TABLE OF CONTENTS
PART IV
INDEX TO FINANCIAL STATEMENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
Or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-36080
IVERIC bio, Inc.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Delaware
20-8185347
8 Sylvan Way
Parsippany NJ
(Address of principal executive offices)
07054
(Zip Code)
(609) 474-6455
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.001 par value
ISEE
The Nasdaq Global Select 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 Section 15(d) of the Act. ☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company
☒
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Yes ☐ No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of June 30, 2021, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $546.1 million, based on the closing price
of the registrant's common stock on June 30, 2021.
The number of shares outstanding of the registrant's class of common stock, as of February 21, 2022: 115,680,118
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report incorporates by reference information from the definitive Proxy Statement for the registrant's 2022 Annual Meeting of Shareholders, which is expected to be filed
with the Securities and Exchange Commission not later than 120 days after the registrant's fiscal year ended December 31, 2021.
Table of Contents
TABLE OF CONTENTS
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
PART IV
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than
statements of historical facts, contained in this Annual Report on Form 10-K, including statements regarding our strategy, future operations, future financial
position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words "anticipate,"
"believe," "goals," "estimate," "expect," "intend," "may," "might," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should,"
"continue" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these
identifying words.
The forward-looking statements in this Annual Report on Form 10-K include, among other things, statements about:
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the potential benefits of our business plan and strategy, including our goal to deliver treatment options for all stages of age-related macular
degeneration (AMD);
our expectations regarding the impact of results from GATHER1, our completed Phase 3 clinical trial evaluating Zimura for the treatment of
Geographic Atrophