaining FDA and other regulatory approvals
of products for use in health care and manufacturing, and marketing and selling approved products. Our competitors may
discover, develop or commercialize products or other novel technologies that are more effective, safer, or less costly than
any that we may develop. Our competitors may also obtain FDA or other regulatory approval for their products more
rapidly than we may obtain approval for ours.
We anticipate that the competition with our drug candidates or technologies that we may acquire will be based on a
number of factors including product efficacy, safety, availability, and price. The timing of market introduction of products
and competitive products will also affect competition among products. We expect the relative speed with which we can
develop products, complete the clinical trials and approval processes, and supply commercial quantities of the products to
the market to be important competitive factors. Our competitive position will also depend upon our ability to attract and
retain qualified personnel, to obtain patent protection or otherwise develop proprietary products or processes, protect our
intellectual property, and to secure sufficient capital resources for the period between technological conception and
commercial sales.
Risks related to our competitors and our competitive position are discussed in further detail in the section entitled
“Risk Factors” of this Annual Report on Form 10-K.
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Government Regulation
Government authorities in the United States, at the federal, state and local level, and in other countries and
jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing,
manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution,
marketing and sales, pricing, post-approval monitoring and reporting, and import and export of pharmaceutical products.
The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with
subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of
substantial time and financial resources. Regulatory requirements are also continually evolving. By example, in light of the
COVID-19 pandemic, the FDA has issued a number of guidance documents to assist companies navigating product
development, and manufacturing concerns raised by COVID-19.
Review and Approval of Drugs in the United States
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and
associated implementing regulations and guidance. The failure to comply with the FDCA and other applicable U.S.
requirements at any time during the product development process, approval process or after approval may subject an
applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal by the FDA to approve
pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types
of enforcement letters, product recalls, product seizures, operating restrictions such as the total or partial suspension of
production or distribution, import bans, injunctions, fines, refusals of government contracts, restitution, disgorgement of
profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice (“DOJ”) or other
governmental entities, including state agencies.
An applicant seeking approval to market and distribute a new drug product in the United States must typically
undertake the following:
● completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s
good laboratory practice (“GLP”) regulations;
● submission to the FDA of an investigational new drug (“IND”) application, which must take effect before human
clinical trials may begin in the United States;
● initial and continuing approval by an independent institutional review board (“IRB”), representing each clinical
site before each clinical trial may be initiated;
● performance of adequate and well-controlled human clinical trials in accordance with good clinical practices
(“GCP”) to establish the safety and efficacy of the proposed drug product for each indication;
● preparation and submission to the FDA of a new drug application (“NDA”);
● review of the product candidate by an FDA advisory committee, where appropriate or if applicable;
● satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the
product, or components thereof, are produced to assess compliance with cGMP requirements and to assure that
the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity;
● satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of
the clinical data;
● payment of user fees and securing FDA approval of the NDA; and
● compliance with any post-approval requirements, including Risk Evaluation and Mitigation Strategies (“REMS”)
where applicable, and post-approval studies required by the FDA.
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Preclinical Studies and Submission of an IND
Before an applicant begins testing a product candidate with potential therapeutic value in humans, the product
candidate enters the preclinical testing stage. Preclinical studies include laboratory evaluation of the chemistry,
pharmacology, toxicity, purity, and stability, among other attributes, of the manufactured drug substance or active
pharmaceutical ingredient and the formulated drug or drug product, as well as in vitro and animal studies to assess the
safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. The conduct of
preclinical studies is subject to federal regulations and requirements, including GLP regulations. The results of the
preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans
for clinical studies, among other things, are submitted to the FDA as part of an IND. Additional preclinical testing, such as
animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted.
Human Clinical Studies in Support of an NDA
Clinical trials involve the administration of the investigational product to human subjects under the supervision of
qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all
research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are
conducted under written study protocols detailing, among other things, the objectives of the study, inclusion and exclusion
criteria, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated, and a statistical
analysis plan. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as
part of the IND. Once an IND is in effect, unapproved product candidates may be shipped in interstate commerce for use in
an investigational clinical trial and the investigational product may be administered to humans as part of a clinical trial. An
IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or
questions related to a proposed clinical trial and places the trial on clinical hold or partial clinical hold. In such a case, the
IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Depending on the
conditions under development, multiple INDs may be required for the same drug product.
In addition to the foregoing IND requirements, an IRB representing each institution participating in the clinical trial
must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct
continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the
study protocol, protocol amendments, communications to study subjects and informed consent information to be provided
to study subjects. An IRB must operate in compliance with FDA regulations. Information about certain clinical trials must
be submitted within specific timeframes to the National Institutes of Health (“NIH”) for public dissemination on their
ClinicalTrials.gov website. Sponsors or distributors of investigational products for the diagnosis, monitoring, or treatment
of one or more serious disease or conditions must also have a publicly available policy on evaluating and responding to
requests for expanded access. Investigators must also provide certain information to clinical trial sponsors to allow the
sponsors to make certain financial disclosures to the FDA.
Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor,
known as a data monitoring committee (“DMC”). This group provides recommendations as to whether a trial should move
forward at designated check points based on access that only the group maintains to available data from the study.
Suspension or termination of development during any phase of clinical trials can occur if it is determined that the
participants or patients are being exposed to an unacceptable health risk. Other reasons for suspension or termination may
be made by us based on evolving business objectives and/or competitive climate.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease (e.g.
cancer) or condition and tested for safety, dosage tolerance, structure-activity relationships, mechanism of action,
absorption, metabolism, distribution, excretion, and pharmacokinetics and, if possible, to gain an early indication of its
effectiveness and to determine optimal dosage.
Phase 2: The drug is administered to a limited patient population to identify possible adverse effects and safety
risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance
and optimal dosage.
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Phase 3: The drug is administered to an expanded patient population, generally at geographically dispersed
clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of
the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for
the labeling of the product.
The manufacture of investigational drugs for the conduct of human clinical trials is subject to cGMP requirements.
Investigational drugs and active ingredients imported into the United States are also subject to regulation by the FDA.
Further, the export of investigational products outside the United States is subject to regulatory requirements of the
receiving country as well as U.S. export requirements under the FDCA.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and to the
IRB and more frequently if serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for
any of the following: serious and unexpected suspected adverse reactions; findings from other studies or animal or in vitro
testing that suggest a significant risk in humans exposed to the drug; and any clinically important increase in the case of a
serious suspected adverse reaction over that listed in the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3
clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA, the sponsor
or the data monitoring committee for a clinical trial may suspend or terminate the clinical trial at any time on various
grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB
can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not
being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious
harm to patients. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity
of the clinical data submitted.
Section 505(b)(2) NDAs
NDAs for most new drug products are based on clinical studies conducted by or for the product sponsor. These
applications are submitted under Section 505(b)(1) of the FDCA. The FDA is, however, authorized to approve an
alternative type of NDA under Section 505(b)(2) of the FDCA. This type of application allows the applicant to rely, in part,
on the FDA’s previous findings of safety and efficacy for a similar product, or published literature. Specifically,
Section 505(b)(2) applies to NDAs for a drug for which the investigations made to show whether or not the drug is safe for
use and effective in use and relied upon by the applicant for approval of the application “were not conducted by or for the
applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the
investigations were conducted.”
Thus, Section 505(b)(2) authorizes the FDA to approve an NDA based on safety and effectiveness data that was not
developed by the applicant. NDAs filed under Section 505(b)(2) may provide an alternate and potentially more expeditious
pathway to FDA approval for new or improved formulations or new uses of previously approved products. If the
Section 505(b)(2) applicant can establish that reliance on the FDA’s previous approval or a similar product or that the
applicant’s reliance on published data is scientifically appropriate, such as through bridging studies, the applicant may
eliminate the need to conduct certain preclinical or clinical studies of the new product. Companies using this pathway,
however, must conduct studies to support any differences from an approved product. The FDA may then approve the new
drug candidate for all or some of the label indications for which the referenced product has been approved, as well as for
any new indication sought by the Section 505(b)(2) applicant.
Submission of an NDA to the FDA
Assuming successful completion of required clinical testing and other requirements, the results of the preclinical and
clinical studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed
labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the drug product
for one or more indications. Under federal law, the submission of most NDAs is subject to a substantial application user
fee. The sponsor of an approved NDA is also subject to an annual program fee. Exceptions or waivers for these fees exist
for a small company (fewer than 500 employees, including employees and affiliates) satisfying certain requirements and
products with orphan drug designation for a particular indication are not subject to a fee provided there are no other
intended uses in the NDA and provided other exemption requirements are met.
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The FDA conducts a preliminary review of an NDA within 60 calendar days of its receipt and strives to inform the
sponsor by the 74th day after the FDA’s receipt of the submission of any filing review issues. The FDA may request
additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the
additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the
submission is accepted for filing, the FDA begins an in-depth substantive review.
The FDA has agreed to specified performance goals under the Prescription Drug User Fee Act (“PDUFA”)
guidelines in the review process of NDAs. Under PDUFA, 90% of applications seeking approval of New Molecular
Entities (“NMEs”), are meant to be reviewed within ten months from the date on which the FDA accepts the NDA for
filing, and 90% of applications for NMEs that have been designated for “priority review” are meant to be reviewed within
six months of the filing date. For applications seeking approval of drugs that are not NMEs, the ten-month and six-month
review periods run from the date that the FDA receives the application. The review process may be extended by the FDA
for three additional months to consider new information or clarification provided by the applicant to address an outstanding
deficiency identified by the FDA following the original submission. This review period may change as the PDUFA statute
must be reauthorized by the U.S. Congress by September 2022.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be
manufactured. These pre-approval inspections cover all facilities associated with an NDA submission, including drug
component manufacturing (such as active pharmaceutical ingredients), finished drug product manufacturing, and control
testing laboratories. The FDA will not approve an application unless it determines that the manufacturing processes and
facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within
required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to
assure compliance with GCP.
In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk
minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential
risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product,
seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or
potential adverse events, and whether the product is a new molecular entity. REMS can include medication guides,
physician communication plans for healthcare professionals, and elements to assure safe use (“ETASU”). ETASU may
include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain
circumstances, special monitoring, and the use of patient registries. The FDA may require a REMS before approval or post-
approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can
materially affect the potential market and profitability of a product. The REMS strategy must be approved by the FDA. In
addition, the REMS must include a timetable to assess the strategy at 18 months, three years, and seven years after the
strategy’s approval.
The FDA is required to refer an application for a novel drug to an advisory committee or explain why such referral
was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific
experts, that reviews, evaluates and provides 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.
Fast Track, Breakthrough Therapy and Priority Review Designations
The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet
medical need in the treatment of a serious or life-threatening disease or condition. These programs are fast track
designation, breakthrough therapy designation and priority review designation.
Specifically, the FDA may designate a product for fast track review if it is intended, whether alone or in combination
with one or more other drugs, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the
potential to address unmet medical needs for such a disease or condition. For fast track products, sponsors may have
greater interactions with the FDA and the FDA may initiate review of sections of a fast track product’s NDA before the
application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of
clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the
FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user
fees. However, the FDA’s time period goal for reviewing a
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fast track application does not begin until the last section of the NDA is submitted. In addition, the fast track designation
may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the
clinical trial process.
In 2012, Congress enacted the Food and Drug Administration Safety and Innovation Act (“FDASIA”). This law
established a new regulatory scheme allowing for expedited review of products designated as “breakthrough therapies.” A
product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more
other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the
product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints,
such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect
to breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing
timely advice to the product sponsor regarding development and approval; involving more senior staff in the review
process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in
an efficient manner. Like fast track designation, breakthrough designation may be rescinded if the product no longer meets
the qualifying criteria.
Third, the FDA may designate a product for priority review if it is a drug that treats a serious condition and, if
approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case-by-case
basis, whether the proposed drug represents a significant improvement when compared with other available therapies.
Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition,
elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance
that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A
priority designation is intended to direct overall attention and resources to the evaluation of such applications, and to
shorten the FDA’s goal for taking action on a marketing application from ten months to six months.
Accelerated Approval Pathway
The FDA may grant accelerated approval to a drug for a serious or life-threatening condition that provides
meaningful therapeutic advantage to patients over existing treatments based upon a determination that the drug has an
effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated
approval for such a condition when the product has an effect on an intermediate clinical endpoint that can be measured
earlier than an effect on irreversible morbidity or mortality (“IMM”), and that is reasonably likely to predict an effect on
irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the
condition and the availability or lack of alternative treatments. Drugs granted accelerated approval must meet the same
statutory standards for safety and effectiveness as those granted traditional approval.
For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement,
radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of
clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An
intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the
clinical benefit of a drug, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on
intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where the
therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a
basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a drug.
The accelerated approval pathway is most often used in settings in which the course of a disease is long and an
extended period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate or
intermediate clinical endpoint occurs rapidly. Thus, accelerated approval has been used extensively in the development and
approval of drugs for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or
decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large trials to demonstrate
a clinical or survival benefit.
The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner,
additional post-approval confirmatory studies to verify and describe the drug’s clinical benefit. As a result, a drug candidate
approved on this basis is subject to rigorous post-marketing compliance requirements, including
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the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct
required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to
withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under
accelerated regulations are subject to prior review by the FDA.
The FDA’s Decision on an NDA
On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the
inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval
letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A
complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing
or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to
the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to
reviewing such resubmissions in two or six months depending on the type of information included. Even with submission
of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria
for approval.
If the FDA approves a product, it may limit the approved indications for use for the product, require that
contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including
Phase 4 clinical trials, be conducted to further assess the drug’s safety after approval, require testing and surveillance
programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or
other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of
the product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or
surveillance programs. After approval, many types of changes to the approved product, such as adding new indications,
manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and
approval.
Post-Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by
the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and
distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most
changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review
and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at
which such products are manufactured, as well as new application fees for supplemental applications with clinical data.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs
are required to register their establishments with the FDA and state agencies, are required to list their distributed products,
and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP
requirements. The information that must be submitted to FDA regarding manufactured products was expanded through the
Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to include the volume of drugs produced during the
prior year. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being
implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose
reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide
to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality
control to maintain cGMP compliance.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and
standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously
unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing
processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new
safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of
distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
● restrictions on the marketing or manufacturing of the product, suspension of the approval, complete withdrawal of
the product from the market or product recalls;
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● warning letters, untitled letters, cyber letters, or holds or termination of post-approval clinical trials;
● refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of
product license approvals;
● product seizure or detention, or refusal to permit the import or export of products; or
FDA debarment, injunctions, fines, consent decrees, corporate integrity agreements, suspension and debarment from
government contracts, refusal of orders under existing government contracts, exclusion from participation in federal and
state healthcare programs, restitution, disgorgement, or the imposition of civil or criminal penalties, including fines and
imprisonment, and adverse publicity.
FDA post-approval requirements are continually evolving. For example, in March 2020, the U.S. Congress passed
the CARES Act, which includes various provisions regarding FDA drug shortage and manufacturing volume reporting
requirements, as well as provisions regarding supply chain security, such as risk management plan requirements, and the
promotion of supply chain redundancy and domestic manufacturing.
The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug products placed
on the market. This regulation includes, among other things, standards and regulations for direct-to-consumer advertising,
communications regarding unapproved uses, industry-sponsored scientific and educational activities, and promotional
activities involving the Internet and social media. Promotional claims about a drug’s safety or effectiveness are prohibited
before the drug is approved. After approval, a drug product may not be promoted for uses that are not approved by the
FDA, as reflected in the product’s prescribing information. In the United States, health care professionals are generally
permitted to prescribe drugs for such uses not described in the drug’s labeling, known as off-label uses, because the FDA
does not regulate the practice of medicine. However, FDA regulations impose rigorous restrictions on manufacturers’
communications, prohibiting the promotion of off-label uses. It may be permissible, under very specific, narrow conditions,
for a manufacturer to engage in nonpromotional, non-misleading communication regarding off-label information, such as
distributing scientific or medical journal information.
If a company is found to have promoted off-label uses, it may become subject to adverse public relations and
administrative and judicial enforcement by the FDA, the DOJ, or the Office of the Inspector General of the Department of
Health and Human Services, as well as state authorities. This could subject a company to a range of penalties that could
have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner
in which a company promotes or distributes drug products. The federal government has levied large civil penalties and
criminal fines against companies for alleged improper promotion and has also requested that companies enter into consent
decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing
Act (“PDMA”), and its implementing regulations, as well as the Drug Supply Chain Security Act (“DSCSA”). The PDMA
regulate and limit the distribution and tracing of prescription drug samples at the federal level. The DSCSA imposes
requirements to ensure accountability in distribution, that requires certain licensing and licensing standards, and to identify
and remove counterfeit and other illegitimate products from the market.
Abbreviated New Drug Applications for Generic Drugs
In 1984, with passage of the Hatch-Waxman Amendments to the FDCA, Congress authorized the FDA to approve
generic drugs under abbreviated approval requirements. To obtain approval of a generic drug, an applicant must submit an
Abbreviated New Drug Application (“ANDA”) to the agency. In support of such applications, a generic manufacturer may
rely on the preclinical and clinical testing previously conducted for a drug product previously approved under an NDA,
known as the Reference Listed Drug (“RLD”). Many states also regulate the distribution of drug product samples and
commercial product.
Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is identical to the
RLD with respect to the active ingredients, the route of administration, the dosage form, and the strength of the drug,
among other requirements. Certain differences, however, between the reference listed drug and ANDA
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product may be permitted pursuant to a suitability petition. Certain labeling differences may also be permitted if
information in the reference listed drug’s label is protected by patent or exclusivities. At the same time, the FDA must also
determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent
to a RLD if “the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of
absorption of the listed drug.”
Upon approval of an ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the
RLD in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the
“Orange Book.” Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the
RLD, subject to state law requirements. In addition, by operation of certain state laws and numerous health insurance
programs, the FDA’s designation of therapeutic equivalence often results in automatic substitution of the generic drug at
the pharmacy.
In an effort to increase competition in the drug and biologic product marketplace, Congress, the executive branch,
and FDA have taken certain legislative and regulatory steps. For example, measures have been proposed and implemented
to facilitate product importation. Moreover, the 2020 Further Consolidated Appropriations Act included provisions
requiring that sponsors of approved drug products, including those subject to REMS, provide samples of the approved
products to persons developing 505(b)(2) NDA or ANDA drug products within specified timeframes, in sufficient
quantities, and on commercially reasonable market-based terms. Failure to do so can subject the approved product sponsor
to civil actions, penalties, and responsibility for attorney’s fees and costs of the civil action. This same bill also includes
provisions with respect to shared and separate REMS programs for reference and generic drug products.
Hatch-Waxman Exclusivities
Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA or 505(b)(2) application until any
applicable period of non-patent exclusivity for the RLD has expired. The FDCA provides a period of five years of non-
patent exclusivity for a new drug containing a new chemical entity. For the purposes of this provision, a new chemical
entity (“NCE”), is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA.
An active moiety is the molecule or ion, excluding those appended portions of the molecule that cause the drug to be an
ester, salt, or other noncovalent derivative, responsible for the physiological or pharmacological action of the drug
substance. In cases where such exclusivity has been granted, an ANDA or 505(b)(2) application may not be filed with the
FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case
the applicant may submit its application four years following the original product approval. The FDCA also provides for a
period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other than
bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of
the application. This three-year exclusivity period prevents FDA from making a drug approval effective for the same
changes to a previously approved drug product, such as a new dosage form, route of administration, combination or
indication, as the product that holds the exclusivity. The three-year and five-year exclusivities, however, do not prevent the
filing or approval of full NDAs.
Hatch-Waxman Patent Certification and the 30-Month Stay
Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent
with claims that cover the applicant’s product or an approved method of using the product. Each of the patents listed by the
NDA sponsor is published in the Orange Book. When an ANDA or 505(b)(2) applicant files its application with the FDA,
the applicant is required to provide a certification to the FDA concerning any patents listed for the reference product in the
Orange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval.
Specifically, the applicant must certify with respect to each patent that:
● the required patent information has not been filed;
● the listed patent has expired;
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● the listed patent has not expired, but will expire on a particular date and approval is sought after patent
expiration; or
● the listed patent is invalid, unenforceable or will not be infringed by the new product.
A certification that the new product will not infringe the already approved product’s listed patents or that such
patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed
patents or indicates that it is not seeking approval of a patented method of use, the application will not be approved until all
the listed patents claiming the referenced product have expired (other than method of use patents involving indications for
which the ANDA applicant is not seeking approval). The applicant may also elect to submit a “Section VIII” statement
certifying that its proposed label does not contain (or carves out) any language regarding the patented method-of-use rather
than certifying to a listed method-of-use patent.
If the ANDA or 505(b)(2) applicant has provided a Paragraph IV certification to the FDA, the applicant must also
send notice of the Paragraph IV certification to the NDA and patent holders within certain specified timeframes. The NDA
and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV
certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification
automatically prevents the FDA from approving the ANDA or 505(b)(2) application until the earlier of 30 months after the
receipt of the Paragraph IV notice, expiration of the patent, or a decision in the infringement case that is favorable to the
ANDA applicant.
Pediatric Studies and Exclusivity
Under the Pediatric Research Equity Act (“PREA”) of 2003, an NDA or supplement thereto must contain data that
are adequate to assess the safety and effectiveness of the drug 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. With enactment of the FDASIA in 2012, sponsors must also submit pediatric study plans prior to the assessment
data. Those plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct,
including study objectives and design, any deferral or waiver requests, and other information required by regulation. The
applicant, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with
each other, and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.
The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all
pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data
requirements. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals
are contained in the FFDCA. Unless otherwise required by regulation, the pediatric data requirements do not apply to
products with orphan designation.
In addition, the FDA Reauthorization Act of 2017 introduced a new provision regarding required pediatric studies.
Under this statute, for product candidates intended for the treatment of adult cancer which are directed at molecular targets
that the FDA determines to be substantially relevant to the growth or progression of pediatric cancer, original application
sponsors must submit, with the marketing application, reports from molecularly targeted pediatric cancer investigations
designed to yield clinically meaningful pediatric study data, gathered using appropriate formulations for each applicable
age group, to inform potential pediatric labeling. The FDA may, on its own initiative or at the request of the applicant,
grant deferrals or waivers of some or all of this data, as above. Unlike PREA, orphan products are not exempt from this
requirement.
Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted,
provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory
exclusivity, including the non-patent and orphan exclusivity and on listed patents. This six-month exclusivity may be
granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The
data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed
to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are
submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of
exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but it
effectively extends the regulatory period during which the FDA cannot approve another application.
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Orphan Drug Designation and Exclusivity
Under the Orphan Drug Act, the FDA may designate a drug product as an “orphan drug” if it is intended to treat a
rare disease or condition (generally meaning that it affects fewer than 200,000 individuals in the United States, or more in
cases in which there is no reasonable expectation that the cost of developing and making a drug product available in the
United States for treatment of the disease or condition will be recovered from sales of the product). A company must
request orphan product designation before submitting an NDA. If the request is granted, the FDA will disclose the identity
of the therapeutic agent and its potential use. Orphan product designation does not convey any advantage in or shorten the
duration of the regulatory review and approval process, although it does convey certain advantages such as tax benefits and
exemption from Prescription Drug User Fee Act fees.
If a product with orphan status receives the first FDA approval for the disease or condition for which it has such
designation or for a select indication or use within the rare disease or condition for which it was designated, the product
generally will receive orphan product exclusivity. Orphan product exclusivity means that the FDA may not approve any
other applications for the same product for the same indication for seven years, except in certain limited circumstances.
Competitors may receive approval of different products for the indication for which the orphan product has exclusivity and
may obtain approval for the same product but for a different indication. If a drug or drug product designated as an orphan
product ultimately receives marketing approval for an indication broader than what was designated in its orphan product
application, it may not be entitled to exclusivity.
Orphan drug exclusivity will not bar approval of another product under certain circumstances, including if a
subsequent product with the same drug for the same condition is shown to be clinically superior to the approved product on
the basis of greater efficacy or safety, or providing a major contribution to patient care, or if the company with orphan drug
exclusivity is not able to meet market demand.
Patent Term Restoration and Extension
A patent claiming a new drug product may be eligible for a limited patent term extension under the Drug Price
Competition and Patent Term Restoration Act of 1984, which permits a patent restoration of up to five years for patent term
lost during product development and the FDA regulatory review. The restoration period granted is typically 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 ultimate approval date. Patent term restoration cannot be used to extend the remaining term of a patent
past a total of 14 years from the product’s approval date. Only one patent applicable to an approved drug product is eligible
for the extension, and the application for the extension must be submitted prior to the expiration of the patent in question.
A patent that covers multiple drugs for which approval is sought can only be extended in connection with one of the
approvals. The USPTO reviews and approves the application for any patent term extension or restoration in consultation
with the FDA.
Review and Approval of Drug Products in the European Union
In order to market any product outside of the United States, a company must also comply with numerous and
varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing,
among other things, clinical trials, marketing authorization, commercial sales and distribution of drug products. Whether or
not it obtains FDA approval for a product, the company would need to obtain the necessary approvals by the comparable
foreign regulatory authorities before it can commence clinical trials or marketing of the product in those countries or
jurisdictions. The approval process ultimately varies between countries and jurisdictions and can involve additional product
testing and additional administrative review periods. The time required to obtain approval in other countries and
jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one
country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory
approval in one country or jurisdiction may negatively impact the regulatory process in others.
Clinical Trial Approval in the EU
Pursuant to the European Clinical Trials Directive, a system for the approval of clinical trials in the European Union
(“EU”) has been implemented through national legislation of the member states. Under this system, an applicant must
obtain approval from the competent national authority of a EU member state in which the clinical
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trial is to be conducted. Furthermore, the applicant may only start a clinical trial after a competent ethics committee has
issued a favorable opinion. Clinical trial application must be accompanied by an investigational medicinal product dossier
with supporting information prescribed by the European Clinical Trials Directive and corresponding national laws of the
member states and further detailed in applicable guidance documents. In April 2014, the EU adopted a new Clinical Trials
Regulation, which will be directly applicable to and binding without the need for any national implementing legislation.
Under the new coordinated procedure for the approval of clinical trials, the sponsor of a clinical trial will be required to
submit a single application for approval of a clinical trial to a reporting EU Member State (RMS) through an EU Portal.
The submission procedure will be the same irrespective of whether the clinical trial is to be conducted in a single EU
member state or in more than one EU member state. The Clinical Trials Regulation also aims to streamline and simplify
the rules on safety reporting for clinical trials.
Orphan Drug Designation and Exclusivity
Regulation 141/2000 provides that a drug shall be designated as an orphan drug if its sponsor can establish: that the
product is intended for the diagnosis, prevention, or treatment of a life-threatening or chronically debilitating condition
affecting not more than five in ten thousand persons in the [EU] when the application is made, or that the product is
intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating, or serious and chronic
condition in the [EU] and that without incentives it is unlikely that the marketing of the drug in the [EU] would generate
sufficient return to justify the necessary investment. For either of these conditions, the applicant must demonstrate that
there exists no satisfactory method of diagnosis, prevention, or treatment of the condition in question that has been
authorized in the [EU] or, if such method exists, the drug will be of significant benefit to those affected by that condition.
Regulation 847/2000 sets out criteria and procedures governing designation of orphan drugs in the EU. Specifically,
an application for designation as an orphan product can be made any time prior to the filing of an application for approval
to market the product. Marketing authorization for an orphan drug leads to a ten-year period of market exclusivity. This
period may, however, be reduced to six years if, at the end of the fifth year, it is established that the product no longer
meets the criteria for orphan drug designation, for example because the product is sufficiently profitable not to justify
market exclusivity. Market exclusivity can be revoked only in very selected cases, such as consent from the marketing
authorization holder, inability to supply sufficient quantities of the product, demonstration of “clinically relevant
superiority” by a similar medicinal product, or, after a review by the Committee for Orphan Medicinal Products, requested
by a member state in the fifth year of the marketing exclusivity period (if the designation criteria are believed to no longer
apply). Medicinal products designated as orphan drugs pursuant to Regulation 141/2000 shall be eligible for incentives
made available by the [EU] and by the EU member states to support research into, and the development and availability of,
orphan drugs.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and
other government authorities. Sales of products will depend, in part, on the extent to which the costs of the products will be
covered by third-party payors, including government healthcare programs in the United States such as Medicare and
Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will
provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor
will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged,
examining the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing
controls to manage costs. Our rebate payments may increase or our prices be adjusted under value-based purchasing
arrangements based on evidence-based measures or outcomes-based measures for a patient or beneficiary based on use of
our drug. Third-party payors may also limit coverage to specific products on an approved list, or formulary, which might
not include all of the approved products for a particular indication, or may impose other market access or utilization
management controls.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may
need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness
of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals. A payor’s
decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved.
Third-party reimbursement may not be sufficient to maintain price levels high enough to realize an appropriate return on
investment in product development.
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The containment of healthcare costs also has become a priority of federal, state and foreign governments and the
prices of drugs have been a focus in this effort. Governments have shown significant interest in implementing cost-
containment programs, including price controls, increases in rebates paid, restrictions on reimbursement, and requirements
for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more
restrictive policies in jurisdictions with existing controls and measures, could further limit a company’s revenue generated
from the sale of any approved products. 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 a company or its
collaborators receive marketing approval, less favorable coverage policies and reimbursement rates may be implemented in
the future. In the EU, pricing and reimbursement schemes vary widely from country to country. Some countries provide
that drug products may be marketed only after a reimbursement price has been agreed. Some countries may require the
completion of additional studies that compare the cost-effectiveness of a particular drug candidate to currently available
therapies, or so-called health technology assessments, in order to obtain reimbursement or pricing approval. For example,
the EU provides options for its member states to restrict the range of drug products for which their national health
insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU member states
may approve a specific price for a drug product or may instead adopt a system of direct or indirect controls on the
profitability of the company placing the drug product on the market. Other EU member states allow companies to fix their
own prices for drug products, but monitor and control company profits. The downward pressure on health care costs in
general, particularly prescription drugs, has become 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 competitive
pressure that may reduce pricing within a country. Any country that has price controls or reimbursement limitations for
drug products may not allow favorable reimbursement and pricing arrangements.
Healthcare Law and Regulation
Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription
of drug products that are granted marketing approval. Arrangements with providers, consultants, third-party payors and
customers are subject to broadly applicable fraud and abuse and other healthcare laws and regulations. Such restrictions
under applicable federal and state healthcare laws and regulations, include the following:
● the federal 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, in whole or in part, under a federal healthcare program such as
Medicare and Medicaid;
● the federal False Claims Act imposes civil penalties, and provides for 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 knowingly making, using, or causing to be made or used a
false record or statement material to a false or fraudulent claim, or making a false statement to avoid, decrease
or conceal an obligation to pay money to the federal government, with potential substantial liability including
mandatory treble damages at trial and significant per-claim penalties;
● the Affordable Care Act included a provision requiring certain providers and suppliers of items and services to
federal healthcare programs to report and return overpayments within sixty days after they are “identified” (the
“Overpayment Statute”), after which the recipient of the overpayment incurs federal civil False Claims Act
liability;
● the Affordable Care Act authorized the imposition of civil monetary penalties on manufactures participating in
the 340B program for failure to charge the statutory ceiling price, and required HHS to promulgate regulations
establishing the standards for implementing this Civil Monetary Penalty, or CMP, authority. CMS’ final CMP
rule went into effect January 1, 2019;
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● the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), imposes criminal and civil
liability for executing a scheme to defraud any healthcare benefit program or making false statements relating
to healthcare matters;
● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and their
respective implementing regulations, including the Final Omnibus Rule published in January 2013, also
imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security
and transmission of individually identifiable health information and sanctions for failing to meet those
obligations;
● 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
healthcare benefits, items or services;
● the federal transparency requirements under the Health Care Reform Law, known as the federal Physician
Payments Sunshine Act, require manufacturers of covered drugs, devices, biologics and medical supplies to
report to the Centers for Medicare & Medicaid Services (“CMS”) within the Department of Health and Human
Services information related to certain payments and other transfers of value to US-licensed physicians,
physician assistants, nurse practitioners, certified registered nurse anesthetists and certified nurse midwifes and
US teaching hospitals and to physician ownership and investment interests held by physicians and their
immediate family members; and
● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply
to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-
governmental third-party payors, including private insurers.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to
requiring drug manufacturers to report information related to payments to physicians and other health care providers or
marketing expenditures. State and foreign laws also govern the privacy and security of health information in some
circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus
complicating compliance efforts.
Healthcare Reform in the United States
A primary trend in the United States healthcare industry and elsewhere is cost containment. There have been a
number of federal and state proposals during the last several years regarding the pricing of pharmaceutical and
biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical products, government
control and other changes to the healthcare system in the United States.
By way of example, the United States and state governments continue to propose and pass legislation designed to
reduce the cost of healthcare. In March 2010, the United States Congress enacted the Patient Protection and Affordable
Care Act (the “PPACA”) which, among other things, includes changes to the coverage and payment for products under
government health care programs. Moreover, in 2017, the U.S. Congress modified and amended certain provisions of the
PPACA, which could have an impact on coverage and reimbursement for healthcare items and services covered by the
federal and state healthcare programs as well as plans in the private health insurance market. The so-called “individual
mandate” was repealed as part of tax reform legislation adopted in December 2017. Legal challenges to the PPACA may
continue to arise and there may continue to be future efforts to modify, repeal, or otherwise invalidate all, or certain
provisions of the Affordable Care Act. The Biden administration is expected to continue to take measures to further
facilitate the implementation of the PPACA. Among the provisions of the PPACA of importance to potential drug
candidates are:
● an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs
and biologic agents, apportioned among these entities according to their market share in certain government
healthcare programs, although this fee would not apply to sales of certain products approved exclusively for
orphan indications;
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● expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer
Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby
potentially increasing a manufacturer’s Medicaid rebate liability;
● expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum
rebate for both branded and generic drugs and revising the definition of “average manufacturer price” (“AMP”)
for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices and extending rebate
liability to prescriptions for individuals enrolled in Medicare Advantage plans;
● addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate
Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;
● expanded the types of entities eligible for the 340B drug discount program;
● established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a point-
of-sale-discount off the negotiated price of applicable brand drugs to eligible beneficiaries during their
coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare
Part D;
● established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct
comparative clinical effectiveness research, along with funding for such research;
● established the Independent Payment Advisory Board (“IPAB”) which has authority to recommend certain
changes to the Medicare program to reduce expenditures by the program that could result in reduced payments
for prescription drugs, subsequently repealed through the Bipartisan Budget Act of 2018; and
● established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and
service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug
spending. Other legislative changes have been proposed and adopted since the PPACA was enacted. These
changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to
Medicare payments to providers of up to 2% per fiscal year that started in 2013 , were paused from May 1,
2020 through December 31, 2021, and will continue through 2031 unless additional Congressional action is
taken, and the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments
to several types of providers and increased the statute of limitations period for the government to recover
overpayments to providers from three to five years. These new laws may result in additional reductions in
Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product
candidates for which we may obtain regulatory approval or the frequency with which any such product
candidate is prescribed or used.
More recently, Congress amended the Medicaid statute, effective October 1, 2019, to exclude prices paid by
secondary manufacturers for an authorized generic drug (but not a product approved under the BLA process) from the
NDA holder’s AMP for the brand, thereby increasing the rebate amount and the 340B price for the brand. This was
implemented by CMS in a final rule issued December 31, 2020. The rule also expanded the definition of products
identified as “line extensions” and, in certain circumstances, required inclusion of patient copay assistance in Medicaid best
price (effective January 1, 2023), thereby potentially increasing Medicaid rebates paid by manufacturers for such drugs.
340B program guidance regulations on civil monetary penalties for statutory violations, which had been finalized in early
2017 but deferred, also recently went into effect. On November 27, 2020, CMS issued an interim final rule implementing a
Most Favored Nation payment model under which reimbursement for certain Medicare Part B drugs and biologicals will be
based on a price that reflects the lowest per capita Gross Domestic Product-adjusted (GDP-adjusted) price of any non-U.S.
member country of the Organization for Economic Co-operation and Development (OECD) with a GDP per capita that is
at least sixty percent of the U.S. GDP per capita. This rule now has been rescinded, but similar programs have been
described in recent legislative proposals.
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These healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result
in additional reductions in Medicare and other healthcare funding, payment of increased rebates, more rigorous coverage
criteria, new payment methodologies and additional downward pressure on the price for any approved product and/or the
level of reimbursement physicians receive for administering any approved product. Reductions in reimbursement levels
may negatively impact the prices or the frequency with which products are prescribed or administered. Any reduction in
reimbursement from Medicare or other government programs may result in a similar reduction in payments from private
payors. Since enactment of the PPACA, there have been numerous legal challenges and congressional actions to repeal and
replace provisions of the law.
Further, there have been several recent U.S. congressional inquiries and proposed federal and proposed and enacted
state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between
pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program
reimbursement methodologies for drug products. At the federal level, Congress and the recent administrations have
indicated that they will continue to seek new legislative and/or administrative measures to control drug costs. At the state
level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control
pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions
on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to
encourage importation from other countries and bulk purchasing. In addition, regional health care authorities and
individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which
suppliers will be included in their prescription drug and other health care programs. These measures could reduce the
ultimate demand for our products, once approved, or put pressure on our product pricing.
Human Capital Resources
Our vision is to translate scientific breakthroughs into important new medicine. We have a culture where patients are
at the center of all we do, with core values that connect us to each other and our stakeholders and define who we are, what
we stand for, and how we work.
We are focused on effective attraction, development, and retention of, and compensation and benefits to, human
resource talent, including workforce and management development, diversity and inclusion initiatives, succession
planning, and corporate culture and leadership quality, which are vital to our success. At December 31, 2021, our total
workforce consisted of 13 full-time employees. We consider our relations with our employees to be good.
During 2021, as we worked to manage through the effects of the human capital aspects of the ongoing COVID-19
pandemic, all employees were provided the option of working remotely or at our Exton, Pennsylvania office with
appropriate safeguards.
Corporate Information
We were incorporated in Delaware in 1989 and our office headquarters is located at 505 Eagleview Boulevard, Suite
212, Exton, Pennsylvania 19341.
Information Available on the Internet
Our internet address is www.iderapharma.com. We make available free of charge through our web site our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we
electronically file or furnish such materials to the SEC. The SEC maintains an internet site at www.sec.gov containing
reports, proxies and information statements and other information regarding issuers that file electronically with the SEC.
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Item 1A. Risk Factors.
RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties
described below in addition to the other information included or incorporated by reference in this Form 10-K before
purchasing our common stock. Our business, financial condition and results of operations could be materially and
adversely affected by any of these and currently unknown risks or uncertainties. In that case, the market price of our
common stock could decline, and you may lose all or part of your investment in our securities.
Risks Relating to Our Financial Position and Need for Additional Capital
Our stock price has been and may continue to be volatile, and the value of an investment in our common stock may
decline.
We historically have experienced significant volatility in our stock price. Since December 31, 2021, our common stock has
traded as low as $0.41 per share. The realization of any of the risks described in these risk factors or other unforeseen risks
could have an adverse effect on the market price of our common stock. The trading price of our common stock is likely to
continue to be highly volatile and could be subject to declines in response to numerous factors, including disappointing
results in a clinical program, as was the case following the announcement of topline results for ILLUMINATE-301. Other
risk factors include results from clinical trials; FDA regulatory actions; announcements by us or our competitors of
acquisitions, regulatory approvals, clinical milestones, new products, significant contracts, commercial relationships or
capital commitments; additions or departures of key personnel; commencement of, or our involvement in, litigation; and
any major change in our Board of Directors or management.
From time to time, we estimate the timing of the potential accomplishment of clinical and other development goals or
milestones. These estimated milestones may include the commencement or completion of clinical trials. Also, from time to
time, we expect that we will publicly announce the anticipated timing of some of these milestones. All these estimated
milestones are based on numerous assumptions. These milestones may change and the actual timing of meeting these
milestones may vary dramatically from our estimates, in some cases for reasons beyond our control. If we do not meet
these estimated milestones, or the anticipated timing thereof, as publicly announced, our stock price may decline.
We may not be able to comply with Nasdaq’s continued listing standards.
Our common stock trades on The Nasdaq Capital Market (“Nasdaq”) under the symbol “IDRA.” There is also no guarantee
that we will be able to perpetually satisfy Nasdaq’s continued listing requirements to maintain our listing on Nasdaq for
any periods of time. Our failure to continue to meet these requirements may result in our securities being delisted from
Nasdaq.
On November 26, 2021, we received a deficiency letter (the “Nasdaq Letter”) from the Nasdaq Listing Qualifications
Department, notifying us that we are not in compliance with Nasdaq Listing Rule 5550(a)(2), which requires the Company
to maintain a minimum bid price of at least $1 per share for continued listing on Nasdaq (the “Minimum Bid
Requirement”). The Company’s failure to comply with the Minimum Bid Requirement was based on the Company’s
common stock per share price being below the $1 threshold for a period of 30 consecutive business days. In accordance
with Nasdaq Listing Rule 5810(c)(3)(A) (the “Compliance Period Rule”), the Company has been provided an initial period
of 180 calendar days (the “Compliance Date”), to regain compliance with the Minimum Bid Requirement. If, at any time
before the Compliance Date, the bid price for the Company’s common stock closes at $1.00 or more per share for a
minimum of 10 consecutive business days, as required under Nasdaq requirements, the Staff will provide written
notification to the Company that it complies with the Minimum Bid Requirement, unless the Staff exercises its discretion to
extend this 10-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H).
If the Company does not regain compliance with the Minimum Bid Requirement by the Compliance Date, the Company
may be eligible for an additional 180 calendar day compliance period (the “Second Compliance Period”). To qualify, the
Company would need to meet the continued listing requirement for the market value of publicly held
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shares and all other initial listing standards of the Nasdaq Capital Market, with the exception of the Minimum Bid
Requirement, and provide written notice to the Staff of its intention to cure the deficiency during the Second Compliance
Period.
Neither the Nasdaq Letter nor the Company’s noncompliance with the Minimum Bid Requirement have an immediate
effect on the listing or trading of the Company’s common stock, which will continue to trade on The Nasdaq Capital
Market under the symbol “IDRA.”
If we fail to comply with Nasdaq rules and requirements, including, without limitation, the Minimum Bid Requirement, our
stock may be delisted. In addition, even if we demonstrate compliance with the Minimum Bid Requirement, we will have
to continue to meet other objective and subjective listing requirements to continue to be listed on Nasdaq. Delisting from
Nasdaq could make trading our common stock more difficult for investors, potentially leading to declines in our share price
and liquidity. Without a Nasdaq listing, stockholders may have a difficult time getting a quote for the sale or purchase of
our common stock, the sale or purchase of our common stock would likely be made more difficult, and the trading volume
and liquidity of our common stock could decline. Delisting from Nasdaq could also result in negative publicity and could
also make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the
acceptance of our common stock as currency or the value accorded by other parties. Further, if we are delisted, we would
also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements
could severely limit the market liquidity of our common stock and the ability of our stockholders to sell our common stock
in the secondary market. If our common stock is delisted by Nasdaq, our common stock may be eligible to trade on an
over-the-counter quotation system, such as the OTCQB Market, where an investor may find it more difficult to sell our
stock or obtain accurate quotations as to the market value of our common stock. In the event our common stock is delisted
from Nasdaq, we may not be able to list our common stock on another national securities exchange or obtain quotation on
an over-the counter quotation system.
We will need additional financing, which may be difficult to obtain on terms attractive to us or at all. If we are unable to
raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or
commercialization efforts.
We expect that we will need to raise additional funds in order to complete the development of, seek regulatory approvals
for, and commercialization of our drug candidates for rare disease and to continue to fund our operations. We are seeking
and expect to continue to seek additional funding through financings of equity or debt securities, collaborations, or the sale
or license of assets. We believe the key factors that will affect our ability to obtain funding are: (i) the results of our clinical
development activities in our drug candidates we develop on the timelines anticipated; (ii) the time and expense required to
submit an NDA for our drug candidates; (iii) the cost, timing, and outcome of regulatory reviews; (iv) the receptivity of the
capital markets to financings by biotechnology companies generally and companies with drug candidates and technologies
similar to ours specifically; (v) receptivity of the capital markets to any in-licensing, product acquisition or other
transaction we may enter into; and (vi) ability to enter into additional collaborations and the success of such collaborations.
Financing may not be available to us when we need it, or on favorable or acceptable terms, or at all. We could be required
to seek funds through collaborative alliances or through other means that may require us to relinquish rights to some of our
technologies, drug candidates or drugs that we would otherwise pursue on our own. In addition, if we raise additional funds
by issuing equity securities, our existing stockholders may experience dilution, or an equity financing that involves existing
stockholders may cause a concentration of ownership. 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 or declaring dividends, and are likely to include rights that are senior to the holders of our common stock.
Any additional debt or equity financing may contain terms which are not favorable to us or to our stockholders, such as
liquidation and other preferences, or liens or other restrictions on our assets. As discussed in Note 13 to the financial
statements appearing elsewhere in this Form 10-K, additional equity financings may also result in cumulative changes in
ownership over a three-year period in excess of 50% which would limit the amount of net operating loss and tax credit
carryforwards that we may utilize in any one year. If we are unable to obtain adequate funding on a timely basis or at all,
we will be required to terminate, modify or delay clinical trials of our drug candidates, or relinquish rights to portions of
our technology, drug candidates and/or products.
We expect that we will continue to incur net losses in the foreseeable future.
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As of December 31, 2021, we had an accumulated deficit of $735.5 million and a cash and cash equivalents balance of
$32.5 million. We expect to incur substantial operating losses in future periods and will require additional capital as we
seek to advance any future drug candidates through development to commercialization. We do not expect to generate
product revenue, sales-based milestones or royalties until we successfully complete development of and obtain marketing
approval for any future drug candidates, either alone or in collaboration with third parties, which may not occur or may
take a number of years. To commercialize any future drug candidates, we need to complete clinical development and
comply with comprehensive regulatory requirements. We are subject to numerous risks and uncertainties similar to those of
other companies of the same size within the biotechnology industry, such as uncertainty of clinical trial outcomes,
uncertainty of additional funding and history of operating losses.
Even if we succeed in receiving marketing approval for and commercializing any product candidate, we will continue to
incur substantial research and development and other expenditures to develop and market additional potential indications
or products. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our
ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect
on our stockholders’ equity and working capital.
Risks Relating to Our Business, Strategy, and Industry
Our recent organizational changes undertaken to align to our focus on new business development opportunities may
not be successful.
In April 2021, following the announcement that ILLUMINATE-301 did not meet its primary endpoint of ORR, we decided
to implement a reduction-in-force affecting approximately 50% of our workforce starting at the second quarter of 2021.
The objective of this workforce reduction was to realign our workforce to meet our needs in light of the outcome of
ILLUMINATE-301’s ORR endpoint. In May 2021, we announced that we would not continue ILLUMINATE-301 toward
its OS endpoint. In connection with these actions, we have incurred termination costs, which include severance, benefits,
and related costs, totaling $1.3 million in 2021.
We believe these changes were needed to streamline our organization and reallocate our resources to better align with our
current strategic goals, including our current focus on new portfolio opportunities. However, these restructuring activities
may yield unintended consequences and costs, such as the loss of institutional knowledge and expertise, attrition beyond
our intended reduction-in-force, a reduction in morale among our remaining employees, and the risk that we may not
achieve the anticipated benefits, all of which may have an adverse effect on our results of operations or financial condition.
In addition, while positions have been eliminated certain functions necessary to our reduced operations remain, and we
may be unsuccessful in distributing the duties and obligations of departed employees among our remaining employees. We
may also discover that the reductions in workforce and cost cutting measures will make it difficult for us to pursue new
opportunities and initiatives and require us to hire qualified replacement personnel, which may require us to incur
additional and unanticipated costs and expenses. Moreover, there is no assurance we will be successful in our pursuit of
any new business development opportunities, including additional strategic alternatives. Our failure to successfully
accomplish any of the above activities and goals may have a material adverse impact on our business, financial condition,
and results of operations.
As a small biopharmaceutical-focused company with limited resources, we may be unable to attract and retain qualified
personnel.
We are a small company with 13 full-time employees as of December 31, 2021. Any future growth will require hiring
additional qualified personnel. Also, because of the specialized scientific nature of our business, we face intense
competition for qualified employees and consultants from biopharmaceutical companies, research organizations and
academic institutions. Failure to attract and retain qualified personnel would materially harm our ability to compete
effectively and grow our business.
If we lose any of our officers or key employees, our management and technical expertise could be weakened
significantly.
Our success largely depends on the skills, experience, and efforts of our executive officers, especially our President and
Chief Executive Officer, Mr. Vincent Milano. We do not maintain key person life insurance policies covering any of our
employees. The loss of any of our executive officers could weaken our management and technical expertise significantly
and harm our business.
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We are depending heavily on the development, regulatory approval, and commercialization of drug candidates. If we are
unable to successfully develop and commercialize drug candidates, or experience significant delays in doing so, our
business may be materially harmed.
We have made and intend to continue to make a significant investment of our time and financial resources in the
development and commercialization of our drug candidates. Our ability to generate product revenues will depend heavily
on our ability to successfully develop, obtain regulatory approval for, and commercialize our drug candidates. If we fail to
obtain regulatory approval and successfully commercialize our drug candidates, our business would be materially and
adversely impacted. Even if our drug candidates receive regulatory approval, we will incur significant expenses to support
its commercialization and launch, which investment may never be realized if sales are insufficient.
If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory
approvals could be delayed or prevented.
We may not be able to initiate or continue clinical trials for our drug candidates if we are unable to locate and enroll a
sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities
outside the U.S.
In addition, some of our competitors have ongoing clinical trials for drug candidates that treat the same indications as our
drug candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of
our competitors' drug candidates. Our inability to enroll a sufficient number of patients for our clinical trials could also
require us to abandon one or more clinical trials altogether. Enrollment delays may result in increased development costs
for our drug candidates, which would cause the value of our company to decline and limit our ability to obtain additional
financing.
If our clinical trials are unsuccessful, delayed or terminated, we may not be able to develop and commercialize our drug
candidates.
Clinical trials are lengthy, complex, and expensive processes with uncertain results. We may not be able to complete any
clinical trial of an investigational product within any specified time period. Moreover, clinical trials may not show our
investigational products to have an acceptable safety and efficacy profile. The FDA, IRBs, or other equivalent foreign
regulatory agencies may not allow us to complete these trials or commence and complete any other clinical trials.
Numerous unforeseen events may occur during, or as a result of, preclinical testing, nonclinical testing or the clinical trial
process that could delay or inhibit the ability to receive regulatory approval or to commercialize drug products. For
example, setbacks in clinical trials may result in enhanced scrutiny by regulators or IRBs of clinical trials of our drug
candidates, which could result in regulators or IRBs prohibiting the commencement of clinical trials, requiring additional
nonclinical studies as a precondition to commencing clinical trials or imposing restrictions on the design or scope of
clinical trials that could slow enrollment of trials, increase the costs of trials or limit the significance of the results of trials.
Such setbacks could also adversely impact the desire of investigators to enroll patients in, and the desire of patients to
enroll in, clinical trials of our drug candidates.
Other events that could delay or inhibit conduct of our clinical trials include: (i) nonclinical or clinical data may not be
readily interpreted, which may lead to delays and/or misinterpretation; (ii) our nonclinical tests, including toxicology
studies, or clinical trials may produce negative or inconclusive results; (iii) we might have to suspend or terminate our
clinical trials if the participating subjects experience serious adverse events or undesirable side effects or are exposed to
unacceptable health risks; (iv) regulators or IRBs may hold, suspend or terminate clinical research for various reasons,
including noncompliance with regulatory requirements, issues identified through inspections of manufacturing or clinical
trial operations or clinical trial sites; (v) we, along with our collaborators and subcontractors, may not employ, in any
capacity, persons who have been debarred under by FDA or similar foreign regulatory authorities; (vi) we or our contract
manufacturers may be unable to manufacture sufficient quantities of our drug candidates for use in clinical trials; (vii) the
cost of our clinical trials may be greater than we currently anticipate making continuation and/or completion improbable;
(viii) our investigators and contract research organizations may not follow the applicable regulatory requirements; and (ix)
our drug candidates may not cause the desired effects or may cause undesirable side effects or our drug candidates may
have other unexpected characteristics.
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In conducting clinical trials, we cannot be certain that any planned clinical trial will begin on time, if at all. Delays in
commencing clinical trials of potential products could increase our drug candidate development costs, delay any potential
revenues, reduce the potential length of patent exclusivity and reduce the probability that a potential product will receive
regulatory approval. Significant clinical trial delays also could allow our competitors to bring products to market before
we do and impair our ability to commercialize our drug candidates.
The technologies on which we rely are unproven and may not result in any approved and marketable products.
Our technologies or therapeutic approaches are relatively new and unproven. Further, the chemical and pharmacological
properties of our drug candidates may not be fully recognized in preclinical studies and small-scale clinical trials, and such
compounds may interact with human biological systems in unforeseen, ineffective or harmful ways that we have not yet
identified. Pre-clinical trials and early stage clinical trials may not be indicative of results that may be obtained in later
stage trials. As a result of these factors, we may never succeed in obtaining regulatory approval to market any product.
We face substantial competition, which may result in others discovering, developing, or commercializing drugs before or
more successfully than us.
There are many other companies, public and private, actively engaged in discovery, development, and commercializing
products and technologies that may compete with our drug candidate and program. Some potentially competitive products
have been in development or commercialized for years. Many of the marketed products have been accepted by the medical
community, patients, and third-party payors. Our ability to compete may be affected by the previous adoption of such
products by the medical community, patients, and third-party payors.
We recognize that other companies, including large pharmaceutical companies, may be developing or have plans to
develop products and technologies that may compete with ours. Many of our competitors have substantially greater
financial, technical, and human resources than we have and/or may have significantly greater experience than we have in
undertaking preclinical studies and human clinical trials of new pharmaceutical products, obtaining FDA and other
regulatory approvals of products for use in health care and manufacturing, and marketing and selling approved products.
We anticipate that the competition with our drug candidates and technologies will be based on a number of factors
including product efficacy, safety, availability, and price. The timing of market introduction of our drug candidates and
competitive products will also affect competition among products. We expect the relative speed with which we can develop
products, complete the clinical trials and approval processes, and supply commercial quantities of the products to the
market to be important competitive factors.
Our business could be adversely affected by the effects of health epidemics, such as the ongoing COVID-19 global
pandemic, including disruptions to our clinical trials or the delay of regulatory approvals.
Our business may be adversely affected by the effects of health epidemics, including the ongoing worldwide COVID-19
pandemic. The COVID-19 pandemic has caused significant volatility and uncertainty globally. This has resulted in an
economic downturn and may disrupt our business and delay our clinical trials and regulatory approvals. This may also
result in an interruption or issues with respect to the manufacture and supply of our product candidates. Quarantines and
similar government orders have been enacted in each of the geographies in which we are conducting our clinical trials and
may impact the ability of patients to participate in our trials. The patient populations that are eligible for our clinical trials
may be immune-compromised and at higher risk for becoming infected with COVID-19. As COVID-19 affects the parts of
the world where we are conducting our clinical trials, and the patients involved with these clinical trials become infected
with COVID-19, we may have more adverse events and deaths in our clinical trials. The COVID-19 pandemic may also
require that changes be made to any clinical trials or product manufacturing that may ultimately have an adverse impact.
Additionally, if global health concerns continue to prevent the FDA from conducting its regular inspections, reviews, or
other regulatory activities, it could significantly impact the ability of the FDA to timely review and process our regulatory
submissions, which could have a material adverse effect on our business. Such concerns could also affect the ability of our
personnel to perform their normal responsibilities and could result in temporary closures of our facilities.
The COVID-19 pandemic continues to evolve. The ultimate impact of the COVID-19 pandemic is highly uncertain and
subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials,
healthcare systems or the global economy. However, any one or a combination of these events could have an adverse effect
on the operation of and results from our clinical trials, which could prevent or delay us from obtaining approval for our
drug candidates, or on our employee resources.
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Risks Related to Regulatory Approval and Marketing and Other Compliance Matters
Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive,
time-consuming, and uncertain and may prevent us from obtaining approvals for the commercialization of some or all
of our drug candidates.
We are not permitted to market our drug candidates in the U.S. or in other countries until we, or any future collaborators,
receive approval of an NDA from the FDA or marketing approval from applicable regulatory authorities outside of the U.S.
The approval process is lengthy, often taking a number of years, is uncertain, and is expensive. Securing marketing
approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory
authorities for each therapeutic indication to establish the drug candidate's safety and efficacy. Information about the
product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities is also required.
Any delay in obtaining or failure to obtain required approvals could materially adversely affect our ability or that of any
collaborators we may have to generate revenue from the particular drug candidate, which likely would result in significant
harm to our financial position and adversely impact our stock price.
Our failure to obtain marketing approval in foreign jurisdictions would prevent our drug candidates from being
marketed abroad which subjects us to additional business risks that could adversely affect our operations.
We, and any future collaborators, must obtain separate marketing approvals and comply with numerous and varying
regulatory requirements in foreign jurisdictions. The approval procedure varies among countries and can involve additional
studies. The time required to obtain approval may differ substantially from that required to obtain FDA approval. In
addition, in many countries outside of the U.S., it is required that the drug be approved for reimbursement before the drug
can be approved for sale in that country. We, and any future collaborators, may not obtain approvals from regulatory
authorities outside of the U.S. on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory
authorities in foreign jurisdictions, and approval by one regulatory authority outside of the U.S. does not ensure approval
by regulatory authorities in other jurisdictions or by the FDA.
Even if we, or any future collaborators, obtain marketing approvals for our drug candidates, the terms of approvals and
ongoing regulation of our drugs may limit how we, or they, manufacture and market our drugs, which could materially
impair our ability to generate revenue.
We, and any future collaborators, must comply with requirements concerning advertising and promotion for any of our
drug candidates for which we or they obtain marketing approval. Such promotional communications are subject to a variety
of legal and regulatory restrictions and must be consistent with the information in the drug’s approved labeling. Thus, we,
and any future collaborators, will not be able to promote any drugs we develop for indications or uses for which they are
not approved.
In addition, manufacturers of approved drugs and those manufacturers’ facilities are required to comply with extensive
FDA requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs, which
include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records
and documentation and reporting requirements. We, our contract manufacturers, our future collaborators and their contract
manufacturers could be subject to periodic unannounced inspections by the FDA, and other regulatory authorities to
monitor and ensure compliance with cGMPs.
Accordingly, assuming we, or our future collaborators, receive marketing approval for one or more of our drug candidates,
we, and our future collaborators, and our and their contract manufacturers will continue to expend time, money and effort
in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control.
If we, and our future collaborators, are not able to comply with post-approval regulatory requirements, we, and our future
collaborators, could have the marketing approvals for our drugs withdrawn by regulatory authorities and our, or our future
collaborators’, ability to market any future drugs could be limited, which could adversely affect our ability to achieve or
sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect on our
operating results and financial condition.
Moreover, legislative and regulatory proposals have been made to expand post-approval requirements and restrict
promotional activities relating to our drugs. We cannot be sure whether additional legislative changes will be enacted, or
whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the
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marketing approvals of our drug candidates, if any, may be. In addition, increased scrutiny by Congress of the FDA's
approval process may significantly delay or prevent marketing approval, as well as subject us and any collaborators to
more stringent product labeling and post-marketing testing and other requirements.
Any of our drug candidates for which we, or our future collaborators, obtain marketing approval in the future could be
subject to post-approval restrictions or withdrawal from the market and we, and our future collaborators, may be
subject to substantial penalties if we, or they, fail to comply with regulatory requirements or if we, or they, experience
unanticipated problems with our drugs following approval.
Any of our drug candidates for which we, or our future collaborators, obtain marketing approval in the future, as well as
the manufacturing processes, post-approval studies and measures, labeling, advertising and promotional activities for such
drug, among other things, will be subject to continual requirements of and review by the FDA and other regulatory
authorities. These requirements include submissions of safety and other post-marketing information and reports,
registration and listing requirements, requirements relating to manufacturing, quality control, quality assurance and
corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and
recordkeeping. Even if marketing approval of a drug candidate is granted, the approval may be subject to limitations on the
indicated uses for which the drug may be marketed or to the conditions of approval, including the requirement to
implement a Risk Evaluation and Mitigation Strategy, which could include requirements for a restricted distribution
system.
The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the
safety or efficacy of a drug. The FDA and other agencies, including the DOJ, closely regulate and monitor the post-
approval marketing and promotion of drugs to ensure that they are manufactured, marketed and distributed only for the
approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent
restrictions on manufacturers’ communications regarding off-label use and if we, or our future collaborators, do not market
any of our drug candidates for which we, or they, receive marketing approval for only their approved indications, we, or
they, may be subject to warnings or enforcement action for off-label promotion.
In addition, later discovery of previously unknown adverse events or other problems with our drugs or their manufacturers
or manufacturing processes, or failure to comply with regulatory requirements both before and after product approval, may
yield various results, including: (i) litigation involving patients taking our drug; (ii) restrictions on such drugs,
manufacturers or manufacturing processes; (iii) restrictions on the labeling or marketing of a drug; (iv) restrictions on drug
distribution or use; (v) requirements to conduct post-marketing studies or clinical trials; (vi) warning letters or untitled
letters, as well as other enforcement and adverse actions; (vii) withdrawal of the drugs from the market; (viii) refusal to
approve pending applications or supplements to approved applications that we submit; (ix) recall of drugs; (x) fines,
restitution or disgorgement of profits or revenues; (xi) suspension or withdrawal of marketing approvals; (xii) damage to
relationships with any potential collaborators; (xiii) unfavorable press coverage and damage to our reputation; (xiv) refusal
to permit the import or export of drugs; (xv) drug seizure; or (xvi) injunctions or the imposition of civil or criminal
penalties.
We may not be able to obtain or maintain orphan drug exclusivity for applications of our drug candidates.
The FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which is
generally defined as a patient population of fewer than 200,000 individuals in the U.S. Generally, if a product with an
orphan drug designation subsequently receives the first marketing approval for the indication for which it has such
designation, the product is entitled to a period of seven years of marketing exclusivity. Orphan drug exclusivity may be lost
if the FDA 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 June 2017, the FDA granted us orphan drug designation for tilsotolimod for the treatment of melanoma Stages IIb to IV.
However, there can be no assurance that we will obtain orphan drug designation or exclusivity for any other disease
indications for which we develop tilsotolimod, or for any other drug candidates. There is also no guarantee that we will be
able to obtain orphan drug exclusivity if any product candidates with orphan designation are approved. Even if we obtain
orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because
different drugs can be approved for the same condition or the same drug can be approved for different conditions. Even
after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA
concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major
contribution to patient care.
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A breakthrough therapy, fast track, or other expedited designation for our drug candidates may not lead to a faster
development or regulatory review or approval process, and it does not increase the likelihood that those drug candidates
will receive marketing approval.
We may seek a breakthrough therapy, fast track, or other designation for appropriate drug candidates. Designations such as
these are within the discretion of the FDA. The receipt of a designation for a drug candidate may not result in a faster
development process, review or approval compared to drugs considered for approval under conventional FDA procedures
and does not assure ultimate approval by the FDA. In addition, even if one or more of our drug candidates qualify under
one of FDA’s designation programs, the FDA may later decide that the products no longer meet the conditions for
qualification or decide that the time period for FDA review or approval will not be shortened.
We have only limited experience in regulatory affairs and our drug candidates are based on new technologies; these
factors may affect our ability or the time we require to obtain necessary regulatory approvals.
We have never obtained regulatory approval for, or commercialized, a drug. It is possible that the FDA may refuse to
accept any or all of our planned NDAs for substantive review or may conclude, after review of our data, that our
applications are insufficient to obtain regulatory approval of any of our drug candidates. The FDA may also require that we
conduct additional clinical or manufacturing validation studies, which may be costly and time-consuming, and submit that
data before it will reconsider our applications. Depending on the extent of these or any other FDA required studies,
approval of any NDA that we submit may be significantly delayed, possibly for years, or may require us to expend more
resources than we have available or can secure.
We are subject to extensive and costly governmental regulation, the violation of which could expose us to criminal
sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Our product candidates are subject and any future commercial products will be subject to costly, extensive and rigorous
domestic and foreign government regulation, as discussed under the caption “Government Regulation” within Item 1 of
this Form 10-K. These requirements are continually evolving, which will require us to adapt our practices and processes,
which we may not be able to do.
In addition, our future arrangements with third party payors, healthcare providers and physicians may expose us to broadly
applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial
arrangements and relationships through which we market, sell and distribute any drugs for which we obtain marketing
approval. These include, but are not limited to, the following: the Anti-Kickback Statute; the Foreign Corrupt Practices
Act; the False Claims Act; privacy laws such as HIPAA; transparency requirements; and analogous state and foreign laws.
Additionally, 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 and require drug
manufacturers to report information related to drug pricing and to certain payments and other transfers of value to
physicians, other healthcare providers, and healthcare entities, or marketing expenditures.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare 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 healthcare 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, imprisonment, exclusion from participation in government funded healthcare programs, such as
Medicare and Medicaid, suspension and debarment from procurement and non-procurement transactions, and the
curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom
we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or
administrative sanctions, including exclusions from government funded healthcare programs.
We depend on information technology, infrastructure, and data to conduct our business. Any significant disruption, or
cyber-attacks, could have a material adverse effect on our business.
We are dependent upon information technology, infrastructure and data. Computer systems, including ours and those of our
suppliers, partners and service providers, contain sensitive confidential information or intellectual property, and are
vulnerable to service interruption or destruction, cyber-attacks (both malicious and random) and
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other natural or man-made incidents or disasters, which may be prolonged or go undetected. Such events are increasing in
their frequency, sophistication and intensity, and have become increasingly difficult to detect. A significant interruption of
our information technology could adversely affect our ability to manage and keep our operations running efficiently and
effectively. An incident that results in a wider or sustained disruption to our business or products could have a material
adverse effect on our business, financial condition and results of operations.
Likewise, data privacy or security breaches by employees or others may pose a risk that sensitive data, including our
intellectual property, trade secrets or personal information of our employees, patients or other business partners may be
exposed to unauthorized persons or to the public. There can be no assurance that our efforts, or the efforts of our partners
and vendors, will prevent service interruptions, or identify breaches in our systems, that could adversely affect our business
and operations and/or result in the loss of critical or sensitive information, which could result in financial, legal, business or
reputational harm to us. In addition, our liability insurance may not be sufficient in type or amount to cover us against
claims related to security breaches, cyberattacks and other related breaches.
Risks Relating to Collaborators
Our existing collaborations and any collaborations we enter into in the future may not be successful.
Our current collaboration agreements, as more fully described within Item 1 of this Form 10-K, or any collaborations we
may enter into in the future, may not be successful. The success of our collaborative alliances, if any, will depend heavily
on the efforts and activities of our collaborators. Our existing collaborations and any potential future collaborations have
risks, including the following: (i) our collaborators may control the development (and timing thereof) of the drug
candidates being developed with our technologies and compounds and/or the companion diagnostic to be developed for use
in conjunction with our drug candidates; (ii) our collaborators may control the public release of information regarding the
developments; (iii) disputes may arise in the future with respect to the ownership of or right to use technology and
intellectual property developed with our collaborators; (iv) disagreements with our collaborators could delay or terminate
the development of our products, or result in litigation or arbitration; (v) we may have difficulty enforcing the contracts if
any of our collaborators fail to perform; (vi) our collaborators may terminate their collaborations with us, which could
make it difficult for us to attract new collaborators or adversely affect the perception of us in the business or financial
communities; (vii) our collaboration agreements are likely to be for fixed terms and subject to termination by our
collaborators in the event of a material breach or lack of scientific progress by us; (viii) our collaborators may challenge
our intellectual property rights or utilize our intellectual property rights in such a way as to invite litigation that could
jeopardize or invalidate our intellectual property rights or expose us to potential liability; (ix) our collaborators may not
comply with all applicable regulatory requirements; (x) our collaborators may under fund or not commit sufficient
resources to the testing or development of our drug candidates; and (xi) our collaborators may develop alternative products
either on their own or in collaboration with others, or encounter conflicts of interest or changes in business strategy or other
business issues. Additionally, our collaborators will face the same development risks that we do and may not be successful
in their efforts. Given these risks, it is possible that any collaborative alliance into which we enter may not be successful.
If we are unable to establish additional collaborative alliances, our business may be materially harmed.
Collaborators provide the necessary resources and drug development experience to advance our compounds in their
programs. We have entered into and expect to continue to seek to enter into collaborative alliances with pharmaceutical
companies. Upfront payments and milestone payments received from collaborations help to provide us with the financial
resources for our internal research and development programs. We believe additional resources will be required to advance
compounds. If we do not reach agreements with additional collaborators in the future or if the terms of such a collaborative
alliance on are not favorable to us, we may not be able to obtain the expertise and resources necessary to achieve our
business objectives, our ability to advance our compounds will be jeopardized and we may fail to meet our business
objectives. Moreover, collaborations are complex and time consuming to negotiate, document, and implement. We may not
be successful in our efforts to establish and implement collaborations on a timely basis.
Risks Relating to Intellectual Property
If we are unable to obtain and maintain patent protection for our discoveries, the value of our technology and products
will be adversely affected.
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Our ability to develop and commercialize drugs depends in significant part on our ability to: (i) obtain and maintain valid
and enforceable patents; (ii) obtain licenses to the proprietary rights of others on commercially reasonably terms; (iii)
operate without infringing upon the proprietary rights of others; (iv) prevent others from infringing on our proprietary
rights; and (v) protect our trade secrets.
We do not know whether any of our currently pending patent applications or those patent applications that we license will
result in the issuance of any patents. Our issued patents and those that may be issued in the future, or those licensed to us,
may be challenged, invalidated, held unenforceable, narrowed in the course of a post-issuance proceeding or circumvented,
and the rights granted thereunder may not provide us proprietary protection or competitive advantages against competitors
with similar technology. Moreover, intellectual property laws may change and negatively impact our ability to obtain
issued patents covering our technologies or to enforce any patents that issue. Because of the extensive time required for
development, testing, and regulatory review of a potential product, it is possible that, before any of our products can be
commercialized, any related patent may expire or remain in force for only a short period following commercialization, thus
reducing any advantage provided by the patent.
Because patent applications in the U.S. and many foreign jurisdictions are typically not published until 18 months after
filing, or in some cases not at all, and because publications of discoveries in the scientific literature often lag behind actual
discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions claimed in
issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set
forth in these patent applications.
Third parties may own or control patents or patent applications and require us to seek licenses, which could increase
our development and commercialization costs, or prevent us from developing or marketing products.
Although we have many issued patents and pending patent applications in the U.S. and other countries, we may not have
rights under certain third-party patents or patent applications related to our compounds under development. Third parties
may own or control these patents and patent applications in the U.S. and abroad. In particular, we are aware of certain
third-party U.S. patents that contain claims related to immunostimulatory polynucleotides and their use to stimulate an
immune response, as well as to antisense technology. Although we do not believe any of our TLR or antisense compounds
under development infringe any valid claim of these patents, we cannot be assured that the holder of such patents would
not seek to assert such patents against us or, if the holder did, that the courts would not interpret the claims of such patents
more broadly than we believe appropriate and determine that we are in infringement of such patents. In addition, there may
be other patents and patent applications related to our current or future drug candidates of which we are not aware.
Therefore, in some cases, in order to develop, manufacture, sell or import some of our drug candidates, we or our
collaborators may choose to seek, or be required to seek, licenses under third-party patents issued in the U.S. and abroad or
under third-party patents that might issue from U.S. and foreign patent applications. In such an event, we would be
required to pay license fees or royalties or both to the licensor. If licenses are not available to us on acceptable terms, we or
our collaborators may not be able to develop, manufacture, sell or import these products, or may be delayed in doing so.
Either of these results could have a material adverse effect on our business.
We may become involved in expensive patent litigation or other proceedings, which could result in our incurring
substantial costs and expenses or substantial liability for damages, require us to stop our development and
commercialization efforts or result in our patents being invalidated, interpreted narrowly or limited.
There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the
biotechnology industry. We may become a party to various types of patent litigation or other proceedings regarding
intellectual property rights from time to time even under circumstances where we are not practicing and do not intend to
practice any of the intellectual property involved in the proceedings. In addition to litigation, we may become involved in
patent office proceedings, including oppositions, reexaminations, supplemental examinations and inter partes reviews
involving our patents or the patents of third parties. We may initiate such proceedings or have such proceedings brought
against us. An adverse determination in any such proceeding, or in litigation, could reduce the scope of, or invalidate, our
patent rights, allow third parties to commercialize our technology or products and compete directly with us, without
payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent
rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it
could dissuade companies from collaborating with us to license, develop or commercialize current or future drug
candidates. An adverse determination in a proceeding involving a
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patent in our portfolio could result in the loss of protection or a narrowing in the scope of protection provided by that
patent.
The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our
competitors may be able to sustain the cost of such litigation or proceedings more effectively than we can because of their
substantially greater financial resources. If any patent litigation or other proceeding is resolved against us, we or our
collaborators may be enjoined from developing, manufacturing, selling or importing our drugs without a license from the
other party and we may be held liable for significant damages. We may not be able to obtain any required license on
commercially acceptable terms or at all. In a patent office proceeding, such as an opposition, reexamination or inter partes
review, our patents may be narrowed or invalidated. Uncertainties resulting from the initiation and continuation of patent
litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent
litigation and other proceedings may also absorb significant management time.
Our intellectual property may be infringed by a third party.
Third parties may infringe one or more of our issued patents or trademarks. We cannot predict if, when or where a third
party may infringe one or more of our issued patents or trademarks. To counter infringement, we may be required to file
infringement claims, which can be expensive and time-consuming. Moreover, there is no assurance that we would be
successful in proving that a third party is infringing one or more of our issued patents or trademarks. Any claims we assert
against perceived infringers could also provoke these parties to assert counterclaims against us, alleging that we infringe
their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent of ours is
invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly and/or 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, any of which
may adversely affect our business. Even if we are successful in proving in a court of law that a third party is infringing one
or more of our issued patents or trademarks there can be no assurance that we would be successful in halting their
infringing activities.
Risks Relating to Product Manufacturing, Marketing and Sales, and Reliance on Third Parties
Even if the compounds we may develop are successful in clinical trials and receive regulatory approvals, we or our
collaboration partners may not be able to successfully commercialize them.
Even if the compounds were successful in clinical development and receive regulatory approvals, it may never reach or
remain on the market, be successfully developed into commercial products or gain market acceptance among physicians,
patients, healthcare payors or the medical community for a number of reasons including: (i) it may be found ineffective or
cause harmful side effects; (ii) it may be difficult to manufacture on a scale necessary for commercialization; (iii) it may
experience excessive product loss due to contamination, equipment failure, inadequate transportation or storage, improper
installation or operation of equipment, vendor or operator error, natural disasters or other catastrophic events, inconsistency
in yields or variability in product characteristics; (iv) it may be uneconomical to produce; (v) the timing of market
introduction of the compounds we may develop and competitive products may be inopportune; (vi) political and legislative
changes may make the commercialization of any product candidates we may develop in the future, more difficult; (vii) we
may fail to obtain reimbursement approvals or pricing that is cost effective for patients as compared to other available
forms of treatment or that covers the cost of production and other expenses; (viii) they may not compete effectively with
existing or future alternatives; (ix) we may be unable to develop commercial operations and to sell marketing rights; (x) it
may fail to achieve market acceptance; or (xi) we may be precluded from commercialization of a product due to
proprietary rights of third parties.
Because we have limited manufacturing experience, and no manufacturing facilities or infrastructure, we are
dependent on third-party manufacturers to manufacture drug candidates for us.
We have limited manufacturing experience and no manufacturing facilities, infrastructure or clinical or commercial scale
manufacturing capabilities. In order to continue to develop our drug candidates, apply for regulatory approvals, and
ultimately commercialize products, we need to develop, contract for or otherwise arrange for the necessary manufacturing
capabilities. We currently rely upon third parties to produce material for nonclinical and clinical testing purposes and
expect to continue to do so in the future. We also expect to rely upon third parties to produce materials that may be required
for the commercial production of our drug candidates, if approved. Our current and anticipated future dependence upon
others for the manufacture of our drug candidates may adversely affect our future profit
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margins and our ability to develop drug candidates and commercialize any drug candidates on a timely and competitive
basis. We currently do not have any long-term supply contracts.
There are a limited number of manufacturers who operate under the FDA's cGMP regulations capable of manufacturing
our drug candidates. As a result, we may have difficulty finding manufacturers for our drug candidates suitable for our
needs. If we are unable to arrange for third-party manufacturing of our drug candidates on a timely basis, or on acceptable
terms, we may not be able to complete development of our drug candidates or market them.
Any contract manufacturers with which we enter into manufacturing arrangements will be subject to extensive regulatory
requirements and ongoing periodic, unannounced inspections by the FDA, or foreign equivalent, and corresponding state
and foreign agencies or their designees to ensure compliance with cGMP requirements and other governmental regulations
and corresponding foreign standards. Any failure by our third-party manufacturers to comply with such requirements,
regulations or standards could lead to a delay in the conduct of our clinical trials, or a delay in, or failure to obtain,
regulatory approval of any of our drug candidates. Such failure could also result in sanctions being imposed, including
fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, product seizures or recalls, imposition of
operating restrictions, total or partial suspension of production or distribution, or criminal prosecution.
Additionally, contract manufacturers may not be able to manufacture our drug candidates at a cost or in quantities
necessary to make them commercially viable. Furthermore, changes in the manufacturing process or procedure, including a
change in the location where the drug substance or drug product is manufactured or a change of a third-party manufacturer,
may require prior FDA review and approval in accordance with the FDA's cGMP and NDA regulations. Contract
manufacturers may also be subject to comparable foreign requirements. This review may be costly and time-consuming
and could delay or prevent the launch of a drug candidate. The FDA or similar foreign regulatory agencies at any time may
also implement new standards or change their interpretation and enforcement of existing standards for manufacture,
packaging or testing of products. If we or our contract manufacturers are unable to comply, we or they may be subject to
regulatory action, civil actions or penalties.
We have no experience selling, marketing or distributing potential products and no internal capability to do so.
Advancing compounds through Phase 3 development and regulatory approval will require us to begin commercialization
preparation activities and incur related expenses. These activities will include, among other things, the development of an
in-house marketing organization and sales force, a market access and payor reimbursement strategy and a distribution
function, which will require significant capital expenditures, management resources and time. If we are unable to
adequately prepare the market for the potential future commercialization of compounds, we may not be able to generate
product revenue once marketing authorization is obtained.
If we are unable or decide not to establish internal sales, marketing and distribution capabilities, we will pursue
collaborative arrangements regarding the sales and marketing of our products; however, there can be no assurance that we
will be able to establish or maintain such collaborative arrangements on commercially reasonable terms, or if we are able to
do so, that they will have effective sales forces. Any revenue we receive will depend upon the efforts of such third parties,
which may not be successful. We may have little or no control over the marketing and sales efforts of such third parties and
our revenue from product sales may be lower than if we had commercialized our product candidates ourselves. We also
face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates.
Finally, regardless of whether we contract out our sales and marketing functions, we will be responsible for the marketing
and promotion of our products and may be held responsible should any products be improperly marketed or promoted.
If third parties on whom we rely for clinical and preclinical trials do not perform as contractually required or as we
expect, we may not be able to obtain regulatory approval for or commercialize our drug candidates and our business
may suffer.
We do not have the ability to independently conduct the clinical or preclinical trials required to obtain regulatory approval
for our drug candidates. We depend on independent investigators, contract research organizations (“CROs”), and other
third-party service providers in the conduct of the trials of our drug candidates and expect to continue to do so. We expect
to contract with CROs for future clinical trials. We rely heavily on these parties for successful execution of our trials, but
do not control many aspects of their activities. We are responsible for ensuring that each of our trials is conducted in
accordance with the applicable regulations and protocols for the trial. Third parties may not complete activities on
schedule, or at all, or may not conduct our trials in accordance with regulatory
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requirements or our protocols. If these third parties fail to carry out their obligations, we may need to enter into new
arrangements with alternative third parties. This could be difficult, costly or impossible, and our preclinical or clinical trials
may need to be extended, delayed, terminated or repeated, and we may not be able to obtain regulatory approval in a timely
fashion, or at all, for the applicable drug candidate, or to commercialize such drug candidate being tested in such trials. If
we seek to conduct any of these activities ourselves in the future, we will need to recruit appropriately trained personnel
and add to our research, clinical, quality and corporate infrastructure. Moreover, if we need to replace any third parties, we
may not be able to do so in a timely fashion or on commercially reasonable terms.
The commercial success of any drug candidates that we may develop will depend upon the degree of market acceptance
by physicians, patients, third-party payors, and others in the medical community.
Any products that we ultimately bring to the market, if they receive marketing approval, may not gain market acceptance
by physicians, patients, third-party payors or others in the medical community. For example, current cancer treatments,
including chemotherapy and radiation therapy are well-established in the medical community, and doctors may continue to
rely on these treatments. If our products do not achieve an adequate level of acceptance, we may not generate product
revenue and we may not become profitable. The degree of market acceptance of our products, if approved for commercial
sale, will depend on a number of factors, including: (i) the prevalence and severity of any side effects; (ii) the efficacy and
potential advantages over alternative treatments; (iii) the ability to offer our drug candidates for sale at competitive prices;
(iv) relative convenience and ease of administration; (v) the willingness of the target patient population to try new therapies
and of physicians to prescribe these therapies; (vi) the strength of marketing and distribution support and the timing of
market introduction of competitive products; and (vii) publicity concerning our products or competing products and
treatments.
Even if a potential product displays a favorable efficacy and safety profile, market acceptance of the product will not be
known until after it is launched. Our efforts to educate patients, the medical community, and third-party payors about our
drug candidates may require significant resources and may never be successful. Such efforts to educate the marketplace
may require more resources than are required by conventional methods used by our competitors.
If we are unable to obtain adequate reimbursement from third-party payors for any products that we may develop or
acceptable prices for those products, our revenues and prospects for profitability will suffer.
Most patients rely on Medicare, Medicaid, private health insurers, and other third-party payors to pay for their medical
needs, including any drugs we may market. If third-party payors do not provide adequate coverage or reimbursement for
any products that we may develop, our revenues and prospects for profitability will suffer.
Third-party payors are challenging the prices charged for medical products and services, and many third-party payors limit
reimbursement for newly-approved products. These third-party payors may base their coverage and reimbursement on the
coverage and reimbursement rate paid by carriers for Medicare beneficiaries. Furthermore, many such payors are
investigating or implementing methods for reducing health care costs, such as the establishment of capitated or prospective
payment systems. Cost containment pressures have led to an increased emphasis on the use of cost-effective products by
health care providers, which could limit the price we might establish for products that we or our current or future
collaborators may develop or sell, which would result in lower product revenues or royalties payable to us. In particular,
third-party payors may limit the indications for which they will reimburse patients who use any products that we may
develop or impose other patient access or utilization controls or limitations.
We face a risk of product liability claims and may not be able to obtain insurance.
Our business exposes us to the risk of product liability claims that is inherent in the manufacturing, testing, and marketing
of prescription drugs. We face a risk of product liability exposure related to the testing of our drug candidates in clinical
trials and will face an even greater risk if we commercially sell any products. Regardless of merit or eventual outcome,
liability claims and product recalls may result in: (i) decreased demand for our drug candidates and products; (ii) damage to
our reputation; (iii) regulatory investigations that could require costly recalls or product modifications; (iv) withdrawal of
clinical trial participants; (v) costs to defend related ligation; (vi) substantial monetary awards to clinical trial participants
or patients; (vii) loss of revenue; (viii) the diversion of
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management's attention away from managing our business; and (ix) the inability to commercialize any products that we
may develop.
Although we have product liability and clinical trial liability insurance that we believe is adequate, this insurance is subject
to deductibles and coverage limitations. We may not be able to obtain or maintain adequate protection against potential
liabilities. If we are unable to obtain insurance at acceptable cost or otherwise protect against potential product liability
claims, we will be exposed to significant liabilities, which may materially and adversely affect our business and financial
position. These liabilities could also prevent or interfere with our commercialization efforts.
Risks Relating to Ownership of Our Common Stock
Provisions in our certificate of incorporation and by-laws and Delaware law, may prevent a change in control that
stockholders may consider desirable.
Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”) and our certificate of incorporation
and by-laws contain provisions that might enable our management to resist a takeover of our company or discourage a third
party from attempting to take over our company. These provisions include: (i) a classified board of directors; (ii) limitations
on the removal of directors; (iii) limitations on stockholder proposals at meetings of stockholders; (iv) the inability of
stockholders to act by written consent or to call special meetings; and (v) the ability of our board of directors to designate
the terms of and issue new series of preferred stock without stockholder approval. These provisions could: (i) have the
effect of delay, defer or prevent a change in control of us or a change in our management that stockholders may consider
favorable or beneficial or (ii) discourage proxy contests and make it more difficult for stockholders to elect directors and
take other corporate actions.
The Company’s amended and restated bylaws (“Bylaws”) provide, to the fullest extent permitted by law, that the Court
of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between the Company and its
stockholders, which could increase costs to bring a claim, discourage claims or limit the ability of the Company’s
stockholders to bring a claim in a judicial forum viewed by the stockholders as more favorable for disputes with the
Company or the Company’s directors, officers or other employees.
Our Bylaws provide to the fullest extent permitted by law that unless the Company consents in writing to the selection of
an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any (i)
derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary
duty owed by any director, officer, other employee or stockholder of the Company to the Company or its stockholders, (iii)
any action arising pursuant to any provision of the DGCL, the Company’s Certificate of Incorporation or the Bylaws, (iv)
any action to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws, or (v) any
action asserting a claim governed by the internal affairs doctrine. The choice of forum provision may increase costs to
bring a claim, discourage claims or limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable
for disputes with the Company or its directors, officers or other employees, which may discourage such lawsuits against the
Company or its directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision
contained in the Company’s Bylaws to be inapplicable or unenforceable in an action, the Company may incur additional
costs associated with resolving such action in other jurisdictions. The exclusive forum provision in our Bylaws would not
apply to claims brought under the Exchange Act or the Securities Act, or any other claim for which the federal courts have
exclusive jurisdiction. Additionally, such provision will not relieve us of our duty to comply with the federal securities laws
and the rules and regulations thereunder, and stockholders will not be deemed to have waived our compliance with these
laws, rules and regulations.
Approximately 24% of our outstanding common stock is held (28% beneficially owned) by three stockholders. If these
significant stockholders choose to act together, they could exert substantial influence over our business, and the
interests of these stockholders may conflict with those of other stockholders.
There is a concentration of ownership of our outstanding common stock because approximately 24% of our outstanding
common stock is owned by three stockholders. As of December 31, 2021: (i) Baker Bros. Advisors LP, and certain of its
affiliated funds (collectively, “Baker Brothers”) beneficially owned 3.9% of our outstanding common stock, which
excludes all convertible securities as a result of certain beneficial ownership limitations as discussed in
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Note 15 of this Form 10-K; (ii) entities affiliated with Pillar Invest Corporation (the “Pillar Investment Entities”)
beneficially owned 19.9% of our outstanding common stock; and (iii) Castellina Ventures Ltd. (“Castellina” and, together
with Baker Brothers and Pillar Investment Entities, the “Significant Securityholders”) beneficially owned 4.2% of our
outstanding common stock. If any of our Significant Securityholders acted together, they could be able to exert substantial
influence over our business. Additionally, the interests of the Significant Securityholders may be different from or conflict
with the interests of our other stockholders. This concentration of voting power with the Significant Securityholders could
delay, defer or prevent a change of control, entrench our management and the board of directors or delay or prevent a
merger, consolidation, takeover or other business combination involving us on terms that other stockholders may desire. In
addition, conflicts of interest could arise in the future between us, on the one hand, and either of our Significant
Securityholders on the other hand, concerning potential competitive business activities, business opportunities, the issuance
of additional securities and other matters.
The issuance or sale of shares of our common stock could depress the trading price of our common stock.
If (i)we issue additional shares of our common stock or rights to acquire shares of our common stock in other future
transactions, (ii) any of our existing stockholders sells a substantial amount of our common stock, or (iii) the market
perceives that such issuances or sales may occur, then the trading price of our common stock may significantly decrease. In
addition, our issuance of additional shares of common stock will dilute the ownership interests of our existing common
stockholders.
Because we do not intend to pay dividends on our common stock, investor returns will be limited to any increase in the
value of our stock.
We have never declared or paid any cash dividends on our common stock. We currently intend to retain all available funds
and any future earnings to support our operations and finance the growth and development of our business and do not
anticipate declaring or paying any cash dividends on our common stock for the foreseeable future.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We lease approximately 11,000 square feet of office space located in Exton, Pennsylvania. The lease expires on May
31, 2025. We may terminate the lease at any point as long as we remain a member of the landlord’s group and require a
space with more square footage. We have specified rights to sublease this facility.
Item 3. Legal Proceedings.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
PART II.
Market Information
Our common stock is listed under the symbol “IDRA” on the Nasdaq.
Holders of Record
As of March 4, 2022, we had approximately 51 common stockholders of record registered on our books, excluding
shares held through banks and brokers.
Dividends
We have never declared or paid cash dividends on our common stock, and we do not expect to pay any cash
dividends on our common stock in the foreseeable future. The declaration and payment of dividends in the future, of which
there can be no assurance, will be determined by our Board of Directors in light of conditions then existing, including
earnings, financial condition, capital requirements and other factors.
Recent Sales of Unregistered Securities
We did not issue any unregistered equity securities during the year ended December 31, 2021.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the year ended December 31, 2021.
Item 6.
Reserved.
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Item 7.
Operations.
Management’s Discussion and Analysis of Financial Condition and Results of
The following discussion and analysis of our financial condition and results of operations should be read in conjunction
with our audited financial statements and the related notes appearing elsewhere in this Form 10-K.
Overview
We are a biopharmaceutical company with a business strategy focused on the clinical development, and ultimately
the commercialization, of drug candidates for rare disease indications characterized by small, well-defined patient
populations with serious unmet medical needs. Our current focus is to identify and potentially acquire rights to novel
development and commercial stage rare disease programs through new business development opportunities, including
additional strategic alternatives. We have in the past and may in the future explore collaborative alliances to support
development and commercialization of any of our drug candidates.
Until May 2021, we were developing tilsotolimod, via intratumoral injection, for the treatment of anti-PD1
refractory metastatic melanoma in combination with ipilimumab, an anti-CTLA4 antibody marketed as Yervoy® by Bristol
Myers Squibb Company (“BMS”) in a Phase 3 registration trial. During the first quarter of 2021, we announced that
ILLUMINATE-301, the Company’s pivotal registration trial of tilsotolimod in combination with ipilimumab versus
ipilimumab alone in patients with anti-PD-1 refractory advanced melanoma, did not meet its primary endpoint of Objective
Response Rate (“ORR”). Based on subsequent evaluation of the full data set, in May 2021, we announced that we would
not continue the trial to its Overall Survival (“OS”) primary endpoint.
Through December 2021, we were also evaluating intratumoral tilsotolimod in combination with nivolumab, an
anti-PD1 antibody marketed as Opdivo® by BMS, and ipilimumab for the treatment of multiple solid tumors in a
multicohort Phase 2 trial. In December 2021, we announced that preliminary data from the second 10 patients dosed in the
safety cohort of ILLUMINATE-206 showed a safety profile consistent with the first 10 patients in ILLUMINATE-206 and
with prior studies. No further enrollment in ILLUMINATE-206 is planned at this time.
While our clinical trials with tilsotolimod have not yet translated into a new treatment alternative for patients, data
supporting tilsotolimod’s mechanism of action and encouraging safety profile from across the array of pre-clinical and
clinical work to date, together with its intellectual property protection, are noteworthy. As a result, in December 2021, we
announced that we will consider an out-licensing arrangement so that its full potential may continue to be explored on
behalf of patients who do not respond to traditional immunotherapy.
Historically, substantially all our revenues have been from collaboration and license agreements, although we did
not generate any such revenue in 2021, and we have received no revenues from the sale of commercial products. Going
forward, we plan to continue to invest in research and development. Accordingly, we anticipate a significant portion of our
operating expenses will continue to be related to research and development in 2022 and beyond. See additional information
below under the headings “Results of Operations” regarding research and development expenses to date and “Financial
Condition, Liquidity and Capital Resources” regarding our future funding requirements.
Recent Events and Updates
Reduction-in-Force
In April 2021, following the announcement that the ILLUMINATE-301 trial did not meet its primary endpoint of
ORR, we implemented a reduction-in-force which affected approximately 50% of our workforce through September 30,
2021, primarily in the area of research and development. The decision was made in order to align our workforce with our
needs in light of the outcome of ILLUMINATE-301’s ORR endpoint, our ongoing ILLUMINATE development program,
and other business development activities focused on identifying new portfolio opportunities.
In connection with these actions, we incurred and paid termination costs for the reduction in workforce, which
includes severance, benefits and related costs, of approximately $1.3 million during the year ended December 31, 2021.
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Nasdaq Compliance
As previously disclosed, on November 26, 2021, we received a deficiency letter (the “Nasdaq Letter”) from the
Nasdaq Listing Qualifications Department, notifying us that the Company is not in compliance with Nasdaq Listing Rule
5550(a)(2), which requires the Company to maintain a minimum bid price of at least $1 per share for continued listing on
The Nasdaq Capital Market (the “Minimum Bid Requirement”). The Company’s failure to comply with the Minimum Bid
Requirement was based on the Company’s common stock per share price being below the $1 threshold for a period of 30
consecutive business days. In accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the “Compliance Period Rule”), the
Company has been provided an initial period of 180 calendar days (the “Compliance Date”), to regain compliance with the
Minimum Bid Requirement. If, at any time before the Compliance Date, the bid price for the Company’s common stock
closes at $1.00 or more per share for a minimum of 10 consecutive business days, as required under Nasdaq requirements,
the Staff will provide written notification to the Company that it complies with the Minimum Bid Requirement, unless the
Staff exercises its discretion to extend this 10-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H).
If the Company does not regain compliance with the Minimum Bid Requirement by the Compliance Date, the
Company may be eligible for an additional 180 calendar day compliance period (the “Second Compliance Period”). To
qualify, the Company would need to meet the continued listing requirement for the market value of publicly held shares
and all other initial listing standards of the Nasdaq Capital Market, with the exception of the Minimum Bid Requirement,
and provide written notice to the Staff of its intention to cure the deficiency during the Second Compliance Period.
Neither the Nasdaq Letter nor the Company’s noncompliance with the Minimum Bid Requirement have an
immediate effect on the listing or trading of the Company’s common stock, which continues to trade on The Nasdaq
Capital Market under the symbol “IDRA.”
Results of Operations
The following is a discussion of results of operations for fiscal 2021 compared to fiscal 2020. For a discussion of results of
operations for fiscal 2020 compared to fiscal 2019, please refer to Item 7—Management’s Discussion and Analysis of
Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2020, filed with the SEC on March 1, 2021.
Years ended December 31, 2021 and 2020
Research and Development Expenses
For each of our research and development programs, we incur both direct and indirect expenses. We track direct
research and development expenses by program, which include third-party costs such as contract research, consulting and
clinical trial and manufacturing costs. We do not allocate indirect research and development expenses, which may include
regulatory, laboratory (equipment and supplies), personnel, facility, and other overhead costs (including depreciation and
amortization), to specific programs.
During the fiscal year ended December 31, 2021, our overall research and development expenses declined by 34%
as compared to 2020, primarily due to decreases in external development costs associated with tilsotolimod (IMO-2125).
This decrease is primarily related to: (i) costs incurred with contract research organizations during the year ended
December 31, 2021 to support our ILLUMINATE-301 trial, which was discontinued by the Company in the second quarter
of 2021; and (ii) lower costs incurred with drug manufacturing activities. The decrease of the research and development
expenses is offset by the costs associated with ILLUMINATE-206 and the Scriptr Agreement.
Tilsotolimod (IMO-2125) external development expenses as well as expenses related to the Scriptr Agreement (as
more fully described under the heading “Collaborative Alliances” above in Item 1.) will continue to be a significant portion
of our total research and development spending in 2022.
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In the table below, research and development expenses are set forth in the following categories: Tilsotolimod (IMO-
2125) and other drug development expenses.
($ in thousands)
Tilsotolimod (IMO-2125) external development expense
Other drug development expense
Total research and development expenses
$
$
Tilsotolimod (IMO-2125) External Development Expenses
Year Ended December 31,
2020
2021
16,707
8,065
24,772
9,247
7,128
16,375
$
$
% Change
2021 vs 2020
(45)%
(12)%
(34)%
These expenses include external expenses we have incurred in connection with the development of tilsotolimod as
part of our immuno-oncology program. These external expenses include payments to independent contractors and vendors
for drug development activities conducted after the initiation of tilsotolimod clinical development in immuno-oncology, but
exclude internal costs such as payroll and overhead expenses.
We commenced clinical development of tilsotolimod as part of our immuno-oncology program in July 2015, and
from July 2015 through December 31, 2021, we incurred approximately $91.1 million in tilsotolimod external development
expenses, including costs associated with the preparation for and conduct of ILLUMINATE-204, ILLUMINATE-101,
ILLUMINATE-301, ILLUMINATE-206, and the manufacture of additional drug substance for use in our clinical trials and
additional nonclinical studies.
Other Drug Development Expenses
These expenses include internal costs, such as payroll and overhead expenses, associated with all our clinical
development programs. In addition, these expenses include external expenses, such as payments to contract vendors,
associated with compounds that were previously being developed but are not currently being developed. We incurred
$2.1 million of expenses within other drug development expenses related to our research collaboration with Scriptr in
2021
General and Administrative Expenses
General and administrative expenses consist primarily of payroll, stock-based compensation expense, consulting
fees and professional legal fees associated with our patent applications and maintenance, our corporate regulatory filing
requirements, our corporate legal matters, and our business development initiatives. For the years ended December 31,
2021 and 2020, general and administrative expenses totaled $10.0 million and $11.9 million, respectively.
General and administrative expenses decreased by approximately $1.9 million, or 16.3%, in 2021 as compared to
2020, primarily due to lower salary, bonus, stock compensation expense, employee-related expense related to terminated
employees as part of our reduction-in-force, and commercial research support costs, partially offset by increased consulting
expenses.
Restructuring Costs
In April 2021, following the announcement that the ILLUMINATE-301 trial did not meet its primary endpoint of
ORR, we implemented a reduction-in-force which affected approximately 50% of the workforce through December 31,
2021, primarily in the area of research and development. The decision was made in order to align our workforce with its
needs in light of the outcome of ILLUMINATE-301’s ORR endpoint, its ongoing ILLUMINATE development program
and other business development activities focused on identifying new portfolio opportunities.
Restructuring costs for the year ended December 31, 2021 totaled approximately $1.3 million and is comprised of
termination costs including severance, benefits and related costs. No such costs were incurred during the year ended
December 31, 2020.
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Interest Income
Interest income for the years ended December 31, 2021 and 2020 totaled $0.1 million and $0.2 million, respectively.
The decrease in 2021, as compared to 2020, was primarily due to lower interest rates and decrease in average short-term
investment and cash balances and yields.
Amounts may fluctuate from period to period due to changes in average investment balances, including commercial
paper and money market funds classified as cash equivalents, and composition of investments.
Warrant Revaluation Gain or Loss
During the years ended December 31, 2021 and 2020, we recorded a non-cash warrant revaluation gain (loss) of
approximately $7.0 million and $(3.7) million, respectively.
The non-cash gain for the fiscal year ended December 31, 2021 relates to the derecognition of the warrant liability in
the first quarter of 2021 due to the termination of such liability-classified warrants that were issued in connection with our
December 2019 Private Placement.
The non-cash loss for the fiscal year ended December 31, 2020 relate to the revaluation of our liability-classified
warrants issued in connection with the December 2019 Private Placement. Due to the nature of and inputs in the model
used to assess the fair value of our outstanding warrants, it is not abnormal to experience significant fluctuations during
each remeasurement period. These fluctuations may be due to a variety of factors, including changes in our stock price and
changes in estimated stock price volatility over the remaining life of the warrants. Warrant revaluation loss for 2020 was
driven primarily by an increase in our stock price during each period. More specifically, the significant warrant revaluation
loss for the 2020 period was primarily due to the approximate 102% increase in our stock price during the period January
1, 2020 to December 31, 2020.
The non-cash warrant revaluation gain (loss) mentioned above are fully described in Note 7 of the Notes to
Financial Statements appearing elsewhere in this Form 10-K.
Future Tranche Right Revaluation Gain or Loss
During the years ended December 31, 2021 and 2020, we recorded a non-cash future tranche right revaluation gain
(loss) of approximately $118.8 million and $(72.4) million, respectively.
The non-cash gain for the fiscal year ended December 31, 2021 relates to the derecognition of the future tranche
right liability in the first quarter of 2021 due to the termination of the future tranche rights that were issued in connection
with our December 2019 Private Placement.
The non-cash loss for the fiscal year ended December 31, 2020 relates to the revaluation of our liability-classified
tranche rights liability issued in connection with the December 2019 Private Placement. Due to the nature of and inputs in
the model used to assess the fair value of the future tranche rights, it is not abnormal to experience significant fluctuations
during each remeasurement period. These fluctuations may be due to a variety of factors, including changes in our stock
price and changes in estimated stock price volatility over the remaining estimated lives of the future tranche rights.
Changes in the fair value of the future tranche right liability and resulting future tranche right revaluation loss for 2020 was
driven primarily by an increase in our stock price during the periods. More specifically, the significant future tranche right
revaluation loss for the 2020 period was primarily due to the approximate 102% increase in our stock price during the
period January 1, 2020 to December 31, 2020.
Both non-cash future tranche right revaluation gain (loss) for the respective periods are fully described in Note 7 of
the Notes to Financial Statements appearing elsewhere in this Form 10-K.
Net Income or Loss to Common Stockholders
As a result of the factors discussed above, our net income (loss) was $98.1 million and $(112.7) million for the years
ended December 31, 2021 and 2020, respectively. See Note 16 of the Notes to Financial Statements appearing elsewhere in
this Annual Report on Form 10-K for additional details.
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Net Operating Loss Carryforwards
We have completed several financings since the effective date of the Tax Reform Act of 1986, which as of
December 31, 2021, have resulted in ownership changes that will significantly limit our ability to utilize our net operating
loss carryforwards (“NOLs”) and tax credit carryforwards. In December 2017, we completed a study which determined
that ownership changes had occurred. The federal and state net operating loss and tax credit carryforwards and related
deferred tax assets discussed below and included in Note 13 to the financial statements appearing elsewhere in this Form
10-K have been adjusted to reflect the limitations that resulted from this study. The Company continues to monitor equity
activity and potential ownership changes.
As of December 31, 2021, we had cumulative federal and state NOLs of approximately $327.5 million and $322.0 ‐
million available to reduce federal and state taxable income, respectively. As a result of the Tax Cuts and Jobs Act of 2017,
federal net operating losses incurred for taxable years beginning after January 1, 2018 have an unlimited carryforward
period, but can only be utilized to offset 80% of taxable income in future taxable periods. Of the $327.5 million of federal
NOLs, $130.1 million have an unlimited carryforward and the remaining NOLs are still subject to expiration through 2037.
State NOLs are still subject to expiration according to the laws of each respective jurisdiction. The Company files state tax
returns in Massachusetts and Pennsylvania whereby both jurisdictions impose a 20-year carryforward period. All $322.0
million of state NOLs expire through 2041, with the first year of expiration being 2032 for $23.4 million of Massachusetts
NOLs. In addition, at December 31, 2021, the Company had cumulative federal and state tax credit carryforwards of $26.7
million and $1.9 million, respectively, available to reduce federal and state income taxes, respectively, which expire
through 2041 and 2033, respectively, for federal and state purposes, other than those that have an unlimited carryforward
period.
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Financial Condition, Liquidity and Capital Resources
Financial Condition
As of December 31, 2021, we had an accumulated deficit of $735.5 million. To date, substantially all our revenues
have been from collaboration and license agreements and we have received no revenues from the sale of commercial
products. We generated no revenue for the fiscal year ended December 31, 2021.
We have devoted substantially all our efforts to research and development, including clinical trials, and we have
not completed development of any commercial products. Our research and development activities, together with our
general and administrative expenses, are expected to continue to result in substantial operating losses for the foreseeable
future. These losses, among other things, have had and will continue to have an adverse effect on our stockholders’ equity,
total assets and working capital. Because of the numerous risks and uncertainties associated with developing drug
candidates, and if approved, commercial products, we are unable to predict the extent of any future losses, whether or when
any of our drug candidates will become commercially available or when we will become profitable, if at all.
Liquidity and Capital Resources
Overview
We require cash to fund our operating expenses and to make capital expenditures. Historically, we have funded our
cash requirements primarily through the following:
(i)
sale of common stock, preferred stock and future tranche rights and warrants (including pre-funded warrants);
(ii) exercise of warrants;
(iii) debt financing, including capital leases;
(iv) license fees, research funding and milestone payments under collaborative and license agreements; and
(v) interest income.
We filed a shelf registration statement on Form S-3 on August 4, 2020, which was declared effective on September
2, 2020, relating to the sale, from time to time, in one or more transactions, up to $150.0 million of common stock,
preferred stock, depository shares and warrants.
LPC Purchase Agreement
On March 4, 2019, we entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”),
pursuant to which, upon the terms and subject to the conditions and limitations set forth therein, Lincoln Park has
committed to purchase an aggregate of $35.0 million of shares of Company common stock from time to time at our sole
discretion (the “LPC Purchase Agreement”).
During the years ended December 31, 2021 and 2020, we sold 800,000 and 750,000 shares of common stock,
respectively, pursuant to the LPC Purchase Agreement, resulting in net proceeds of $4.2 million and $1.7 million,
respectively. The LPC Purchase Agreement had a 36-month term which expired on March 4, 2022. Accordingly, we no
longer have access to capital under the LPC Purchase Agreement.
ATM Agreement
In November 2018, we entered into an Equity Distribution Agreement (the “ATM Agreement”) with JMP Securities
LLC (“JMP”) pursuant to which we may issue and sell shares of its common stock having an aggregate offering price of up
to $50.0 million through JMP as its agent.
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During the years ended December 31, 2021 and 2020, we sold 5,117,357 and 3,608,713 shares of common stock,
respectively, pursuant to the ATM Agreement, resulting in net proceeds, after deduction of commissions and other offering
expenses, of $15.3 million and $12.3 million, respectively. As of March 31, 2022, we may sell up to an additional $19.5
million of shares under the ATM Agreement.
The LPC Purchase Agreement and ATM Agreement are more fully described in Note 8 of the notes to our financial
statements included elsewhere in this Form 10-K.
Funding Requirements
We had cash and cash equivalents of approximately $32.5 million at December 31, 2021. We believe based on our
current operating plan, our existing cash, cash equivalents on hand as of December 31, 2021 will enable us to fund our
operations through the one-year period subsequent to the filing date of this Form 10-K. Specifically, we believe our
available funds will be sufficient to enable us to perform the following:
(i)
fund business development related activities, such as identifying and potentially acquiring rights to novel
development and commercial stage rare disease programs, including additional strategic alternatives;
(ii) conclude our current Low-Dose, High-Frequency Cohort of our Phase 2 study of tilsotolimod in combination
with nivolumab and ipilimumab for the treatment of MSS-CRC (ILLUMINATE-206);
(iii) conclude our Phase 3 clinical trial of tilsotolimod in combination with ipilimumab for the treatment of anti-PD1
refractory metastatic melanoma (ILLUMINATE-301);
(iv) fund certain research including investigator initiated clinical trials of tilsotolimod and the Scriptr Agreement;
and
(v) maintain a level of general and administrative expenses to support the business.
In addition, we are seeking and expect to continue to seek additional funding through collaborations, the sale or
license of assets or financings of equity or debt securities. We believe the key factors which will affect our ability to obtain
funding are:
(i)
the receptivity of the capital markets to any in-licensing, product acquisition or other transaction we may enter
into;
(ii) the receptivity of the capital markets to financings by biotechnology companies generally and companies with
drug candidates and technologies similar to ours specifically;
(iii) the results of our clinical development activities in our drug candidates we develop on the timelines anticipated;
(iv) competitive and potentially competitive products and technologies and investors' receptivity to our drug
candidates we develop and the technology underlying them in light of competitive products and technologies;
(v) the cost, timing, and outcome of regulatory reviews;
(vi) our ability to enter into additional collaborations with biotechnology and pharmaceutical companies and the
success of such collaborations; and
(vii)the impact of the COVID-19 pandemic to global economy and capital markets, and to our business and our
financial results.
In addition, increases in expenses or delays in clinical development may adversely impact our cash position and
require additional funds or cost reductions.
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Cash Flows
The following table presents a summary of the primary sources and uses of cash for the years ended December 31,
2021 and 2020:
(in thousands)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Decrease in cash and cash equivalents
Year Ended December 31,
2021
2020
$
$
(24,597)
4,500
19,413
(684)
$
$
(33,772)
(1,687)
28,669
(6,790)
Operating Activities. The net cash used in operating activities for all periods presented consists primarily of our net
income (losses) adjusted for non-cash charges/gains and changes in components of working capital. The decrease in cash
outflow for the year ended December 31, 2021, as compared to 2020, related primarily to lower costs incurred for our
tilsotolimod development program during 2021.
Investing Activities. Net cash provided by (used in) investing activities primarily consisted of the following amounts
relating to our investments in available-for-sale securities and purchases and disposals of property and equipment:
● For the year ended December 31, 2021, proceeds from the maturity of available-for-sale securities were $4.5
million; and
● For the year ended December 31, 2020, proceeds from the maturity of available-for-sale securities of $10.5
million, substantially offset by the purchase of $12.2 million of available-for-sale securities.
Financing Activities. Net cash provided by financing activities primarily consisted of the following amounts raised
in connection with the following transactions:
● For the year ended December 31, 2021, aggregate net proceeds of $19.5 million from financing arrangements
consisting of $4.2 million received pursuant to the LPC Purchase Agreement and $15.3 million received under
the ATM Agreement, plus $0.3 million received from the exercise of stock options and warrants, partially offset
by $0.4 million in payments related to our short-term insurance premium financing arrangement; and
● For the year ended December 31, 2020, aggregate net proceeds of $28.8 million from financing arrangements
consisting of $14.8 million received pursuant to the April 2020 and July 2020 Securities Purchase Agreements,
$1.7 million received pursuant to the LPC Purchase Agreement and $12.3 million received under the ATM
Agreement, plus an additional $0.1 million in proceeds from employee stock purchases under our 2017
Employee Stock Purchase Plan, partially offset by $0.2 million in payments related to our short-term insurance
premium financing arrangement.
Material Cash Requirements
As of December 31, 2021, we had a material lease commitment in an aggregate amount of $0.8 million relating to
our facility in Exton, Pennsylvania. This lease expires on May 31, 2025. See Note 12 of the Notes to Financial Statements
in this Form 10-K for additional information.
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Critical Accounting Policies and Estimates
This management’s discussion and analysis of 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.
The preparation of these financial statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis,
management evaluates its estimates and judgments, including those related to warrant and future tranche right liabilities
and related revaluation gains (losses), research and development prepayments, accruals and related expenses, and stock-
based compensation. Management bases its estimates and judgments on historical experience and on various other factors
that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
We regard an accounting estimate or assumption underlying our financial statements as a “critical accounting
estimate” where:
● the nature of the estimate or assumption is material due to the level of subjectivity and judgment necessary to
account for highly uncertain matters or the susceptibility of such matters to change; and
● the impact of the estimates and assumptions on financial condition or operating performance is material.
While our significant accounting policies are described in more detail in Note 2 to our financial statements appearing
elsewhere in this Form 10-K, we believe the following accounting policies to be most critical to the judgments and
estimates used in the preparation of our financial statements.
Research and Development Prepayments, Accruals and Related Expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued and prepaid
expenses for research and development activities performed by third parties, including Clinical Research Organizations
(“CROs”) clinical investigators and our research collaboration partners. These estimates are made as of the reporting date
of the work completed over the life of the individual study in accordance with agreements established with CROs and
clinical trial sites. Some CROs invoice us on a monthly basis, while others invoice upon achievement of milestones and the
expense is recorded as services are rendered. We determine the estimates of research and development activities incurred at
the end of each reporting period through discussion with internal personnel and outside service providers and research
collaboration partners as to the progress or stage of completion of trials or services, as of the end of each reporting period,
pursuant to contracts with clinical trial centers and CROs and the agreed upon fee to be paid for such services. We
periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Clinical
trial site costs related to patient enrollments are recorded as patients are entered into the trial.
Stock-Based Compensation
We recognize all share-based payments to employees and directors as expense in our statements of operations based
on their fair values. We record compensation expense over an award’s requisite service period, or vesting period, based on
the award’s fair value at the date of grant. Our policy is to charge the fair value of stock options as an expense, adjusted for
forfeitures, on a straight-line basis over the vesting period, which is generally four years for employees and one year for
directors.
We use the Black-Scholes option pricing model to estimate the fair value of stock option grants. The Black-Scholes
option pricing model relies on a number of key assumptions to calculate estimated fair values, including assumptions as to
average risk-free interest rate, expected dividend yield, expected life and expected volatility. For the assumed risk-free
interest rate, we use the U.S. Treasury security rate with a term equal to the expected life of the option. Our assumed
dividend yield of zero is based on the fact that we have never paid cash dividends to common stockholders and have no
present intention to pay cash dividends. We use an expected option life based on actual experience. Our assumption for
expected volatility is based on the actual stock-price volatility over a period equal to the expected life of the option.
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If factors change and we employ different assumptions for estimating stock-based compensation expense in future
periods, or if we decide to use a different valuation model, the stock-based compensation expense we recognize in future
periods may differ significantly from what we have recorded in the current period and could materially affect our loss from
operations, net income (loss) and earnings (loss) per share. It may also result in a lack of comparability with other
companies that use different models, methods and assumptions. The Black-Scholes option pricing model was developed for
use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. These
characteristics are not present in our option grants. Although the Black-Scholes option pricing model is widely used,
existing valuation models, including the Black-Scholes option pricing model, may not provide reliable measures of the fair
values of our stock-based compensation.
Warrant and Future Tranche Right Liabilities and Related Revaluation Gain (Loss)
We entered into the December 2019 Securities Purchase Agreement, as more fully described in Note 7 of the Notes
to Financial Statements appearing elsewhere in this Form 10-K, pursuant to which we issued shares of convertible
preferred stock with detachable warrants. Additionally, the December 2019 Securities Purchase Agreement contains call
options on redeemable preferred shares with warrants (conditionally exercisable for shares that are puttable), which we
refer to as future tranche rights.
We determined that these warrants and future tranche rights represent freestanding financial instruments and account
for both the warrants and future tranche rights as liabilities, which requires the measurement of the fair value of the liability
at the time of issuance and recording changes as a charge to current earnings at each reporting period, which is included in
Warrant Liability Revaluation Expense and/or Future Tranche Right Liability Revaluation Expense in our statements of
operations.
Warrant Liability. We use an option pricing model to value our liability-classified warrants. Inherent in the valuation
model are assumptions related to volatility, risk-free interest rate, expected term, dividend rate, and other scenarios (i.e.
probability of complex features of the warrants being triggered). Due to the nature of and inputs in the model used to assess
the fair value of the warrants, it is not abnormal to experience significant fluctuations during each remeasurement period.
Future Tranche Right Liability. We use both a lattice model and a Monte Carlo simulation to value the future tranche
rights. We selected these models as we believe they are reflective of all significant assumptions that market participants
would likely consider in negotiating the transfer of the future tranche rights. Such assumptions include, among other inputs,
stock price volatility, risk-free rates, and expected terms inclusive of early exercise and cancellation assumptions. Due to
the nature of and inputs in the model used to assess the fair value of the future tranche rights, it is not abnormal to
experience significant fluctuations during each remeasurement period.
All outstanding warrants and future tranche rights previously issued pursuant to the December 2019 Securities
Purchase Agreement were terminated during the three months ended March 31, 2021. Accordingly, we are no longer
eligible to receive additional proceeds pursuant to the December 2019 Securities Purchase Agreement and the related
warrant liability and future tranche right liability were derecognized during the three months ended March 31, 2021.
New Accounting Pronouncements
New accounting pronouncements are discussed in Note 2 of the Notes to Financial Statements in this Form 10-K.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
As of December 31, 2021, all material assets and liabilities are in U.S. dollars, which is our functional currency.
We maintain investments in accordance with our investment policy. The primary objectives of our investment
activities are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. Although our
investments are subject to credit risk, our investment policy specifies credit quality standards for our investments and limits
the amount of credit exposure from any single issue, issuer or type of investment. We regularly review our investment
holdings in light of the then current economic environment. At December 31, 2021, all our invested funds were invested in
money market funds classified in cash and cash equivalents on the accompanying balance sheet.
Based on a hypothetical ten percent adverse movement in interest rates, the potential losses in future earnings, fair
value of risk sensitive financial instruments, and cash flows are immaterial to our earnings, although the actual effects may
differ materially from the hypothetical analysis.
Item 8.
Financial Statements and Supplementary Data.
All financial statements required to be filed hereunder are filed as listed under Item 15(a) of this Form 10-K and are
incorporated herein by this reference.
There have been no retrospective changes to our statements of operations for any of the quarters within the two years
in the period ended December 31, 2021.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated
the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) as of December 31, 2021. In designing and evaluating our 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 their objectives and our management necessarily applied its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based on this evaluation, our principal executive officer and principal
financial officer concluded that as of December 31, 2021, our disclosure controls and procedures were (1) designed to
ensure that material information relating to us is made known to our principal executive officer and principal financial
officer by others, particularly during the period in which this report was prepared, and (2) effective, in that they provide
reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Internal Control over Financial Reporting
a) Management’s Annual Report on Internal Control over Financial Reporting
Our management, with the participation of our principal executive officer and principal financial officer, is
responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over
financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed
by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the
Company’s Board of Directors, management and other personnel, to provide reasonable
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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:
● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors of the
Company; and
● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In
making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control — Integrated Framework (2013).
Based on its assessment, management believes that, as of December 31, 2021, the Company’s internal control over
financial reporting is effective based on those criteria.
b)
Attestation Report of the Registered Public Accounting Firm
Not Applicable.
c)
Changes in Internal Control over Financial Reporting.
No change in our internal control over financial reporting occurred during the fourth quarter of the fiscal year ended
December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
Item 9B. Other Information.
None
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
51
Table of Contents
Item 10. Directors, Executive Officers, and Corporate Governance.
PART III.
The information required by this item is incorporated by reference to our Proxy Statement for the 2022 Annual
Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2021.
We have adopted a written code of business conduct and ethics that applies to our principal executive officer,
principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have
posted a current copy of the Code of Business Conduct and Ethics in the “Investors — Corporate Governance” section of
our website, which is located at www.iderapharma.com. We intend to satisfy the disclosure requirements under Item 5.05
of Form 8-K regarding an amendment to, or waiver from, a provision of our code of business conduct and ethics by posting
such information on our website at www.iderapharma.com.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference to our Proxy Statement for the 2022 Annual
Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2021.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The information required by this item is incorporated by reference to our Proxy Statement for the 2022 Annual
Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2021.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information as of December 31, 2021 regarding total shares subject to outstanding
stock options, warrants, and rights and total additional shares available for issuance under our existing equity incentive and
employee stock purchase plans. In addition, from time to time, we may grant “inducement grants” pursuant to Nasdaq
Listing Rule 5635(c)(4).
Plan Category
Equity compensation plans approved by
stockholders (1)
Equity compensation plans not approved by
stockholders (2)
Total
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
(a)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a))
(c)
5,452,709
325,000
5,777,709
$
$
$
6.75
27.82
8.06
396,098
—
396,098
(1) Consists of our: 2008 Stock Incentive Plan, 2013 Stock Incentive Plan, and 2017 Employee Stock Purchase Plan. Amounts in
column (a) include stock options and unvested restricted stock units outstanding. Shares are available for future issuance only
under our 2013 Stock Incentive Plan and 2017 Employee Stock Purchase Plan.
(2) Consists of stock options issued as inducement grants (issued prior to 2017) as of December 31, 2021. These stock options are
generally subject to the same terms and conditions as those awarded pursuant to the plans approved by our stockholders.
52
Table of Contents
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item is incorporated by reference to our Proxy Statement for the 2022 Annual
Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2021.
Item 14. Principal Accountant Fees and Services.
The information required by this item is incorporated by reference to our Proxy Statement for the 2022 Annual
Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2021.
53
Table of Contents
PART IV.
Item 15. Exhibits and Financial Statement Schedules.
(a) (1) Financial Statements.
Report of Independent Registered Public Accounting Firm
Balance Sheets at December 31, 2021 and 2020
Statements of Operations for the years ended December 31, 2021, 2020 and
2019
Statements of Redeemable Preferred Stock and Stockholders’ Equity (Deficit)
for the years ended December 31, 2021, 2020 and 2019
Statements of Cash Flows for the years ended December 31, 2021, 2020 and
2019
Notes to Financial Statements
Page number in
this Report
F-2
F-4
F-5
F-6
F-7
F-8
(2) We are not filing any financial statement schedules as part of this Annual Report on Form 10-K
because they are not applicable or the required information is included in the financial statements or
notes thereto.
(3)
The list of Exhibits filed as a part of this Annual Report on Form 10-K is set forth on the Exhibit Index
below.
(b)
The list of Exhibits filed as a part of this Annual Report on Form 10-K is set forth on the Exhibit Index below.
(c) None.
54
Table of Contents
Exhibit Index
Exhibit
Number
1.1
2.1
3.1
3.2
3.3
3.4
4.1
4.2
4.3
4.4
4.5
4.6
Description
Equity Distribution Agreement, dated November
26, 2018, by and between Idera Pharmaceuticals,
Inc. and JMP Securities LLC
Agreement and Plan of Merger, dated as January
21, 2018, by and among Idera Pharmaceuticals,
Inc., BioCryst Pharmaceuticals, Inc., Nautilus
Holdco, Inc., Island Merger Sub, Inc. and Boat
Merger Sub, Inc.
Form SEC File No.
001-31918
8-K
1.1
Filing Date
November 26, 2018
Incorporated by Reference to
Exhibit(s)
8-K
001-31918
2.1
January 22, 2018
Restated Certificate of Incorporation of Idera
Pharmaceuticals, Inc., as amended.
10-Q
001-31918
8-K
001-31918
10-K
001-31918
8-K
001-31918
3.1
3.1
3.2
3.1
August 2, 2018
May 18, 2020
March 7, 2018
December 23, 2019
S-1
33-99024
4.1
December 8, 1995
10-K
000-27352
10.39
April 1, 2002
10-Q
001-31918
10.5
May 15, 2013
8-K
001-31918
4.1
September 26, 2013
8-K
001-31918
4.1
February 5, 2014
8-K
001-31918
4.1
December 23, 2019
Certificate of Amendment to the Restated
Certificate of Incorporation of Idera
Pharmaceuticals, Inc.
Amended and Restated Bylaws of Idera
Pharmaceuticals, Inc.
Certificate of Designations, Preferences and
Rights of Series B1 Convertible Preferred Stock,
Series B2 Convertible Preferred Stock, Series B3
Convertible Preferred Stock and Series B4
Convertible Preferred Stock of the Company
Specimen Certificate for shares of Common
Stock, $.001 par value, of Idera Pharmaceuticals,
Inc.
Unit Purchase Agreement by and among Idera
Pharmaceuticals, Inc. and certain persons and
entities listed therein, dated April 1, 1998
Form of Warrant issued in May 2013 to
purchasers in Idera Pharmaceuticals, Inc.’s
registered public offering on Idera
Pharmaceuticals, Inc.’s registration statement on
Form S-1 (File No. 333-187155)
Form of Warrant issued in September 2013 to
purchasers in Idera Pharmaceuticals, Inc.’s
registered public offering on Idera
Pharmaceuticals, Inc.’s registration statement on
Form S-3 (File No. 333-191073)
Form of Warrant issued in February 2014 to
purchasers in Idera Pharmaceuticals, Inc.’s
registered public offering on Idera
Pharmaceuticals, Inc.’s registration statement on
Form S-3 (File No. 333-191073)
Form of Warrant issued in December 2019 to
purchasers in Idera Pharmaceuticals, Inc. private
placement transaction
55
Table of Contents
Exhibit
Number
4.7
Description
Warrant Amendment Agreement, dated as of
December 23, 2019, by and among Idera
Pharmaceuticals, Inc. and certain holders of
warrants named therein
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
Form SEC File No.
001-31918
10-K
Incorporated by Reference to
Exhibit(s)
Filing Date
March 12, 2020
4.13
4.1
4.2
4.1
4.2
April 7, 2020
April 7, 2020
July 15, 2020
July 15, 2020
Form of Pre-Funded Warrant issuable pursuant to
the April 2020 Securities Purchase Agreement
8-K
001-31918
Form of Warrant issuable pursuant to the April
2020 Securities Purchase Agreement
8-K
001-31918
Form of Pre-Funded Warrant issuable pursuant to
the July 2020 Securities Purchase Agreement
8-K
001-31918
Form of Warrant issuable pursuant to the July
2020 Securities Purchase Agreement
8-K
001-31918
Registration Rights Agreement, dated March 24,
2006, by and among Idera Pharmaceuticals, Inc.
and the Investors named therein
Registration Rights Agreement, dated February
9, 2015, among Idera Pharmaceuticals, Inc. and
the Selling Stockholders named therein
Amendment to the Registration Rights
Agreement, dated January 21, 2018, by and
among Idera Pharmaceuticals, Inc., 667, L.P.,
Baker Brothers Life Sciences, L.P. and 14159,
L.P.
Registration Rights Agreement, dated as of
March 4, 2019, by and between Idera
Pharmaceuticals, Inc. and Lincoln Park Capital
Fund, LLC
Registration Rights Agreement, dated December
23, 2019, by and among Idera Pharmaceuticals,
Inc. and certain investors named therein
Voting Agreement, dated as of December 23,
2019, by and among Idera Pharmaceuticals, Inc.
and certain investors named therein
Registration Rights Agreement, dated April 7,
2020, by and among Idera Pharmaceuticals, Inc.
and Pillar Partners Foundation, L.P.
Voting Agreement, dated April 7, 2020, by and
among Idera Pharmaceuticals, Inc. and Pillar
Partners Foundation, L.P.
Registration Rights Agreement, dated July 13,
2020, by and among Idera Pharmaceuticals, Inc.
and Pillar Partners Foundation, L.P.
8-K
001-31918
10.2
March 29, 2006
8-K
001-31918
4.1
February 9, 2015
8-K
001-31918
10.1
January 22, 2018
10-K
001-31918
4.5
March 6, 2019
10-K
001-31918
4.11
March 12, 2020
10-K
001-31918
4.12
March 12, 2020
8-K
001-31918
4.4
April 7, 2020
8-K
001-31918
4.3
April 7, 2020
8-K
001-31918
4.3
July 15, 2020
56
Table of Contents
Exhibit
Number
4.21
Description
Description of the Idera Pharmaceuticals, Inc.
Securities Registered Under Section 12 of the
Securities Exchange Act of 1934
10.1†
2008 Stock Incentive Plan, as amended
10.2†
2013 Stock Incentive Plan, as amended
Amendment to 2013 Stock Incentive Plan, as
amended
Amendment to 2013 Stock Incentive Plan, as
amended
10.3†
10.4†
10.5†
Incorporated by Reference to
Exhibit(s)
Form SEC File No.
001-31918
10-K
Filing Date
March 1, 2021
8-K
8-K
8-K
001-31918
001-31918
001-31918
June 17, 2011
June 13, 2014
June 11, 2015
8-K
001-31918
10.1
June 9, 2017
4.21
99.2
10.1
10.1
Amendment to 2013 Stock Incentive Plan, as
amended
DEF14A 001-31918 Appendix
A
April 25, 2019
10.6†
2017 Employee Stock Purchase Plan
8-K
001-31918
10.2
June 9, 2017
10.7†
10.8
10.9†
10.10†
10.11†
10.12†
10.13†
10.14†
10.15†
10.16†
10.17†
10.18†
10.19†
Amendment to 2017 Employee Stock Purchase
Plan
DEF14A 001-31918 Appendix
C
April 25, 2019
Policy on Treatment of Stock Options in the
Event of Retirement, approved April 28, 2014
Form of Incentive Stock Option Agreement
Granted Under the 2008 Stock Incentive Plan
Form of Nonstatutory Stock Option Agreement
Granted Under the 2008 Stock Incentive Plan
Form of Nonstatutory Stock Option Agreement
(Non-Employee Directors) Granted Under the
2008 Stock Incentive Plan
Form of Restricted Stock Agreement Under the
2008 Stock Incentive Plan
Form of Incentive Stock Option Agreement
granted under the 2013 Stock Incentive Plan
Form of Nonstatutory Stock Option Agreement
granted under the 2013 Stock Incentive Plan
Form of Nonstatutory Stock Option Agreement
(Non-Employee Directors) granted under the
2013 Stock Incentive Plan
Form of Inducement Stock Option Award –
Nonstatutory Stock Option Agreement
Form of Restricted Stock Agreement under the
2013 Stock Incentive Plan
Form of Performance-Based Restricted Stock
Agreement under the 2013 Stock Incentive Plan
Employment Letter Agreement, dated December
1, 2014, by and between Idera Pharmaceuticals,
Inc. and Vincent Milano
10-Q
001-31918
10.1
August 12, 2014
8-K
001-31918
10.2
June 10, 2008
8-K
001-31918
10.3
June 10, 2008
8-K
001-31918
10.4
June 10, 2008
8-K
001-31918
10.5
June 10, 2008
8-K
001-31918
10.2
July 29, 2013
8-K
001-31918
10.3
July 29, 2013
8-K
001-31918
10.4
July 29, 2013
10-Q
001-31918
10.1
November 6, 2015
10-Q
001-31918
10.3
August 8, 2019
10-Q
001-31918
10.3
October 29, 2020
10-K
001-31918
10.24
March 12, 2015
10.20† Amendment to Employment Agreement, dated
January 10, 2020, by and between the Company
and Vincent J. Milano
8-K
001-31918
10.1
January 15, 2020
57
Table of Contents
Exhibit
Number
10.21†
Description
Form of Vincent J. Milano Restricted Stock Unit
Agreement
10.22†
Employment Letter, dated January 26, 2015, by
and between Idera Pharmaceuticals, Inc. and
Clayton Fletcher
10.23† Consulting Agreement, dated December 29,
2020, between the Company and R. Clayton
Fletcher
10.24†
10.25†
10.26†
10.27†
10.28†
10.29†
10.30†
Employment Offer Letter, dated October 15,
2015, by and between Idera Pharmaceuticals,
Inc. and John J. Kirby
Employment Offer Letter, dated November 16,
2020, by and between Idera Pharmaceuticals,
Inc. and Daniel Soland
Severance and Change of Control Agreement,
dated February 19, 2021, by and between the
Company and Daniel Soland
Employment Offer Letter, dated August 20,
2018, by and between Idera Pharmaceuticals,
Inc. and Bryant D. Lim
Employment Offer Letter, dated June 26, 2019,
by and between Idera Pharmaceuticals, Inc. and
Elizabeth Tarka
Form of Director and Officer Indemnification
Agreement
Form of Executive Severance and Change of
Control Agreement
10.31†† Development and Commercialization
Agreement, dated May 1, 2014, by and between
Abbott Molecular Inc. and Idera
Pharmaceuticals, Inc.
10.32†† License Agreement, dated November 28, 2016,
by and between Idera Pharmaceuticals, Inc. and
Vivelix Pharmaceuticals, Ltd.
10.33†† Clinical Trial Collaboration and Supply
Agreement, by and between Idera
Pharmaceuticals, Inc. and Bristol-Myers Squibb
Company, dated May 18, 2018
10.34†† Clinical Trial Collaboration and Supply
Agreement, by and between Idera
Pharmaceuticals, Inc. and Bristol-Myers Squibb
Company, dated March 11, 2019
10.35†† Clinical Trial Collaboration and Supply
Agreement, effective August 27, 2019, by and
between AbbVie Inc. and Idera Pharmaceuticals,
Inc.
10.36
Lease Agreement dated March 31, 2015, between
Idera Pharmaceuticals, Inc. and 505 Eagleview
Boulevard Associates, L.P.
58
Incorporated by Reference to
Exhibit(s)
Form SEC File No.
001-31918
8-K
10.2
Filing Date
January 15, 2020
10-Q
001-31918
10.1
May 11, 2015
8-K
001-31918
10.1
January 5, 2021
10-K
001-31918
10.26
March 6, 2019
10-K
001-31918
10.25
March 1, 2021
10-K
001-31918
10.26
March 1, 2021
10-Q
001-31918
10.1
November 6, 2018
10-Q
001-31918
10.4
August 8, 2019
10-Q
001-31918
10.1
May 4, 2017
10-Q
001-31918
10.2
May 4, 2017
10-Q
001-31918
10.3
August 12, 2014
10-K
001-31918
10.56
March 15, 2017
10-Q
001-31918
10.1
August 2, 2018
10-Q
001-31918
10.1
May 2, 2019
10-Q
001-31918
10.1
November 6, 2019
10-K
001-31918
10.45
March 7, 2018
Incorporated by Reference to
Exhibit(s)
Form SEC File No.
001-31918
10-K
10.46
Filing Date
March 7, 2018
10-K
001-31918
10.42
March 12, 2020
10-K
001-31918
10.37
March 6, 2019
8-K
001-31918
10.1
September 3, 2020
8-K
001-31918
10.1
December 23, 2019
8-K
001-31918
10.1
April 7, 2020
8-K
001-31918
10.1
July 15, 2020
8-K
001-31918
10.2
December 15, 2020
Table of Contents
Exhibit
Number
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
23.1*
31.1*
31.2*
32.1*
32.2*
Description
First Amendment dated September 23, 2015 to
Lease Agreement dated March 31, 2015 between
Idera Pharmaceuticals, Inc. and 505 Eagleview
Boulevard Associates, L.P.
Second Amendment dated January 13, 2020 to
Lease Agreement dated March 31, 2015 between
Idera Pharmaceuticals, Inc. and 505 Eagleview
Boulevard Associates, L.P.
Purchase Agreement, dated as of March 4, 2019,
by and between Idera Pharmaceuticals, Inc. and
Lincoln Park Capital Fund, LLC
First Amendment to Purchase Agreement, dated
as of September 2, 2020, by and between Idera
Pharmaceuticals, Inc. and Lincoln Park Capital
Fund, LLC
Securities Purchase Agreement, dated December
23, 2019, by and among the institutional
investors named therein
Securities Purchase Agreement, dated April 7,
2020, by and among Idera Pharmaceuticals, Inc.
and Pillar Partners Foundation, L.P.
Securities Purchase Agreement, dated July 13,
2020, by and among Idera Pharmaceuticals, Inc.
and Pillar Partners Foundation, L.P.
Amendment to the Securities Purchase
Agreement and Registration Rights Agreement,
dated December 11, 2020, by and among Idera
Pharmaceuticals, Inc., Pillar Partners
Foundation, L.P. and Pillar Pharmaceuticals 6,
L.P.
Consent of Independent Registered Public
Accounting Firm
Certification of Chief Executive Officer pursuant
to Exchange Act Rules 13a-14 and 15d-14, as
adopted pursuant to Section 302 of Sarbanes-
Oxley Act of 2002
Certification of Chief Financial Officer pursuant
to Exchange Act Rules 13a-14 and 15d-14, as
adopted pursuant to Section 302 of Sarbanes-
Oxley Act of 2002
Certification of Chief Executive Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002
Certification of Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002
59
Table of Contents
Exhibit
Number
101.INS Inline XBRL Instance Document
Description
Form SEC File No.
Incorporated by Reference to
Exhibit(s)
Filing Date
101.SCH Inline XBRL Taxonomy Extension Schema
Document
101.CAL Inline XBRL Taxonomy Extension Calculation
Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition
Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label
Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation
Linkbase Document
104
*
†
Cover Page Interactive Data File (formatted as
inline XBRL with applicable taxonomy
extension information contained in Exhibits 101)
Filed or furnished, as applicable, herewith.
Management contract or compensatory plan or arrangement required to be filed as an Exhibit to the
Form 10-K.
††
In accordance with Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted in order
for them to remain confidential.
Item 16.
Form 10-K Summary.
Not applicable.
60
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 31st
day of March 2022.
Idera Pharmaceuticals, Inc.
By:
/S/ VINCENT J. MILANO
Vincent J. Milano
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/ VINCENT J. MILANO
Vincent J. Milano
President, Chief Executive Officer and
Director (Principal Executive Officer)
March 31, 2022
/S/ JOHN J. KIRBY
John J. Kirby
Chief Financial Officer (Principal
Financial and Accounting Officer)
March 31, 2022
/S/ MICHAEL DOUGHERTY
Michael Dougherty
/S/ CRISTINA CSIMMA
Cristina Csimma, Pharm. D., M.H.P.
/S/ JAMES A. GERAGHTY
James A. Geraghty
/S/ MARK GOLDBERG
Mark Goldberg, M.D.
/S/ MAXINE GOWEN
Maxine Gowen, Ph.D.
/S/ CAROL A. SCHAFER
Carol A. Schafer
Chairman of the Board of Directors
March 31, 2022
Director
Director
Director
Director
Director
61
March 31, 2022
March 31, 2022
March 31, 2022
March 31, 2022
March 31, 2022
Table of Contents
IDERA PHARMACEUTICALS, INC.
INDEX TO FINANCIAL STATEMENTS
December 31, 2021
Report of Independent Registered Public Accounting Firm (PCAOB ID 42)
Balance Sheets
Statements of Operations
Statements of Redeemable Preferred Stock and Stockholders’ Equity (Deficit)
Statements of Cash Flows
Notes to Financial Statements
Page
F-2
F-4
F-5
F-6
F-7
F-8
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Idera Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Idera Pharmaceuticals, Inc. (the Company) as of December 31, 2021
and 2020, and the related statements of operations, redeemable preferred stock and stockholders’ equity (deficit) and cash
flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as
the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex
judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accounting for Research and Development Prepayments, Accruals and Related
Expenses
Description of
the Matter
As disclosed in Note 2 to the financial statements, the Company is required to estimate prepaid and
accrued expenses for research and development costs performed by third parties at each balance
sheet date. The Company recorded prepaid research and development costs, which are included in
prepaid expenses and other current assets on the December 31, 2021 balance sheet, and accrued
expenses for the research and development costs, which are included in accrued expenses on the
December 31, 2021
F-2
Table of Contents
How We
Addressed the
Matter in Our
Audit
balance sheet. The amounts recorded for prepaid and accrued research and development costs
within the aforementioned balance sheet captions represent the Company’s estimate of the prepaid
and unpaid research and development costs based on the progress of the research and development
services compared to the amounts paid for those services through December 31, 2021.
Auditing the Company’s prepaid and accrued research and development costs involved a higher
degree of subjectivity due to the estimation required by management in determining the progress
to completion of services that have been performed by the third parties, including clinical research
organizations, clinical investigators and research collaborators.
To test the prepaid and accrued research and development costs, our audit procedures included,
among others, reviewing a sample of agreements with the service providers to corroborate key
financial and contractual terms, and testing the accuracy and completeness of the underlying data
used in the accrual and prepaid expense computations. We also evaluated management’s estimates
of the progress of a sample of research and development activities by making direct inquiries of
the Company’s operations personnel that oversee the external research and development activities
and obtaining information directly from certain service providers about the service providers’
estimate of costs that had been incurred through December 31, 2021. Additionally, we assessed the
historical accuracy of management’s estimates when evaluating the current period estimate. To
evaluate the completeness of the accruals, we also examined subsequent invoices from the service
providers and cash disbursements to the service providers, to the extent such invoices were
received, or payments were made prior to the date that the financial statements were issued.
We have served as the Company’s auditor since 2002.
Philadelphia, Pennsylvania
March 31, 2022
/s/ ERNST & YOUNG LLP
F-3
Table of Contents
IDERA PHARMACEUTICALS, INC.
BALANCE SHEETS
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable
Accrued expenses
Operating lease liability
Other current liability
Total current liabilities
Warrant liability, long-term
Future tranche right liability, long-term
Operating lease liability, net of current portion
Total liabilities
Commitments and contingencies (Note 12)
Preferred stock, $0.01 par value, Authorized — 5,000 shares:
Series B1 redeemable convertible preferred stock (Note 7);
Designated — 278 shares, Issued and outstanding — 0 and 24 shares at
December 31, 2021 and December 31, 2020, respectively
Stockholders’ equity (deficit):
Preferred stock, $0.01 par value, Authorized — 5,000 shares:
Series A convertible preferred stock; Designated — 1,500 shares,
Issued and outstanding — 1 share
Common stock, $0.001 par value, Authorized — 140,000 shares; Issued
and outstanding — 52,818 and 38,291 at December 31, 2021 and
December 31, 2020, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ deficit
Total liabilities and stockholders’ deficit
December 31,
2021
December 31,
2020
$
$
$
$
32,545
$
—
$
$
1,493
34,038
22
734
70
34,864
565
4,088
209
—
4,862
—
—
549
5,411
—
—
53
764,861
(735,461)
29,453
34,864
$
33,229
4,499
3,627
41,355
44
930
70
42,399
329
6,072
191
435
7,027
6,983
118,803
758
133,571
—
—
38
742,342
(833,552)
(91,172)
42,399
The accompanying notes are an integral part of these financial statements.
F-4
Table of Contents
IDERA PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Alliance revenue
Operating expenses:
Research and development
General and administrative
Restructuring costs
Total operating expenses
Loss from operations
Other income (expense):
Interest income
Interest expense
Warrant revaluation gain (loss)
Future tranche right revaluation gain (loss)
Foreign currency exchange loss
Net income / (loss)
Deemed dividend on preferred stock related to December 2019
Private Placement (see Note 7)
Undistributed earnings to preferred stockholders
Net income (loss) applicable to common stockholders
Net income (loss) applicable to common stockholders (Note 16)
— Basic
— Diluted
Net income (loss) per share applicable to common stockholders
(Note 16)
— Basic
— Diluted
Weighted-average number of common shares used in computing net
income (loss) per share applicable to common stockholders
$
$
$
$
$
$
— Basic
— Diluted
2021
Year Ended December 31,
2020
2019
$
— $
— $
1,448
16,375
9,976
1,322
27,673
(27,673)
9
(7)
6,983
118,803
(24)
98,091
—
(1,150)
96,941
96,941
(28,845)
1.97
(0.58)
49,203
50,127
$
$
$
$
$
$
24,772
11,915
—
36,687
(36,687)
165
(3)
(3,742)
(72,367)
(28)
(112,662)
—
—
(112,662)
(112,662)
(112,662)
(3.33)
(3.33)
33,821
33,821
$
$
$
$
$
$
34,853
12,481
181
47,515
(46,067)
1,150
—
(598)
(10,964)
(36)
(56,515)
(28,043)
—
(84,558)
(84,558)
(84,558)
(2.96)
(2.96)
28,545
28,545
The accompanying notes are an integral part of these financial statements.
F-5
Table of Contents
IDERA PHARMACEUTICALS, INC.
STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
Series B1 Preferred
Common Stock
Additional
Total
(In thousands)
Balance, December 31, 2018
Sale of common stock, net of issuance costs
Sale of redeemable convertible preferred stock
Deemed dividend related to December 2019
Private Placement (Note 7)
Issuance of commitment shares
Issuance of common stock under employee stock
purchase plan
Issuance of common stock upon exercise of
common stock options and warrants
Issuance of common stock for services rendered
Stock-based compensation
Net loss
Balance, December 31, 2019
Sale of common stock, net of issuance costs
Issuance of common stock under employee stock
purchase plan (vesting of restricted stock units)
Issuance of common stock under employee stock
purchase plan
Issuance of common stock upon exercise of stock
options
Issuance of common stock for services rendered
Stock-based compensation
Net loss
Balance, December 31, 2020
Sale of common stock, net of issuance costs
Conversion of Series B1 preferred stock
Issuance of common stock under employee stock
purchase plan
Issuance of common stock under employee stock
purchase plan (vesting of restricted stock units)
Issuance of common stock upon exercise of
common stock options and warrants
Issuance of common stock for services rendered
Stock-based compensation
Net income
Balance, December 31, 2021
Number of
Shares
$0.01 Par
Value
— $
—
24
—
—
—
—
—
—
—
24
—
$
—
—
—
—
—
—
24
—
(24)
—
$
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Number of
Shares
27,188
2,068
—
—
270
61
38
47
—
—
29,672
8,218
177
76
5
143
—
—
38,291
5,918
2,368
49
237
5,871
84
—
—
52,818
$
$
$
$
$
Accumulated
Deficit
(664,375)
—
—
$
Stockholders’
Equity (Deficit)
63,994
5,298
—
$0.001 Par
Value
27
3
—
—
—
—
—
—
—
—
30
8
$
Paid-In
Capital
728,342
5,295
—
(28,043)
—
121
3
129
3,845
—
709,692
28,638
$
—
—
—
—
—
—
(56,515)
(720,890)
—
$
$
—
—
—
—
—
—
—
—
38
6
2
—
$
—
7
—
—
—
53
$
113
—
15
243
3,641
—
742,342
19,509
(2)
59
264
152
2,537
—
764,861
$
$
—
—
—
(112,662)
(833,552)
—
—
$
—
—
—
—
—
98,091
(735,461)
$
(28,043)
—
121
3
129
3,845
(56,515)
(11,168)
28,646
—
113
15
243
3,641
(112,662)
(91,172)
19,515
—
59
—
271
152
2,537
98,091
29,453
The accompanying notes are an integral part of these financial statements.
F-6
Table of Contents
IDERA PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
Cash Flows from Operating Activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Year Ended December 31,
2020
2021
2019
$
98,091
$
(112,662)
$ (56,515)
Stock-based compensation
Warrant liability revaluation loss (gain)
Future tranche right liability revaluation (gain) loss
Issuance of common stock for services rendered
Accretion of discounts on short-term investments
Depreciation and amortization expense
(Gain) loss on disposal of property and equipment
Changes in operating assets and liabilities:
Prepaid expenses and other assets
Accounts payable, accrued expenses, and other liabilities
Other
Net cash used in operating activities
Cash Flows from Investing Activities:
Purchases of available-for-sale securities
Proceeds from maturity of available-for-sale securities
Proceeds from the sale of property and equipment
Purchases of property and equipment
Net cash (used in) provided by investing activities
Cash Flows from Financing Activities:
Proceeds from private placement
Proceeds from common stock financings, net
Proceeds from employee stock purchases
Proceeds from exercise of common stock options and warrants
Payments on note payable and seller-financed purchases
Other
Net cash provided by financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalent, beginning of period
Cash and cash equivalents, end of period
2,537
(6,983)
(118,803)
152
(1)
22
—
2,134
(1,751)
5
(24,597)
—
4,500
—
—
4,500
3,641
3,742
72,367
243
(46)
61
—
500
(1,629)
11
(33,772)
(12,178)
10,499
—
(8)
(1,687)
—
—
19,518
59
271
(435)
28,758
113
15
(217)
—
—
19,413
(684)
33,229
32,545
$
28,669
(6,790)
40,019
33,229
$
$
3,845
598
10,964
129
(372)
120
(10)
(2,160)
(1,105)
8
(44,498)
(44,502)
42,100
11
(11)
(2,402)
10,072
5,298
121
3
—
(6)
15,488
(31,412)
71,431
40,019
Supplemental disclosure of cash flow information:
Cash paid for interest
$
Increase to operating lease right-of-use asset upon adoption of ASC 842 $
Increase to operating lease right-of-use assets upon acquisition
$
Increase to operating lease liability upon adoption of ASC 842
$
Increase to operating lease liability upon acquisition
$
Supplemental disclosure of non-cash financing and investing activities:
Offering costs in accounts payable and accrued expenses
Non-cash seller-financed purchases
$
$
5
$
— $
— $
— $
— $
3
$
— $
3
$
— $
$
54
— $
$
54
112
652
$
$
—
1,236
—
1,236
—
165
—
The accompanying notes are an integral part of these financial statements.
F-7
Table of Contents
Note 1. Business and Organization
Business Overview
IDERA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2021
Idera Pharmaceuticals, Inc. (“Idera” or the “Company”), a Delaware corporation, is a biopharmaceutical company
with a business strategy focused on the clinical development, and ultimately the commercialization, of drug candidates for
rare disease indications characterized by small, well-defined patient populations with serious unmet medical needs. The
Company’s current focus is to identify and potentially acquire rights to novel development or commercial stage rare
disease programs, through new business development opportunities, including additional strategic alternatives. The
Company has in the past and may in the future explore collaborative alliances to support development and
commercialization of any of our drug candidates.
Until May 2021, the Company was developing tilsotolimod, via intratumoral injection, for the treatment of anti-PD1
refractory metastatic melanoma in combination with ipilimumab, an anti-CTLA4 antibody marketed as Yervoy® by Bristol
Myers Squibb Company (“BMS”) in a Phase 3 registration trial. During the first quarter of 2021, the Company announced
that ILLUMINATE-301, its pivotal registration trial of tilsotolimod in combination with ipilimumab versus ipilimumab
alone in patients with anti-PD-1 refractory advanced melanoma, did not meet its primary endpoint of Objective Response
Rate (“ORR”). Based on subsequent evaluation of the full data set, in May 2021, the Company announced that it would
not continue the trial to its Overall Survival (“OS”) primary endpoint.
Through December 2021, the Company was also evaluating intratumoral tilsotolimod in combination with
nivolumab, an anti-PD1 antibody marketed as Opdivo® by BMS, and ipilimumab for the treatment of multiple solid
tumors in a multicohort Phase 2 trial. In December 2021, the Company announced that preliminary data from the second
10 patients dosed in the safety cohort of ILLUMINATE-206 showed a safety profile consistent with the first 10 patients in
ILLUMINATE-206 and with prior studies. No further enrollment in ILLUMINATE-206 is planned at this time.
The Company believes that while the clinical trials with tilsotolimod have not yet translated into a new treatment
alternative for patients, data supporting tilsotolimod’s mechanism of action and encouraging safety profile from across the
array of pre-clinical and clinical work to date, together with its intellectual property protection, are noteworthy. As a result,
in December 2021, the Company announced that it will consider an out-licensing arrangement so that tilsotolimid’s full
potential may continue to be explored on behalf of patients who do not respond to traditional immunotherapy.
Reduction-in-Force
In April 2021, following the announcement that the Company’s ILLUMINATE-301 trial did not meet its primary
endpoint of ORR, the Company implemented a reduction-in-force which affected approximately 50% of its workforce
through September 30, 2021. The Company eliminated 17 positions primarily in the area of research and development. The
decision was made in order to align the Company’s workforce with its needs in light of the outcome of ILLUMINATE-
301’s ORR endpoint, its ongoing ILLUMINATE development program and other business development activities focused
on identifying new portfolio opportunities.
In connection with these actions, the Company incurred and paid termination costs for the reduction in workforce,
which includes severance, benefits and related costs, of approximately $1.3 million during the year ended December 31,
2021.
F-8
Table of Contents
Note 1. Business and Organization (Continued)
Nasdaq Compliance
As previously disclosed, on November 26, 2021, we received a deficiency letter (the “Nasdaq Letter”) from the
Nasdaq Listing Qualifications Department, notifying us that the Company is not in compliance with Nasdaq Listing Rule
5550(a)(2), which requires the Company to maintain a minimum bid price of at least $1 per share for continued listing on
The Nasdaq Capital Market (the “Minimum Bid Requirement”). The Company’s failure to comply with the Minimum Bid
Requirement was based on the Company’s common stock per share price being below the $1 threshold for a period of 30
consecutive business days. In accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the “Compliance Period Rule”), the
Company has been provided an initial period of 180 calendar days (the “Compliance Date”), to regain compliance with the
Minimum Bid Requirement. If, at any time before the Compliance Date, the bid price for the Company’s common stock
closes at $1.00 or more per share for a minimum of 10 consecutive business days, as required under Nasdaq requirements,
the Staff will provide written notification to the Company that it complies with the Minimum Bid Requirement, unless the
Staff exercises its discretion to extend this 10-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H).
If the Company does not regain compliance with the Minimum Bid Requirement by the Compliance Date, the
Company may be eligible for an additional 180 calendar day compliance period (the “Second Compliance Period”). To
qualify, the Company would need to meet the continued listing requirement for the market value of publicly held shares
and all other initial listing standards of the Nasdaq Capital Market, with the exception of the Minimum Bid Requirement,
and provide written notice to the Staff of its intention to cure the deficiency during the Second Compliance Period.
Neither the Nasdaq Letter nor the Company’s noncompliance with the Minimum Bid Requirement have an
immediate effect on the listing or trading of the Company’s common stock, which continue to trade on The Nasdaq Capital
Market under the symbol “IDRA.”
Liquidity and Financial Condition
As of December 31, 2021, the Company had an accumulated deficit of $735.5 million and a cash and cash
equivalents balance of $32.5 million. The Company expects to incur substantial operating losses in future periods and will
require additional capital as it seeks to advance any future drug candidates through development to commercialization. The
Company does not expect to generate product revenue, sales-based milestones, or royalties until the Company successfully
completes development of and obtains marketing approval for any future drug candidates, either alone or in collaboration
with third parties, which the Company expects will take a number of years, if at all. To commercialize any future drug
candidates, the Company needs to complete clinical development and comply with comprehensive regulatory
requirements. The Company is subject to a number of risks and uncertainties similar to those of other companies of the
same size within the biotechnology industry, such as uncertainty of clinical trial outcomes, uncertainty of additional
funding, and history of operating losses.
The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 205-40, Presentation of Financial Statements—Going Concern, which requires management to
assess the Company’s ability to continue as a going concern within one year after the date the financial statements are
issued. Management currently anticipates that the Company’s balance of cash and cash equivalents on hand as of
December 31, 2021 is sufficient to enable the Company to continue as a going concern through the one-year period
subsequent to the filing date of this Form 10-K. The Company has and will continue to evaluate available alternatives to
extend its operations beyond this date, which include the ATM Agreement (Note 8) or additional financing or strategic
transactions. Additionally, management’s plans may include the possible deferral of certain operating expenses unless
additional capital is received. Management’s operating plan, which underlies the analysis of the Company’s ability to
continue as a going concern, involves the estimation of the amount and timing of future cash inflows and outflows. Actual
results could vary from the operating plan.
F-9
Table of Contents
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates,
judgements, and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses, and
related disclosure of contingencies in the accompanying financial statements and these notes. In addition, management’s
assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of
future cash inflows and outflows. On an ongoing basis, the Company evaluates its estimates, judgments and
methodologies. The Company bases its estimates on historical experience and on various other assumptions that are
believed to be reasonable. Actual results could differ materially from those estimates.
Segment Information
Operating segments are defined as components of an enterprise in which separate discrete information is available
for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and
assessing performance. The Company views its operations and manages its business as one operating segment, which is the
business of developing novel therapeutics for rare diseases and oncology.
Financial Instruments
The fair value of the Company’s financial instruments is determined and disclosed in accordance with the three-tier
fair value hierarchy specified in Note 3. The Company is required to disclose the estimated fair values of its financial
instruments. As of December 31, 2021, the Company’s financial instruments consisted of cash and cash equivalents. As of
December 31, 2020, the Company’s financial instruments consisted of cash, cash equivalents, short-term investments, and
warrant and future tranche right liabilities. The estimated fair values of these financial instruments approximate their
carrying values as of December 31, 2021 and 2020. As of December 31, 2021, the Company did not have any other
derivatives, hedging instruments or other similar financial instruments.
Concentration of Credit Risk
Financial instruments that subject the Company to credit risk primarily consist of cash, cash equivalents and short-
term investments. The Company’s credit risk is managed by investing in highly rated money market instruments, U.S.
treasury bills, corporate bonds, commercial paper and/or other debt securities. Due to these factors, no significant
additional credit risk is believed by management to be inherent in the Company’s assets. As of December 31, 2021, all of
the Company’s cash and cash equivalents were held at two financial institutions.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of 90 days or less when purchased to be “cash
equivalents.” Cash and cash equivalents at December 31, 2021 consisted of cash and money market funds. Cash and cash
equivalents at December 31, 2020 consisted of cash and cash equivalents and short-term investments.
F-10
Table of Contents
Note 2. Summary of Significant Accounting Policies (Continued)
Property and Equipment
Property and equipment are carried at acquisition cost less accumulated depreciation, subject to review for
impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be
recoverable as described further under the heading "Impairment of Long-Lived Assets" below. The cost of normal,
recurring, or periodic repairs and maintenance activities related to property and equipment are expensed as incurred. The
cost for planned major maintenance activities, including the related acquisition or construction of assets, is capitalized if
the repair will result in future economic benefits.
Depreciation and amortization are computed using the straight-line method based on the estimated useful lives of the
related assets. Leasehold improvements are amortized over the remaining lease term or the related useful life, if shorter.
Equipment and other long-lived assets are depreciated over three to five years.
When an asset is disposed of, the associated cost and accumulated depreciation is removed from the related accounts
on the Company's balance sheet with any resulting gain or loss included in the Company's statement of operations.
Operating Lease Right-of-use Asset and Lease Liability
The Company accounts for leases under ASC 842, Leases. Operating leases are included in “Operating lease right-
of-use assets” within the Company’s balance sheets and represent the Company’s right to use an underlying asset for the
lease term. The Company’s related obligation to make lease payments are included in “Operating lease liability” and
“Operating lease liability, net of current portion” within the Company’s balance sheets. Operating lease right-of-use
(“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the
lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing
rates, which are the rates incurred to borrow on a collateralized basis over a similar term, an amount equal to the lease
payments in a similar economic environment. Lease expense for lease payments is recognized on a straight-line basis over
the lease term. The ROU assets are tested for impairment according to ASC 360, Property, Plant, and Equipment (“ASC
360”). Leases with an initial term of 12 months or less are not recorded on the balance sheet and are recognized as lease
expense on a straight-line basis over the lease term.
As of December 31, 2021 and 2020, the Company’s operating lease ROU assets and corresponding short-term and
long-term lease liabilities primarily relate to its existing Exton, Pennsylvania facility operating lease, which expires on May
31, 2025.
Impairment of Long-Lived Assets
In accordance with ASC 360-10-35, Impairment or Disposal of Long-Lived Assets, the Company reviews its long-
lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable (i.e. impaired). Once an impairment is determined, the actual impairment recognized is the difference
between the carrying amount and the fair value (less costs to sell for assets to be disposed of) as estimated using one of the
following approaches: income, cost and/or market. Fair value using the income approach is determined primarily using a
discounted cash flow model that uses the estimated cash flows associated with the asset or asset group under review,
discounted at a rate commensurate with the risk involved. Fair value utilizing the cost approach is determined based on the
replacement cost of the asset reduced for, among other things, depreciation and obsolescence. Fair value, utilizing the
market approach, benchmarks the fair value against the carrying amount.
F-11
Table of Contents
Note 2. Summary of Significant Accounting Policies (Continued)
Other Current Liability
In October 2020, the Company entered into a short-term financing arrangement with a third-party vendor to finance
insurance premiums. The aggregate amount financed under this agreement was $0.6 million. As of December 31, 2020,
the balance of $0.4 million, which was included in “Other current liability’ in the Company’s balance sheets, was paid in
monthly installments through June 2021. Accordingly, as of December 31, 2021, no amounts were outstanding under this
agreement.
Warrant Liability
The Company accounts for stock warrants as either equity instruments, liabilities or derivative liabilities in
accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and/or ASC 815, Derivatives and
Hedging (“ASC 815”), depending on the specific terms of the warrant agreement. Freestanding warrants for shares that are
potentially redeemable, whereby the Company may be required to transfer assets (e.g. cash or other assets) outside of its
control, are classified as liabilities. Liability-classified warrants are recorded at their estimated fair values at each reporting
period until they are exercised, terminated, reclassified or otherwise settled. Changes in the estimated fair value of liability-
classified warrants are recorded in Warrant Revaluation (Loss) Gain in the Company’s statements of operations. Equity
classified warrants are recorded within additional paid-in capital at the time of issuance and not subject to remeasurement.
During the three months ended March 31, 2021, all the Company’s liability-classified warrants terminated and,
accordingly, the liability balance was derecognized. For additional discussion on warrants and warrant liabilities, see Note
7 and 8.
Future Tranche Right Liability
On December 23, 2019, the Company entered into a Securities Purchase Agreement (the “December 2019 Securities
Purchase Agreement”) with institutional investors affiliated with Baker Brothers (the “Purchasers”), an existing
stockholder and related party (see Note 15). As more fully described in Note 7, the December 2019 Securities Purchase
Agreement contained call options on redeemable preferred shares with warrants (conditionally exercisable for shares that
are puttable). The Company determined that these call options represent freestanding financial instruments and accounts
for the options as liabilities (“Future Tranche Right Liability”) under ASC 480, which requires the measurement and
recognition of the fair value of the liability at the time of issuance and at each reporting period. Any change in fair value is
recognized in Future Tranche Right Liability Revaluation (Loss) Gain in the Company’s statements of operations.
As of December 31, 2020, the Future Tranche Right Liability was classified as a long-term liability in the
Company’s balance sheet as settlement is in the form of the applicable Series B convertible preferred stock and warrants
exercisable for shares of either Series B1 Preferred Stock or the Company’s common stock. During the three months ended
March 31, 2021, the liability-classified call options provided for under the December 2019 Securities Purchase Agreement
terminated and, accordingly, the liability balance was derecognized. For additional discussion on the Future Tranche Right
Liability, see Note 7.
Preferred Stock
The Company applies ASC 480 when determining the classification and measurement of its preferred stock.
Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value.
Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within
the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) are classified as temporary equity. At all other times, preferred shares are classified as stockholders’ equity.
Accretion of redeemable convertible preferred stock includes the accretion of the Company's Series B redeemable
convertible preferred stock to its stated value. The carrying value of the Series B redeemable convertible preferred stock is
being accreted to redemption value using the effective interest method, from the date of issuance to the earliest date the
holders can demand redemption or until the redeemable convertible preferred stock ceases to be outstanding.
F-12
Table of Contents
Note 2. Summary of Significant Accounting Policies (Continued)
Redeemable Preferred Stock Issued with Other Freestanding Instruments
The Company considers guidance within ASC 470-20, Debt (ASC 470), ASC 480, and ASC 815 when accounting
for a redeemable equity instrument issued with other freestanding instruments (e.g. detachable warrants and future tranche
right liabilities), such as in the December 2019 Private Placement (Note 7). In circumstances in which redeemable
convertible preferred stock is issued with freestanding liability-classified instruments, the proceeds from the issuance of the
convertible preferred stock are first allocated to those instruments at their full estimated fair value. The remaining
proceeds, as further reduced by discounts created by the bifurcation of embedded derivatives and/or beneficial conversion
features, if any, are allocated to the redeemable equity instrument.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC
606”), which applies to all contracts with customers, except for contracts that are within the scope of other standards, such
as leases, insurance, collaboration arrangements and financial instruments. In accordance with ASC 606, the Company
recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the
consideration which the entity expects to receive in exchange for those goods or services. To determine revenue
recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five
steps:
(i)
identify the contract(s) with a customer;
(ii) identify the performance obligations in the contract;
(iii) determine the transaction price;
(iv) allocate the transaction price to the performance obligations in the contract; and
(v) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company only applies the five-step model to contracts when it determines that it is probable it will collect the
consideration to which it is entitled in exchange for the goods or services it transfers to the customer. At contract inception,
once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised
within each contract and determines those that are performance obligations, and assesses whether each promised good or
service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the
respective performance obligation when (or as) the performance obligation is satisfied.
Amounts received prior to satisfying the revenue recognition criteria are recognized as deferred revenue in the
Company’s balance sheet. Amounts expected to be recognized as revenue within the 12 months following the balance
sheet date are classified as current portion of deferred revenue. Amounts not expected to be recognized as revenue within
the 12 months following the balance sheet date are classified as deferred revenue, net of current portion.
Alliance Revenues
The Company’s revenues have primarily been generated through collaborative research, development and/or
commercialization agreements. The terms of these agreements may include payment to the Company of one or more of the
following: nonrefundable, up-front license fees; research, development and commercial milestone payments; and other
contingent payments due based on the activities of the counterparty or the reimbursement by licensees of costs associated
with patent maintenance. Each of these types of revenue are recorded as Alliance revenues in the Company’s statements of
operations.
See Note 10, “Collaboration and License Agreements” for additional details regarding the Company’s collaboration
and out-licensing arrangements.
F-13
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Note 2. Summary of Significant Accounting Policies (Continued)
Research and Development Prepayments, Accruals and Related Expenses
All research and development expenses are expensed as incurred. Research and development expenses are
comprised of costs incurred in performing research and development activities, including drug development trials and
studies, research collaborations, drug manufacturing, laboratory supplies, external research, payroll including stock-based
compensation and overhead. The Company is required to estimate our accrued and prepared expenses for research and
development activities performed by third parties, including Clinical Research Organizations (“CRO’s”) and clinical
investigators. These estimates are made as of the reporting date of the work completed over the life of the individual study
in accordance with agreements established with CRO’s and other clinical sites. Some CRO’s invoice the Company on a
monthly basis, while others invoice upon the achievement of milestones. The Company determines the estimates of
research and development activities incurred at the end of each reporting period through discussion with internal personnel,
outside service providers, and research collaboration partners as to the progress or stage of completion of trials or services,
as of the end of the reporting period, pursuant to contracts with clinical trial centers or CRO’s and the agreed upon fee to be
paid for such services. Nonrefundable advance payments for goods or services to be received in the future for use in
research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods
are accepted by the Company or the services are performed. As of December 31, 2021 and 2020, the Company recorded
approximately $0.9 million and $2.5 million as prepaid research and development, respectively, which is included within
prepaid expenses and other current assets in the accompanying balance sheets.
Stock-Based Compensation
The Company accounts for stock-based compensation using ASC 718, Compensation – Stock Compensation, or
ASC 505-50, Equity – Equity Based Payments to Non-Employees, as applicable. The Company accounts for stock-based
awards to employees and non-employee directors using the fair value based method to determine compensation expense for
all arrangements where shares of stock or equity instruments are issued for compensation.
The Company recognizes all share-based payments to employees and directors as expense in the statements of
operations based on their fair values. The Company records compensation expense on a straight-line basis over an award’s
requisite service period, or vesting period, based on the award’s fair value at the date of grant. Vesting for time-based
options and restricted stock units is generally four years for employees and one year for directors. The Company uses a
Black-Scholes option-pricing model to determine the fair value of each option grant as of the date of grant for expense
incurred. The Black-Scholes option pricing model requires inputs for risk-free interest rate, dividend yield, expected stock
price volatility and expected term of the options. Forfeitures are accounted for as they occur. See Note 11, “Stock-based
Compensation” for additional details.
Income Taxes
An asset and liability approach is used for financial accounting and reporting for income taxes. Deferred income
taxes arise from temporary differences between income tax and financial reporting and principally relate to recognition of
revenue and expenses in different periods for financial and tax accounting purposes and are measured using currently
enacted tax rates and laws. In addition, a deferred tax asset can be generated by a net operating loss carryover. If it is more
likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.
In the event the Company is charged interest or penalties related to income tax matters, the Company would record
such interest as interest expense and would record such penalties as other expense in the Statements of Operations. No
such charges have been incurred by the Company. For each of the years ended December 31, 2021, 2020 and 2019, the
Company had no uncertain tax positions. See Note 13, “Income Taxes” for additional details.
F-14
Table of Contents
Note 2. Summary of Significant Accounting Policies (Continued)
Net Income (Loss) per Common Share applicable to Common Stockholders
The Company uses the two-class method to compute net income per common share during periods the Company
realizes net income and has securities outstanding (e.g. redeemable convertible preferred stock) that entitle the holder to
participate in dividends and earnings of the Company. In addition, the Company analyzes the potential dilutive effect of
outstanding redeemable convertible preferred stock under the "if-converted" method when calculating diluted earnings per
share and reports the more dilutive of the approaches (two class or "if-converted"). The two-class method is not applicable
during periods with a net loss, as the holders of the redeemable convertible preferred stock have no obligation to fund
losses. The Company also analyzes the potential dilutive effect of outstanding stock options, unvested restricted stock
units, warrants and shares underlying future tranche rights under the treasury stock method (as applicable), during periods
of income, or during periods in which income is recognized related to changes in fair value of its liability-classified
securities.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB and rules are issued by the SEC that
the Company has or will adopt as of a specified date. Unless otherwise noted, management does not believe that any other
recently issued accounting pronouncements issued by the FASB or guidance issued by the SEC had, or is expected to have,
a material impact on the Company’s present or future financial statements.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments— Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard requires that
credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and
establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, this
standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. The Company
adopted ASU 2016-13 in the first quarter of 2020. The adoption of this ASU did not have a material effect on the
Company’s financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework—Changes to the Disclosure
Requirements for Fair Value Measurement (“ASU 2018-13”), which amends ASC 820, Fair Value Measurement. ASU
2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain
disclosures. The Company adopted ASU 2018-13 in the first quarter of 2020. The adoption of this ASU did not have a
material effect on the Company’s financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the guidance on an issuer’s
accounting for convertible instruments and contracts in its own equity. The Company adopted ASU 2020-06 in the first
quarter of 2021. The adoption of this ASU did not have a material effect on the Company’s financial statements.
COVID-19
While the Company is not aware of a material impact from the continuation of the coronavirus ("COVID-19")
pandemic through December 31, 2021, the full extent to which the COVID-19 pandemic will directly or indirectly impact
the Company’s business, results of operations, and financial condition, depends on future developments.
F-15
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Note 3. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company applies the guidance in ASC 820, Fair Value Measurement, to account for financial assets and
liabilities measured on a recurring basis. Fair value is measured at the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a
market-based measurement that is determined based on assumptions that market participants would use in pricing an asset
or liability.
The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data
(observable inputs) and an entity's own assumptions (unobservable inputs). The guidance requires that fair value
measurements be classified and disclosed in one of the following three categories:
● Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical,
unrestricted assets or liabilities;
● Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or
indirectly, for substantially the full term of the asset or liability; and
● Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value
measurement and unobservable (i.e., supported by little or no market activity).
Determining which category an asset or liability falls within the hierarchy requires significant judgment. The
Company evaluates its hierarchy disclosures each reporting period. There were no transfers between Level 1, 2, and 3
during the year ended December 31, 2021.
The table below presents the assets and liabilities measured and recorded in the financial statements at fair value on
a recurring basis at December 31, 2021 and 2020 categorized by the level of inputs used in the valuation of each asset and
liability.
(In thousands)
Assets
Cash
Cash equivalents – money market funds
Total assets
(In thousands)
Assets
Cash
Cash equivalents – money market funds
Short-term investments – commercial paper
Short-term investments – US treasury bills
Total assets
Liabilities
Warrant liability
Future tranche right liability
Total liabilities
$
$
$
$
$
$
Total
December 31, 2021
Level 1
Level 2
Level 3
250
32,295
32,545
$
$
250
32,295
32,545
$
$
— $
—
— $
December 31, 2020
Total
Level 1
Level 2
Level 3
250
32,979
3,499
1,000
37,728
6,983
118,803
125,786
$
$
$
$
250
32,979
$
—
—
$
33,229
— $
—
3,499
1,000
4,499
$
— $
—
— $
— $
—
— $
6,983
118,803
125,786
—
—
—
—
—
—
—
—
The Level 1 assets consist of money market funds, which are actively traded daily. The Level 2 assets consist of
commercial paper and US treasury bills whose fair value may not represent actual transactions of identical securities. The
fair value of commercial paper is generally determined based on the relationship between the investment’s discount rate
and the discount rates of the same issuer’s commercial paper available in the market which may not be actively traded
daily. Since these fair values may not be based upon actual transactions of identical securities, they are classified as
Level 2.
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Note 3. Fair Value Measurements (Continued)
Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis
Warrant Liability and Future Tranche Right Liability
The reconciliation of the Company's warrant and future tranche right liability measured at fair value on a recurring
basis using unobservable inputs (Level 3) is as follows:
(In thousands)
Balance, December 31, 2019
Change in the fair value of liability
Balance, December 31, 2020
Change in the fair value of liability (1)
Balance, December 31, 2021
Warrant
Liability
Future
Tranche Right
Liability
3,241
3,742
6,983
(6,983)
$
$
— $
46,436
72,367
118,803
(118,803)
—
$
$
$
(1) During the year ended December 31, 2021, the Company’s liability-classified warrants and future tranche rights terminated,
and accordingly, the liabilities were derecognized. See Notes 7 and 8.
Assumptions Used in Determining Fair Value of Liability-Classified Warrants
The Company utilizes an option pricing model to value its liability-classified warrants. Inherent in the valuation
model are assumptions related to volatility, risk-free interest rate, expected term, dividend rate, and other scenarios (i.e.
probability of complex features of the warrants being triggered).
The fair value of the warrants has been estimated with the following weighted-average assumptions:
Risk-free interest rate
Expected dividend yield
Expected term (years)
Expected volatility
Exercise price (per share)
December 31,
2020
December 31,
2019
0.50%
—
5.98
80%
1.52
$
1.79%
—
6.98
80%
1.52
$
Assumptions Used in Determining Fair Value of Future Tranche Rights
The Company utilizes a lattice model to value the Series B2 and B3 future tranche rights and a Monte Carlo
simulation to value the Series B4 future tranche rights. The Company selected these models as it believes they are
reflective of all significant assumptions that market participants would likely consider in negotiating the transfer of the
Future Tranche Rights (as defined in Note 7). Such assumptions include, among other inputs, stock price volatility, risk-
free rates, and expected terms inclusive of early exercise and cancellation assumptions.
The estimated fair value of the Future Tranche Rights is determined using Level 2 and Level 3 inputs. Significant
inputs and assumptions used in the valuation models are as follows:
Risk-free interest rate
Expected dividend yield
Expected term (years) of call options on preferred stock
Expected term (years) of warrants
Expected volatility
Exercise price (per share) for common stock equivalent for preferred stock and
warrant
December 31,
2020
0.64% - 0.73%
—
0.25 - 1.12
7.25 - 8.12
80%
December 31,
2019
1.84% - 1.88%
—
1.16 - 2.16
8.16 - 9.16
80%
$
1.52 - 1.82
$
1.52 - 1.82
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Note 4. Investments
The Company had no available-for-sale investments at December 31, 2021. The Company’s available-for-sale
investments at fair value consisted of the following at December 31, 2020:
(In thousands)
Short-term investments – commercial paper
Short-term investments – US treasury bills
Total short-term investments
December 31, 2020
Gross
Unrealized
(Losses)
Gross
Unrealized
Gains
Estimated
Fair
Value
— $
—
— $
— $
—
— $
3,499
1,000
4,499
Cost
3,499
1,000
4,499
$
$
$
$
The Company had no realized gains or losses from the sale of investments in available-for-sale securities during
each of the years ended December 31, 2021 and 2020. In accordance with ASU 2016-13, if the fair value of the Company’s
investments in available-for-sale debt securities is less than the amortized cost, the Company records (i) an allowance for
credit losses with a corresponding charge to net income (loss) for any credit-related impairment, with subsequent
improvements in expected credit losses recognized as a reversal of the allowance, and/or (ii) any non-credit impairment
loss to other comprehensive income (loss).
As of December 31, 2020, the Company had no allowance for credit losses pertaining to the Company’s investments
in available-for-sale debt securities. Additionally, there were no impairment charges or recoveries recorded during each of
the years ended December 31, 2021 and 2020.
Note 5. Property and Equipment
At December 31, 2021 and 2020, net property and equipment at cost consisted of the following:
(In thousands)
Leasehold improvements
Equipment and other
Total property and equipment, at cost
Less: Accumulated depreciation and amortization
Property and equipment, net
December 31,
2021
December 31,
2020
$
$
$
107
712
819
797
22
$
$
$
107
770
877
833
44
Depreciation and amortization expense on property and equipment was approximately $0.1 million for each of the
years ended December 31, 2021, 2020, and 2019.
Note 6. Accrued Expenses
At December 31, 2021 and 2020, accrued expenses consisted of the following:
(In thousands)
Payroll and related costs
Clinical and nonclinical trial expenses
Professional and consulting fees
Other
Total accrued expenses
December 31,
2021
December 31,
2020
477
2,909
591
111
4,088
$
$
2,133
3,229
584
126
6,072
$
$
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Note 7. Redeemable Convertible Preferred Stock
December 2019 Private Placement
On December 23, 2019, the Company entered into the December 2019 Securities Purchase Agreement, under which
the Company sold 23,684 shares of Series B1 convertible preferred stock (“Series B1 Preferred Stock”) and warrants to
purchase 2,368,400 shares of the Company’s common stock at an exercise price of $1.52 per share (or, if the holder elected
to exercise the warrants for shares of Series B1 Preferred Stock, 23,684 shares of Series B1 Preferred Stock at an exercise
price of $152 per share) for aggregate gross proceeds of $3.9 million (the “Initial Closing”).
In addition, the Company agreed to sell to the purchasers, at their option and subject to certain conditions, (i) 98,685
shares of Series B2 convertible preferred stock (“Series B2 Preferred Stock”) and 9,868,500 warrants to purchase common
stock at an exercise price of $1.52 per share (or, at the election of the holder, 98,685 shares of Series B2 Preferred Stock at
an price of $152 per share), for aggregate gross proceeds of $15 million (the “Series B2 Tranche”), (ii) 82,418 shares of
Series B3 convertible preferred stock (“Series B3 Preferred Stock”) and 6,593,440 warrants to purchase common stock at
an exercise price of $1.82 per share (or, at the election of the holder, 65,934 shares of Series B3 Preferred Stock at a price
of $182 per share), for aggregate gross proceeds of $15 million (the “Series B3 Tranche”), and (iii) 82,418 shares of Series
B4 convertible preferred stock (“Series B4 Preferred Stock”) and 6,593,440 warrants to purchase common stock at an
exercise price of $1.82 per share (or, at the election of the holder, 65,934 shares of Series B3 Preferred Stock at a price of
$182 per share), for aggregate gross proceeds of $15 million (the “Series B4 Tranche”) over a period of up to 21 months
following the Company’s 2020 Annual Meeting of Stockholders held on May 12, 2020, where stockholders of the
Company voted to approve an amendment to the Company’s Restated Certificate of Incorporation to increase the
authorized number of shares of the Company’s common stock to 140,000,000. As consideration for the future tranche
rights, the Company received aggregate gross proceeds of $6.2 million in December 2019.
The purchase and sale of the securities issuable under the Series B2, B3, and B4 tranches described above were
subject to three separate closings, each to be conducted at the purchasers’ discretion. The right of the purchasers to
purchase Series B2, Series B3 and Series B4 Preferred Stock was set to expire on the 10th business day following the
Company’s ORR Data Announcement as defined in the December 2019 Securities Purchase Agreement for its
ILLUMINATE-301 study. As a result of the purchasers not exercising the Series B2 Tranche prior to expiration, all future
tranche rights and outstanding warrants previously issued pursuant to the December 2019 Securities Purchase Agreement
were terminated during the three months ended March 31, 2021. Accordingly, the Company is no longer eligible to receive
additional proceeds pursuant to the December 2019 Securities Purchase Agreement and the related warrant liability and
future tranche right liability were derecognized during the three months ended March 31, 2021.
Accounting Considerations
The Company determined that the Series B1 Preferred Stock, the accompanying Series B1 warrants, and each of the
future tranche rights represent freestanding financial instruments. The Series B1 warrants and the future tranche rights were
classified as liabilities until their termination in March 2021 as the underlying shares were potentially redeemable and such
redemption was deemed to be outside of the Company’s control. The $10.1 million in gross proceeds received in December
2019 was allocated to the Series B1 warrants and the Future Tranche Rights based on their estimated fair values
of $2.6 million and $35.5 million, respectively. The excess fair value of $28.0 million over the gross proceeds received
of $10.1 million was recorded as a deemed dividend to Baker Brothers, an existing significant shareholder. Costs incurred
in connection with the December 2019 Securities Purchase Agreement were expensed as incurred.
Due to the redeemable nature of the Series B1 Preferred Stock, the Series B1 Preferred Stock was classified as
temporary equity and the carrying value was being accreted to its redemption value as of December 31, 2020 and while the
Series B1 Preferred Stock was outstanding during 2021. During 2021, all the Company’s 23,684 shares of Series B1
Preferred Stock outstanding were converted into shares of the Company’s common stock. See Note 15 for details. For the
years ended December 31, 2021 and 2020, accretion was de minimis.
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Note 8. Stockholders’ Equity (Deficit)
Preferred Stock
The Restated Certificate of Incorporation, as amended, of the Company permits its Board of Directors to issue up to
5,000,000 shares of preferred stock, par value $0.01 per share, in one or more series, to designate the number of shares
constituting such series, and fix by resolution, the powers, privileges, preferences and relative, optional or special rights
thereof, including liquidation preferences and dividends, and conversion and redemption rights of each such series.
As of December 31, 2020, the Company has designated the following class of preferred stock:
● Series A:
1,500,000 authorized shares of Series A Convertible Preferred Stock
● Series B1:
277,921 authorized shares of Series B1 Redeemable Convertible Preferred Stock
● Series B2:
98,685 authorized shares of Series B2 Redeemable Convertible Preferred Stock
● Series B3:
82,814 authorized shares of Series B3 Redeemable Convertible Preferred Stock
● Series B4:
82,814 authorized shares of Series B4 Redeemable Convertible Preferred Stock
Series A Convertible Preferred Stock. The dividends on the Series A convertible preferred stock (“Series A Preferred
Stock”) are payable semi-annually in arrears at the rate of 1% per annum, at the election of the Company, either in cash or
additional duly designated, fully paid and nonassessable shares of Series A Preferred Stock. In the event of liquidation,
dissolution or winding up of the Company, after payment of debts and other liabilities of the Company, the holders of the
Series A Preferred Stock then outstanding will be entitled to a distribution of $1 per share out of any assets available to
shareholders. The Series A Preferred Stock is non-voting. All remaining shares of Series A Preferred Stock rank, as to
payment upon the occurrence of any liquidation event, senior to the Company’s common stock. Shares of Series A
Preferred Stock are convertible, in whole or in part, at the option of the holder into fully paid and nonassessable shares of
common stock at $272.00 per share, subject to adjustment. As of December 31, 2021 and 2020, there were 655 shares of
Series A Preferred Stock outstanding.
Series B Convertible Preferred Stock. As of December 31, 2020, there were 23,684 shares of Series B Preferred
Stock outstanding. There were no shares outstanding at December 31, 2021.
Common Stock
Common Stock Authorized
As of December 31, 2021, the Company had 140,000,000 shares of common stock authorized of which 23,918,172
shares of common stock were reserved for issuance upon the exercise of outstanding warrants and options to purchase
common stock, outstanding restricted stock units, the conversion of Series A convertible preferred stock, shares required to
be reserved under the LPC Purchase Agreement (defined below), and shares available for grant under the Company’s 2013
Stock Incentive Plan and shares available for purchase under the Company’s 2017 Employee Stock Purchase Plan.
The expiration of the LPC Purchase Agreement on March 4, 2022 decreased the reserved shares of the common
stock to 14,906,278 shares.
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Note 8. Stockholders’ Equity (Deficit) (Continued)
Put Shares
Pursuant to the terms of a unit purchase agreement dated as of May 5, 1998, the Company issued and sold a total of
149,960 shares of common stock (the “Put Shares”) at a price of $128.00 per share. Under the terms of the unit purchase
agreement, the initial purchasers (the “Put Holders”) of the Put Shares have the right (the “Put Right”) to require the
Company to repurchase the Put Shares. The Put Right may not be exercised by any Put Holder unless: (1) the Company
liquidates, dissolves or winds up its affairs pursuant to applicable bankruptcy law, whether voluntarily or involuntarily;
(2) all of the Company’s indebtedness and obligations, including without
limitation the indebtedness under the Company’s then outstanding notes, has been paid in full; and (3) all rights of the
holders of any series or class of capital stock ranking prior and senior to the common stock with respect to liquidation,
including without limitation the Series A convertible preferred stock, have been satisfied in full. The Company may
terminate the Put Right upon written notice to the Put Holders if the closing sales price of its common stock exceeds
$256.00 per share for the twenty consecutive trading days prior to the date of notice of termination. Because the Put Right
is not transferable, in the event that a Put Holder has transferred Put Shares since May 5, 1998, the Put Right with respect
to those shares has terminated. As a consequence of the Put Right, in the event the Company is liquidated, holders of shares
of common stock that do not have Put Rights with respect to such shares may receive smaller distributions per share upon
the liquidation than if there were no Put Rights outstanding.
As of December 31, 2021, the Company has repurchased or received documentation of the transfer of 49,993 Put
Shares and 4,472 of the Put Shares continued to be held in the name of Put Holders. The Company cannot determine at this
time what portion of the Put Rights of the remaining 95,494 Put Shares have terminated.
Equity Financings
April 2020 Private Placement
On April 7, 2020, the Company entered into a Securities Purchase Agreement with Pillar Partners Foundation, L.P.
(“Pillar Partners”), a related party as more fully described in Note 15, which was amended on December 11, 2020 (as
amended to date, the “April 2020 Securities Purchase Agreement”), under which the Company sold 3,039,514 shares of
common stock and accompanying warrants to purchase 3,039,514 shares of the Company’s common stock with an exercise
price of $2.28 per share, for aggregate gross proceeds of $5.0 million. Each share and the accompanying common warrant
had a combined purchase price of $1.645, which included $0.125 for each share of common stock underlying each warrant.
The April 2020 Securities Purchase Agreement also provided for the option for Pillar Partners to purchase 2,747,252 shares
of the Company’s common stock (or pre-funded warrants to purchase shares of the Company’s common stock at an
exercise price of $0.01 in lieu of certain shares to the extent that purchasing such shares will cause Pillar Investment
Entities (as defined below) to beneficially own in excess of 19.99% of the total number of shares of common stock
outstanding post transaction) and warrants to purchase up to 1,373,626 shares of the Company’s common stock (with an
exercise price of $2.71), for aggregate gross proceeds of $5.0 million (the “April 2020 Private Placement Second
Closing”). Subsequently, in December 2020, the April 2020 Private Placement Second Closing was consummated. Total
net proceeds received pursuant to the April 2020 Securities Purchase Agreement, after deduction of offering expenses, was
$9.8 million.
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Table of Contents
Note 8. Stockholders’ Equity (Deficit) (Continued)
July 2020 Private Placement
On July 13, 2020, the Company entered into a Securities Purchase Agreement (the “July 2020 Securities Purchase
Agreement”) with Pillar Partners, Pillar Pharmaceuticals 6 L.P. (“Pillar 6”), and Pillar Pharmaceuticals 7 L.P. (“Pillar 7”
and, together with Pillar Partners and Pillar 6, the “July 2020 Purchasers”), each a related party as more fully described in
Note 15, pursuant to which, among other things, provided the July 2020 Purchasers the option to purchase, at their sole
discretion, pre-funded warrants to purchase up to 784,615 shares of the Company’s common stock, at an exercise price
of $0.01 per share, and warrants to purchase up to 274,615 shares of the Company’s common stock, at an exercise price
of $9.75, for aggregate gross proceeds of $5.1 million (the “July 2020 Private Placement Second Closing”). During the
three months ended March 31, 2021, the option to purchase securities in the July 2020 Private Placement Second Closing
terminated. As a result, the Company is no longer eligible to receive additional proceeds from the sale of additional
securities pursuant to the July 2020 Securities Purchase Agreement. However, the July 2020 Purchasers still hold
outstanding warrants previously issued under the July 2020 Securities Purchase Agreement, as detailed below under the
heading “Common Stock Warrants”.
Common Stock Purchase Agreement
On March 4, 2019, the Company entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC
(“Lincoln Park”), which was amended on September 2, 2020 (as amended to date, the “LPC Purchase Agreement”),
pursuant to which, upon the terms and subject to the conditions and limitations set forth therein, Lincoln Park has
committed to purchase an aggregate of $35.0 million of shares of Company common stock from time to time at the
Company’s sole discretion over a 36-month period. As consideration for entering into the LPC Purchase Agreement, the
Company issued 269,749 shares of Company common stock to Lincoln Park as a commitment fee (the “Commitment
Shares”). The closing price of the Company’s common stock on March 4, 2019 was $2.84 and the Company did not
receive any cash proceeds from the issuance of the Commitment Shares.
During the years ended December 31, 2021 and 2020, the Company sold 800,000 and 750,000 shares, respectively,
pursuant to the LPC Purchase Agreement, resulting in net proceeds of $4.2 million and $1.7 million, respectively. The 36-
month period noted above for the LPC Purchase Agreement expired on March 4, 2022; accordingly, the Company no
longer has access to additional capital under the LPC Purchase Agreement subsequent to this date.
"At-The-Market" Equity Program
In November 2018, the Company entered into an Equity Distribution Agreement (the “ATM Agreement”) with JMP
Securities LLC (“JMP”) pursuant to which the Company may issue and sell shares of its common stock having an
aggregate offering price of up to $50.0 million (the “Shares”) through JMP as its agent. Subject to the terms and conditions
of the ATM Agreement, JMP will use its commercially reasonable efforts to sell the Shares from time to time, based upon
the Company’s instructions, by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated
under the Securities Act of 1933, as amended, or if specified by the Company, by any other method permitted by law,
including but not limited to in negotiated transactions. The Company has no obligation to sell any of the Shares, and the
Company or JMP may at any time suspend sales under the ATM Agreement or terminate the ATM Agreement. JMP is
entitled to a fixed commission of 3.0% of the gross proceeds from Shares sold.
During the years ended December 31, 2021 and 2020, the Company sold 5,117,357 and 3,608,713 Shares,
respectively, pursuant to the ATM Agreement resulting in net proceeds, after deduction of commissions and other offering
expenses, of $15.3 million and $12.3 million, respectively. As of March 31, 2022, the Company may sell up to an
additional $19.5 million of shares under the ATM Agreement.
F-22
Table of Contents
Note 8. Stockholders’ Equity (Deficit) (Continued)
Common Stock Warrants
In connection with various financing transactions, the Company has issued warrants to purchase shares of the
Company’s common stock and preferred stock. The Company accounts for common stock and preferred stock warrants as
equity instruments or liabilities, depending on the specific terms of the warrant agreement. See Note 2 for further details on
accounting policies related to the Company’s warrants.
The following table summarizes outstanding warrants to purchase shares of the Company’s common stock and/or
preferred stock as of December 31, 2021 and 2020:
Description
Liability-classified Warrants
December 2019 Series B1 warrants (1)
Equity-classified Warrants
May 2013 warrants
September 2013 warrants
February 2014 warrants
April 2020 Private Placement first closing warrants
April 2020 Private Placement second closing warrants
April 2020 Private Placement second closing warrants
July 2020 Private Placement first closing warrants
July 2020 Private Placement first closing warrants
Total outstanding
Number of Shares
December 31,
2021
December 31, Weighted-Average
2020
Exercise Price
Expiration Date
—
—
2,368,400
2,368,400
$ 1.52 Dec 2026
15,437
4,096
2,171
3,039,514
1,373,626
1,143,428
389,731
2,764,227
8,732,230
8,732,230
1,949,754
514,756
266,006
3,039,514
1,373,626
2,677,311
2,014,234
2,764,227
14,599,428
16,967,828
$ 0.08 None
$ 0.08 None
$ 0.08 None
$ 2.28 Apr 2023
$ 2.71 Dec 2023
$ 0.01 None
$ 0.01 None
$ 2.58 Jul 2023
(1) The Series B1 warrants were exercisable for either common stock (exercise price of $1.52) or Series B1 Convertible
Preferred Stock (exercise price of $152) at the discretion of the warrant holder. However, as more fully disclosed in Note 7,
the December 2019 Series B1 warrants were terminated during the three months ended March 31, 2021 contemporaneously
with the termination of the future tranche rights.
The table below is a summary of the Company's warrant activity for the year ended December 31, 2021.
Outstanding at December 31, 2020
Issued
Exercised (1)
Expired
Outstanding at December 31, 2021
Number of
Warrants
Weighted-Average
Exercise Price
16,967,828
$
—
(5,867,198)
(2,368,400)
8,732,230
$
1.28
—
0.04
1.52
2.04
(1) During the year ended December 31, 2021, certain related parties were issued warrants as more fully described in Note 15.
F-23
Table of Contents
Note 9. Alliance Revenue
There were no Alliance revenues for the years ended December 31, 2021 and 2020. Alliance revenue for the years
ended December 31, 2019 represents revenue from contracts with customers accounted for in accordance with ASC 606.
For the year ended December 31, 2019, the Company recognized Alliance revenues totaling $1.4 million which
consistent primarily of revenues recognized under the Licensee Agreement, primarily related to the transfer of the IMO-
8400 License and IMO-8400 drug product.
See Note 10 for additional details regarding the Company’s collaboration arrangements.
Note 10. Collaboration and License Agreements
Option and License Agreement with Licensee
In April 2019, the Company entered into an amended and restated option and license agreement with a privately-
held biopharmaceutical company (“Licensee”), pursuant to which the Company granted Licensee (i) exclusive worldwide
rights to develop and market IMO-8400 for the treatment, palliation and diagnosis of all diseases, conditions or indications
in humans (the “IMO-8400 License”), (ii) an exclusive right and license to develop IMO-9200 in accordance with certain
IMO-9200 pre-option exercise protocols (the “IMO-9200 Option Period License”), and (iii) an exclusive one-year option,
exercisable at Licensee’s discretion, to obtain the exclusive worldwide rights to develop and market IMO-9200 for the
treatment, palliation and diagnosis of all diseases, conditions or indications in humans (the “IMO-9200 Option”)
(collectively, the “Licensee Agreement”). In connection with the Licensee Agreement, the Company transferred certain
drug material to Licensee for Licensee’s use in development activities. Licensee is solely responsible for the development
and commercialization of IMO-8400 and, if Licensee exercises the IMO-9200 Option, Licensee would be solely
responsible for the development and commercialization of IMO-9200.
Under the terms of the Licensee Agreement, the Company received upfront, non-refundable fees totaling
approximately $1.4 million and ownership of 10% of Licensee’s outstanding common stock, subject to future adjustment,
for granting Licensee the IMO-8400 License, the IMO-9200 Option Period License and transfer of related drug materials.
In addition, following expiry of the IMO-9200 Option in 2020, the Company is now only eligible to receive certain
development and sales-based milestone payments and royalties on global net sales related to the IMO-8400 Compound and
potential future IMO-8400 Products, each as defined in the Licensee Agreement. The Company does not anticipate the
receipt of any of the future milestones or royalties in the short term, if ever.
The Company accounts for the Licensee Agreement in accordance with ASC 606. As of December 31, 2021, the
total transaction price of the contract was $1.4 million, which excluded the Option Fee and all development and sales
milestones as all such payments were fully constrained. Additionally, as of December 31, 2021, there were no remaining
performance obligations under the Licensee Agreement. The Company re-evaluates its performance obligations and
transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
As disclosed above, in connection with the Licensee Agreement, the Company owns 10% of Licensee’s outstanding
common stock, subject to future adjustment. The Company evaluated the guidance in ASC 321, Investments-Equity
Securities, and elected to account for the investment using the measurement alternative as the equity securities are without
a readily determinable fair value, and the arrangement does not result in Idera having control or significant influence over
Licensee. Accordingly, the securities are measured at cost, less any impairment, plus or minus changes resulting from
observable price changes and are recorded in Other assets at a value of less than $0.1 million in the accompanying balance
sheets. As of December 31, 2021, the Company considered the cost of the investment to not exceed the fair value of the
investment and did not identify any observable price changes.
F-24
Table of Contents
Note 10. Collaboration and License Agreement (Continued)
Collaboration Agreement with Scriptr
In February 2021, the Company entered into a collaboration and option agreement with Scriptr, pursuant to which (i)
Scriptr and Idera will conduct a research collaboration utilizing Scriptr Platform Technology (“SPT”) to identify, research
and develop gene therapy candidates (each, a “Collaboration Candidate”) for the treatment, palliation, diagnosis or
prevention of (a) myotonic dystrophy type 1 (“DM1 Field”) and (b) Friedreich’s Ataxia (“FA Field”) on a Research
Program-by-Research Program basis, as applicable, and (ii) the Company was granted an exclusive option, in its sole
discretion, to make effective the Scriptr License Agreement, as defined below, for a given Research Program, as defined
below, to make use of Collaboration Candidates and related intellectual property (collectively, the “Scriptr Agreement”).
Pursuant to the Scriptr Agreement, Scriptr will use commercially reasonable efforts to carry out research activities
set forth in accordance with the applicable DM1 Field and FA Field research plans, including certain pre-clinical proof of
concept studies, to identify research Collaboration Candidates utilizing SPT (each, a “Research Program”). Following the
completion of activities under a given Research Program, Scriptr will prepare and submit to us a comprehensive data
package (each, a “Data Package”) that summarizes, on a Research Program-by-Research Program basis, any Collaboration
Candidates researched under the Research Program, including any data and results. Upon receipt of a Data Package, Idera
has, in its sole discretion, up to two-hundred seventy (270) calendar days to make effective the exclusive license agreement
entered into by and between Scriptr and the Company, pursuant to which, among other things, Scriptr grants us exclusive
rights and licenses with respect to the development, manufacture and commercialization of licensed candidates and
products, subject to certain conditions and limitations (the “Scriptr License Agreement”), for a given Research Program
(each licensed Research Program, a “Licensed Program”). The Scriptr License Agreement provides for customary
development milestones on candidates developed under a Licensed Program and royalties on licensed products, if any.
In partial consideration of the rights granted by Scriptr to Idera under the Scriptr Agreement, the Company made a
one-time, non-creditable and non-refundable payment to Scriptr during the first quarter of 2021. In order to fund the
Research Programs, Idera will reimburse Scriptr for costs incurred by or on behalf of Scriptr in connection with the
conduct of each Research Program during the research term in accordance with the applicable Research Program budget
and payment schedule. The Company incurred approximately $2.1 million in research and development expenses under the
Scriptr Agreement during the year ended December 31, 2021.
F-25
Table of Contents
Note 11. Stock-based Compensation
As of December 31, 2021, the only equity compensation plans from which the Company may currently issue new
awards are the Company’s 2013 Stock Incentive Plan (as amended to date, the “2013 Plan”) and 2017 Employee Stock
Purchase Plan (the “2017 ESPP”), each as more fully described below.
Equity Incentive and Employee Stock Purchase Plans
2013 Stock Incentive Plan
The Company's board of directors adopted the 2013 Plan, which was approved by the Company’s stockholders
effective July 26, 2013. Amendments to the 2013 Plan were approved by the Company’s stockholders in June 2014, June
2015, June 2017 and June 2019. The 2013 Plan is intended to further align the interests of the Company and its
stockholders with its employees, including its officers, non-employee directors, consultants and advisers by providing
equity-based incentives. The 2013 Plan allows for the issuance of incentive stock options intended to qualify under
Section 422 of the Internal Revenue Code, non-statutory stock options, stock appreciation rights, restricted stock awards,
restricted stock units (“RSUs”), other stock-based awards and performance awards. The total number of shares of common
stock authorized for issuance under the 2013 Plan is 5,653,057 shares of the Company’s common stock, plus such
additional number of shares of common stock (up to 868,372 shares) as is equal to the number of shares of common stock
subject to awards granted under the Company’s 2005 Stock Incentive Plan or 2008 Stock Incentive Plan (the “2008 Plan”),
to the extent such awards expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the
Company at their original issuance price pursuant to a contractual repurchase right.
As of December 31, 2021, options to purchase a total of 4,721,038 shares of common stock and 575,703 RSUs were
outstanding and up to 199,873 shares of common stock remained available for grant under the 2013 Plan.
Other Awards and Inducement Grants
The Company has not made any awards pursuant to other equity incentive plans, including the 2008 Plan, since the
Company’s stockholders approved the 2013 Plan. As of December 31, 2021, options to purchase a total of 155,968 shares
of common stock were outstanding under the 2008 Plan. In addition, as of December 31, 2021, non-statutory stock options
to purchase an aggregate of 325,000 shares of common stock were outstanding that were issued outside of the 2013 Plan to
certain employees in 2017, 2015 and 2014 pursuant to the Nasdaq inducement grant exception as a material component of
new hires’ employment compensation.
2017 Employee Stock Purchase Plan
The Company’s board of directors adopted the 2017 ESPP which was approved by the Company’s stockholders and
became effective June 7, 2017. An amendment to the 2017 ESPP was approved by the Company’s stockholders in June
2019. The 2017 ESPP is intended to qualify as an "employee stock purchase plan" as defined in Section 423 of the Internal
Revenue Code, and is intended to encourage our employees to become stockholders of ours, to stimulate increased interest
in our affairs and success, to afford employees the opportunity to share in our earnings and growth and to promote
systematic savings by them. The total number of shares of common stock authorized for issuance under the 2017 ESPP is
412,500 shares of common stock, subject to adjustment as described in the 2017 ESPP. Participation is limited to
employees that would not own 5% or more of the total combined voting power or value of the stock of the Company after
the grant. As of December 31, 2021, 196,225 shares remained available for issuance under the 2017 ESPP.
F-26
Table of Contents
Note 11. Stock-based Compensation (Continued)
Stock Purchase Plan Administration
The 2017 ESPP provides for offerings to employees to purchase common stock with offerings beginning on dates
determined by the compensation committee of the board of directors or on the first business day thereafter. Each offering
begins a “plan period” during which payroll deductions are to be made and held for the purchase of common stock at the
end of the plan period. The compensation committee may, at its discretion, choose a plan period of 12 months or less for
subsequent offerings and/or choose a different commencement date for offerings. During each plan period participating
employees may elect to have a portion of their compensation, ranging from 1% to 10% of compensation as defined by the
plan, withheld and used for the purchase of common stock at the end of each plan period. The purchase price is equal to
85% of the lower of the fair market value of a share of common stock on the first trading date of each plan period or the
fair market value of a share of common stock on the last trading day of the plan period, and is limited by participant to
$25,000 in fair value of common stock per year as well as other quarterly plan limitations as defined by each plan.
For the years ended December 31, 2021, 2020 and 2019, the Company issued 49,117, 75,999, and 60,953, shares of
common stock, in each year respectively, under the 2017 ESPP and received proceeds of $0.1 million for each year, as a
result of stock purchases.
Accounting for Stock-based Compensation
The Company recognizes non-cash compensation expense for stock-based awards under the Company’s equity
incentive plans and employee stock purchases under the Company’s 2017 ESPP as follows:
● Stock Options: Compensation cost is recognized over an award’s requisite service period, or vesting period,
using the straight-line attribution method, based on the grant date fair value determined using the Black-
Scholes option-pricing model.
● RSUs: Compensation cost for time-based RSUs, which vest over time based only on continued service, is
recognized on a straight-line basis over the requisite service period based on the fair value of the Company’s
common stock on the date of grant. Compensation cost for awards that are subject to market considerations is
recognized on a straight-line basis over the implied requisite service period, based on the grant date fair value
estimated using a Monte Carlo simulation. Compensation cost for awards that are subject to performance
conditions is recognized over the period of time commencing when the performance condition is deemed
probable of achievement based on the fair value of the Company’s common stock on the date of grant.
● Employee Stock Purchases: Compensation cost is recognized over each plan period based on the fair value of
the look-back provision, calculated using the Black-Scholes option-pricing model, considering
the 15% discount on shares purchased.
Total stock-based compensation expense attributable to stock-based payments made to employees and directors and
employee stock purchases included in operating expenses in the Company's statements of operations for the years ended
December 31, 2021, 2020 and 2019 was as follows:
(in thousands)
Stock-based compensation:
Research and development
Employee Stock Purchase Plan
Equity Incentive Plan
General and administrative
Employee Stock Purchase Plan
Equity Incentive Plan
Total stock-based compensation expense
2021
2020
2019
$
$
$
$
$
28 $
546
574 $
3 $
1,960
1,963 $
88 $
673
761 $
9 $
2,871
2,880 $
2,537 $
3,641 $
36
1,312
1,348
20
2,477
2,497
3,845
F-27
Table of Contents
Note 11. Stock-based Compensation (Continued)
During the years ended December 31, 2021, 2020 and 2019, the weighted average fair market value of stock options
granted was $1.54, $1.25, and $1.64, respectively.
Assumptions Used in Determining Fair Value of Stock Options
Inherent in the Black-Scholes option-pricing model are the following assumptions:
Volatility. The Company estimates stock price volatility based on the Company’s historical stock price performance
over a period of time that matches the expected term of the stock options.
Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of
grant commensurate with the expected term assumption.
Expected term. The expected term of stock options granted is based on an estimate of when options will be exercised
or cancelled in the future.
Dividend rate. The dividend rate is based on the historical rate, which the Company anticipates will remain at zero.
Forfeitures. The Company accounts for forfeitures when they occur. Ultimately, the actual expense recognized over
the vesting period will be for only those shares that vest. See Note 2.
The fair value of each option award at the date of grant was estimated using the Black-Scholes option pricing model.
All options granted during the three years in the period ended December 31, 2021 were granted at exercise prices equal to
the fair market value of the common stock on the dates of grant.
The following weighted average assumptions apply to the options to purchase 1,356,700, 1,215,382, and 1,279,016
shares of common stock granted to employees and directors during the years ended December 31, 2021, 2020 and 2019,
respectively:
Average risk-free interest rate
Expected dividend yield
Expected lives (years)
Expected volatility
Weighted average exercise price (per share)
2021
2020
2019
0.4%
—
3.6
94%
2.68
$
1.0%
—
3.9
84%
2.08
$
2.1%
—
3.7
84%
2.75
$
All options granted during the years ended December 31, 2021, 2020 and 2019 were granted at exercise prices equal
to the fair market value of the common stock on the dates of grant.
Stock Option Activity
The following table summarizes stock option activity for the year ended December 31, 2021.
($ in thousands, except per share data)
Outstanding at December 31, 2020
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2021 (1)
Exercisable at December 31, 2021
Stock
Options
4,614,323
1,356,700
(22,500)
(261,426)
(485,091)
5,202,006
4,096,875
$
$
Weighted-
Average
Exercise Price
$
9.78
2.68
2.11
4.44
11.52
8.06
9.62
Weighted-
Average
Remaining
Contractual
Life
(in years)
Aggregate
Intrinsic
Value
6.8
$
2,949
5.9
5.1
$
$
—
—
(1)
Includes both vested stock options as well as unvested stock options for which the requisite service period has not been
rendered but that are expected to vest based on achievement of a service condition.
F-28
Table of Contents
Note 11. Stock-based Compensation (Continued)
In March 2021, the Company accelerated the vesting of 1,535,578 options, which were previously granted from
2019 to 2021. The modification results in an incremental stock based compensation charge that was not significant. As of
December 31, 2021, there was $1.2 million of unrecognized compensation cost related to unvested options, which the
Company expects to recognize over a weighted average period of 2.1 years.
Restricted Stock Activity
The following table summarizes restricted stock activity for the year ended December 31, 2021:
($ in thousands, except per share data)
Nonvested shares at December 31, 2020
Granted
Cancelled
Vested
Nonvested shares at December 31, 2021
Time-based Restricted Stock Units
Time-based Awards
Market/Performance-based Awards
Number of
Shares
Weighted-Average
Grant Date
Fair Value
Number of
Shares
Weighted-Average
Grant Date
Fair Value
354,003
$
2.27
549,318
$
(48,563)
(236,765)
68,675
$
2.31
2.25
2.30
(42,290)
—
507,028
$
1.54
1.54
—
1.54
In December 2020, the Company’s Chief Executive Officer was granted an award of 128,170 RSUs, pursuant to the
2013 Plan, in lieu of salary pursuant to a January 10, 2020 amendment to the officers’ employment agreement. The RSUs
were fully vested on the grant date.
In March 2021, the Company accelerated the vesting of 137,872 unvested time-based restricted stock units which
were previously granted in 2019 and 2020. The modification results in an incremental stock based compensation charge
that was not significant. During the year ended December 31, 2021, the Company recognized $0.3 million of compensation
expense related to these awards. As of December 31, 2021, there was $0.1 million of unrecognized compensation cost
related to the Company’s time-based RSUs, which is expected to be recognized over a weighted average period of
1.6 years.
Market/Performance-based Restricted Stock Units
In July 2020, the Company granted RSUs to certain employees, including executive officers, under the 2013 Plan,
with vesting that may occur upon a combination of specific performance and/or market conditions. Accordingly, the
Company views these RSUs as two separate awards: (i) an award that vests if the market condition is achieved, and (ii) an
award that vests whether or not the market condition is achieved, so long as the performance condition is achieved.
The Company is currently recognizing compensation expense for these awards over the estimated requisite service
period of 2.36 years based on the estimated fair value when considering the market condition of the award, which was
determined using a Monte Carlo simulation. During the year ended December 31, 2021, the Company recognized $0.3
million of compensation expense related to these awards. As of December 31, 2021, the remaining unrecognized
compensation cost for the market-based component of these awards, which is expected to be recognized over a weighted-
average period of 0.9 years, is $0.3 million. In addition, should the performance condition be achieved, the Company
would recognize an additional $0.3 million of compensation expense.
F-29
Table of Contents
Note 12. Commitments and Contingencies
Lease Commitments
As of December 31, 2021, the Company’s leased assets primarily consisted of its office headquarters in Exton,
Pennsylvania. During 2021, 2020 and 2019, rent expense, including real estate taxes, was $0.3 million, $0.4 million, and
$0.3 million, respectively. The leases are classified as operating leases.
Future minimum commitments as of December 31, 2021 under the Company’s lease agreements are approximately:
December 31,
2022
2023
2024
2025
Operating
Leases
(in
thousands)
249
250
240
101
840
$
The Company entered into the Exton, Pennsylvania facility lease on April 1, 2015, which was subsequently amended
on September 23, 2015 to include additional space. The Company currently leases approximately 11,000 square feet of
office space at our Exton facility. The lease expires on May 31, 2025.
Vendor Financing Arrangement
In October 2020, the Company entered into a short-term financing arrangement with a third-party vendor to finance
insurance premiums. As of December 31, 2020, the balance of $0.4 million, was paid in monthly installments through June
2021. Accordingly, as of December 31, 2021, no amounts were outstanding under this agreement.
Note 13. Income Taxes
As of December 31, 2021, the Company had cumulative federal and state net operating loss carryforwards (“NOLs”)
of approximately $327.5 million and $322.0 million available to reduce federal and state taxable income, respectively. As a
result of the Tax Cuts and Jobs Act of 2017, federal net operating losses incurred for taxable years beginning after January
1, 2018 have an unlimited carryforward period, but can only be utilized to offset 80% of taxable income in future taxable
periods. Of the $327.5 million of federal NOLs, $130.1 million have an unlimited carryforward and the remaining NOLs
are still subject to expiration through 2037. State NOLs are still subject to expiration according to the laws of each
respective jurisdiction. The Company files state tax returns in Massachusetts and Pennsylvania whereby both jurisdictions
impose a 20-year carryforward period. All $322.0 million of state NOLs expire through 2041, with the first year of
expiration being 2032 for $23.4 million of Massachusetts NOLs. In addition, at December 31, 2021, the Company had
cumulative federal and state tax credit carryforwards of $26.7 million and $1.9 million, respectively, available to reduce
federal and state income taxes, respectively, which expire through 2041 and 2033, respectively, for federal and state
purposes, other than those that have an unlimited carryforward period.
Sections 382 and 383 of the Internal Revenue Code prescribe limitations on the amount of NOLs and tax credit
carryforwards that may be utilized in any one year. The Company has completed several financings since the effective date
of the Tax Reform Act of 1986, which as of December 31, 2021, have resulted in ownership changes that will significantly
limit the Company’s ability to utilize its net operating loss and tax credit carryforwards. In December 2017, the Company
completed a study which determined that ownership changes had occurred. The federal and state net operating loss and tax
credit carryforwards and related deferred tax assets shown in the table below have been adjusted to reflect the limitations
that resulted from this study. As no study has been completed subsequent to 2017, additional ownership change limitations
may result from ownership changes that have occurred, or may occur in the future. The Company continues to monitor
equity activity and potential ownership changes.
F-30
Table of Contents
Note 13. Income Taxes (Continued)
As of December 31, 2021 and 2020, the components of the deferred tax assets are approximately as follows:
(in thousands)
Operating loss carryforwards
Tax credit carryforwards
Stock-based compensation
Capitalized research and development
Lease liabilities
Other
Total deferred tax assets
Right-of-use asset
Valuation allowance
Net deferred tax assets
$
$
2021
90,550
28,226
6,902
7,818
220
70
133,786
(213)
(133,573)
$
— $
2020
90,895
26,550
6,820
—
276
162
124,703
(270)
(124,433)
—
The Company has provided a full valuation allowance for its deferred tax asset due to the uncertainty surrounding
the ability to realize these assets.
The difference between the U.S. federal corporate tax rate and the Company’s effective tax rate for the years ended
December 31, 2021, 2020 and 2019 is as follows:
Expected federal income tax rate
Expiring credits and NOLs
Change in valuation allowance
Federal and state credits
State income taxes, net of federal benefit
Warrant and future tranche right revaluation loss
Stock-based compensation
Other
Effective tax rate
2021
(21.0)%
—
(9.3)
1.7
2.1
26.9
—
(0.4)
0.0 %
2020
(21.0)%
—
10.6
(3.1)
(1.9)
14.2
0.2
1.0
0.0 %
2019
(21.0)%
—
26.2
(8.1)
(4.7)
4.3
0.5
2.8
0.0 %
The Company applies ASC 740-10, Accounting for Uncertainty in Income Taxes, an interpretation of ASC 740.
ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in financial statements and requires the
impact of a tax position to be recognized in the financial statements if that position is more likely than not of being
sustained by the taxing authority. The Company had no unrecognized tax benefits resulting from uncertain tax positions on
December 31, 2021 and 2020.
The Company has not conducted a study of its research and development tax credit carryforwards. Such a study
might result in an adjustment to the Company’s research and development credit carryforwards, however, until a study is
completed and any adjustment is known, no amounts are being presented as an uncertain tax position under ASC 740-10. A
full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment
is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact
on the statements of operations if an adjustment was required.
The Company files income tax returns in the U.S. federal, Massachusetts and Pennsylvania jurisdictions. The
Company is no longer subject to tax examinations for years before 2018, except to the extent that it utilizes tax attributes
that originated before 2018. The Company does not believe there will be any material changes in its unrecognized tax
positions over the next 12 months. The Company has not incurred any interest or penalties. In the event that the Company
is assessed interest or penalties at some point in the future, they will be classified in the statements of operations as general
and administrative expense.
F-31
Table of Contents
Note 14. Employee Benefit Plan
The Company has an employee benefit plan under Section 401(k) of the Internal Revenue Code. The plan allows
employees to make contributions up to a specified percentage of their compensation. Under the plan, the Company matches
up to 5% of employee base salary, by matching 100% of the first 5% of annual base salary contributed by each employee.
Approximately $0.3 million of 401(k) benefits was charged to operating expenses for each of the years ended December
31, 2021, 2020 and 2019.
Note 15. Related Party Transactions
Baker Brothers
Julian C. Baker, a member of the Company’s Board of Directors until his resignation in September 2018, is a
principal of Baker Bros. Advisors, LP. Additionally, Kelvin M. Neu, a member of Company’s Board until his resignation
in June 2019, is an employee of Baker Bros. Advisors, LP. As of December 31, 2021, Baker Bros. Advisors, LP and certain
of its affiliated funds (collectively, “Baker Brothers”) held sole voting power with respect to an aggregate of 2,047,180
shares of the Company’s common stock, representing approximately 4% of the Company's outstanding common stock.
During 2019, Baker Brothers purchased shares of the Company’s Series B1 Preferred Stock and accompanying
warrants to purchase common stock in connection with the December 2019 Private Placement, as more fully described in
Note 7. Concurrent with the December 2019 Private Placement, the Company amended the warrants initially issued to
Baker Brothers and other holders on May 7, 2013, September 30, 2013 and February 10, 2014 to remove expiration date.
Under the terms of the warrants issued to Baker Brothers and the December 2019 Securities Purchase Agreement related to
the securities issued in connection with the 2019 Private Placement, Baker Brothers is not permitted to convert or exercise
any common stock equivalents to the extent that such conversion or exercise would result in Baker Brothers (and its
affiliates) beneficially owning more than 4.99% of the number of shares of our common stock outstanding immediately
after giving effect to the issuance of shares of common stock issuable upon conversion or exercise of such securities. Baker
Brothers has the right to increase this beneficial ownership limitation in its discretion on 61 days' prior written notice to us,
provided that in no event is Baker Brothers permitted to convert or exercise such securities to the extent that such exercise
would result in Baker Brothers (and its affiliates) beneficially owning more than 19.99% of the number of shares of our
common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon
conversion or exercise of such securities.
During March 2021, Baker Brothers exercised warrants to purchase 2,708,812 shares of the Company’s common
stock at an exercise price of $0.08 per share for a total exercise price of approximately $0.2 million. Additionally, Baker
Brothers converted 14,150 shares Series B1 Preferred Stock into 1,415,000 shares of the Company’s common stock. In
April 2021, Baker Brothers converted 9,534 shares Series B1 Preferred Stock into 953,400 shares of the Company’s
common stock.
Pillar Investment Entities
Youssef El Zein, a member of the Company’s Board of Directors until his resignation in October 2017, is a director
and controlling stockholder of Pillar Invest Corporation (“Pillar Invest”), which is the general partner of Pillar
Pharmaceuticals I, L.P., Pillar Pharmaceuticals II, L.P., Pillar Pharmaceuticals III, L.P., Pillar Pharmaceuticals IV, L.P.,
Pillar Pharmaceuticals V, L.P., Pillar 6 and Pillar Partners (collectively, the “Pillar Investment Entities”). As of December
31, 2021, the Pillar Investment Entities beneficially owned approximately 19.99% of the Company's common stock.
F-32
Table of Contents
Note 15. Related Party Transactions (Continued)
During 2020, the Company sold shares of its common stock, prefunded warrants and common stock warrants to
entities affiliated with Pillar Invest Corporation in connection with private placement transactions, as more fully descried in
Note 8.
During the year ended December 31, 2021, certain of the Pillar Investment Entities exercised warrants to purchase
3,158,386 shares of the Company’s common stock at an exercise price of $0.01 per share for a total exercise price of less
than $0.1 million. 19,052 shares were used as cashless shares for the exercise costs.
As of December 31, 2021, the Pillar Investment Entities held (i) prefunded warrants to purchase up to 1,533,159
shares of the Company’s common stock at an exercise price of $0.01 per share, (ii) warrants to purchase up to 3,039,514
shares of the Company’s common stock at an exercise price of $2.28 per share, (iii) warrants to purchase up to 2,764,227
shares of the Company’s common stock at an exercise price of $2.58 per share, and (iv) warrants to purchase up to
1,373,626 shares of the Company’s common stock at an exercise price of $2.71 per share.
Board Fees Paid in Stock
Pursuant to the Company’s director compensation program, in lieu of director board and committee fees of $0.1
million, $0.3 million, and $0.1 million, respectively, incurred during each of the years ended December 31, 2021, 2020 and
2019, respectively, the Company issued 105,691, 145,392, and 53,985, shares of common stock, respectively, to certain of
its directors. Director board and committee fees are paid in arrears and the number of shares issued was calculated based
on the market closing price of the Company’s common stock on the issuance date.
Officer Salary Paid in Stock
In December 2020, the Company’s Chief Executive Officer was granted an award of 128,170 RSUs, pursuant to the
2013 Plan, in lieu of salary of $0.6 million pursuant to a January 10, 2020 amendment to the officers’ employment
agreement. The RSUs were fully vested on the grant date.
No such RSU awards were granted to any executive officers as compensation in 2021.
F-33
Table of Contents
Note 16. Net Income (Loss) per Common Share Applicable to Common Stockholders
Details in the computation of basic and diluted net income (loss) per common share were as follows:
($ in thousands except per share data)
Net income (loss) applicable to common stockholders —
Basic:
Net income (loss)
Less: Deemed dividend on preferred stock
Less: Undistributed earnings to preferred stockholders
Net income (loss) applicable to common stockholders - basic $
$
Numerator for basic net income (loss) applicable to common
stockholders
Denominator for basic net income (loss) applicable to
common stockholders
Net income (loss) applicable to common stockholders - basic $
$
Net loss applicable to common stockholders — Diluted:
Net income (loss)
Less: Warrant revaluation gain applicable to dilutive liability-
classified warrants
Less: Future tranche right revaluation gain applicable to
dilutive liability-classified future tranche rights
Numerator for diluted net income (loss) applicable to common
stockholders
$
$
Denominator for basic net income (loss) applicable to
common stockholders
Plus: Incremental shares underlying “in the money” liability-
classified warrants outstanding
Plus: Incremental shares underlying “in the money” liability-
classified future tranche rights outstanding
Denominator for diluted net income (loss) applicable to
common stockholders
Net income (loss) applicable to common stockholders -
diluted
2021
Year Ended
December 31,
2020
2019
(56,515)
(28,043)
—
(84,558)
(112,662)
—
—
(112,662)
$
$
(112,662)
$
(84,558)
33,821
(3.33)
$
28,545
(2.96)
(112,662)
$
(84,558)
—
—
—
—
$
$
$
$
$
98,091
—
(1,150)
96,941
96,941
49,203
1.97
96,941
(6,983)
(118,803)
(28,845)
$
(112,662)
$
(84,558)
49,203
33,821
28,545
93
831
—
—
—
—
50,127
33,821
28,545
$
(0.58)
$
(3.33)
$
(2.96)
Total antidilutive securities excluded from the calculation of diluted net loss per share for the years ended December
31, 2021, 2020 and 2019, were as follows:
(in thousands)
Stock options
Restricted stock units
Common stock warrants
Convertible preferred stock
Future tranche rights
Total
2021
2020
2019
5,202
576
8,732
—
—
14,510
4,614
903
16,968
2,369
50,467
75,321
4,220
194
5,099
2,369
49,407
61,289
F-34
Table of Contents
Note 17. Subsequent Events
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the
financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional
disclosure.
F-35
Exhibit 23.1
We consent to the incorporation by reference in the following Registration Statements:
Consent of Independent Registered Public Accounting Firm
(1) Registration Statement (Form S-8 No. 333-152669) pertaining to the 2008 Stock Incentive Plan of Idera Pharmaceuticals,
Inc.
(2) Registration Statement (Form S-8 No. 333-176067) pertaining to the 2008 Stock Incentive Plan and 1995 Employee Stock
Purchase Plan of Idera Pharmaceuticals, Inc.
(3) Registration Statement (Form S-8 No. 333-191076) pertaining to the 2013 Stock Incentive Plan of Idera Pharmaceuticals,
Inc.
(4) Registration Statement (Form S-8 No. 333-197062) pertaining to the 2013 Stock Incentive Plan of Idera Pharmaceuticals,
Inc.
(5) Registration Statement (Form S-8 No. 333-202691) pertaining to Inducement Stock Option Awards of Idera Pharmaceuticals,
Inc.
(6) Registration Statement (Form S-8 No. 333-206129) pertaining to the 2013 Stock Incentive Plan, as amended, of Idera
Pharmaceuticals, Inc.
(7) Registration Statement (Form S-8 No. 333-210090) pertaining to an Inducement Stock Option Award of Idera
Pharmaceuticals, Inc.
(8) Registration Statement (Form S-1 as amended by Form S-3/A No. 333-136610) of Idera Pharmaceuticals, Inc.
(9) Registration Statement (Form S-1 as amended by Form S-3/A No. 333-187155) of Idera Pharmaceuticals, Inc.
(10) Registration Statement (Form S-2 as amended by Form S-3/A No. 333-109630) of Idera Pharmaceuticals, Inc.
(11) Registration Statement (Form S-3 No. 333-119943) of Idera Pharmaceuticals, Inc.
(12) Registration Statement (Form S-3 No. 333-126634) of Idera Pharmaceuticals, Inc.
(13) Registration Statement (Form S-3 No. 333-131804) of Idera Pharmaceuticals, Inc.
(14) Registration Statement (Form S-3 No. 333-133455) of Idera Pharmaceuticals, Inc.
(15) Registration Statement (Form S-3 No. 333-133456) of Idera Pharmaceuticals, Inc.
(16) Registration Statement (Form S-3 No. 333-139830) of Idera Pharmaceuticals, Inc.
(17) Registration Statement (Form S-3 as amended by Form S-3/A No. 333-185392) of Idera Pharmaceuticals, Inc.
(18) Registration Statement (Form S-3 No. 333-186312) of Idera Pharmaceuticals, Inc.
(19) Registration Statement (Form S-3 No. 333-189700) of Idera Pharmaceuticals, Inc.
(20) Registration Statement (Form S-3 No. 333-210140) of Idera Pharmaceuticals, Inc.
(21) Registration Statement (Form S-8 No. 333-217665) pertaining to an Inducement Stock Option Award of Idera
Pharmaceuticals, Inc.
(22) Registration Statement (Form S-8 No. 333-219740) pertaining to the 2017 Employee Stock Purchase Plan of Idera
Pharmaceuticals, Inc.
(23) Registration Statement (Form S-8 No. 333-219741) pertaining to the 2013 Stock Incentive Plan, as amended, of Idera
Pharmaceuticals, Inc.
(24) Registration Statement (Form S-8 No. 333-232609) pertaining to the 2017 Employee Stock Purchase Plan of Idera
Pharmaceuticals, Inc.
(25) Registration Statement (Form S-8 No. 333-232610) pertaining to the 2013 Stock Incentive Plan, as amended, of Idera
Pharmaceuticals, Inc.
(26) Registration Statement (Form S-3 No. 333-238868) of Idera Pharmaceuticals, Inc.
(27) Registration Statement (Form S-3 No. 333-240361) of Idera Pharmaceuticals, Inc.
(28) Registration Statement (Form S-3 No. 333-240366) of Idera Pharmaceuticals, Inc.
(29) Registration Statement (Form S-3 No. 333-248560) of Idera Pharmaceuticals, Inc.
(30) Registration Statement (Form S-3 and S-3/A No. 333-253804) of Idera Pharmaceuticals, Inc.
of our report dated March 31, 2022, with respect to the financial statements of Idera Pharmaceuticals, Inc. included in this Annual
Report (Form 10-K) of Idera Pharmaceuticals, Inc. for the year ended December 31, 2021.
Philadelphia, Pennsylvania
March 31, 2022
/s/ ERNST & YOUNG LLP
Exhibit 31.1
Certification of Chief Executive Officer pursuant to Exchange
Act Rules 13a-14 and 15d-14, as adopted pursuant to
Section 302 of Sarbanes-Oxley Act of 2002
I, Vincent J. Milano, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Idera Pharmaceuticals, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in 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 annual 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 changes in the registrant’s internal control over financial reporting that occurred
during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of 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 and financial reporting.
Dated: March 31, 2022
/s/ Vincent J. Milano
Vincent J. Milano
Chief Executive Officer
Exhibit 31.2
Certification of Chief Financial Officer pursuant to Exchange
Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of
Sarbanes-Oxley Act of 2002
I, John J. Kirby, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Idera Pharmaceuticals, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in 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 annual 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 changes in the registrant’s internal control over financial reporting that occurred
during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of 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 and financial reporting.
Dated: March 31, 2022
/s/ John J. Kirby
John J. Kirby
Chief Financial Officer
Exhibit 32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of Idera Pharmaceuticals, Inc. (the “Company”) for the period
ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned, Vincent J. Milano, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C.
Section 1350, that to his knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
A signed original of this written statement has been provided to Idera Pharmaceuticals, Inc. and will be retained by
Idera Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: March 31, 2022
/s/ Vincent J. Milano
Vincent J. Milano
Chief Executive Officer
Exhibit 32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of Idera Pharmaceuticals, Inc. (the “Company”) for the period
ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned, John J. Kirby, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350,
that to his knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
A signed original of this written statement has been provided to Idera Pharmaceuticals, Inc. and will be retained by
Idera Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: March 31, 2022
/s/ John J. Kirby
John J. Kirby
Chief Financial Officer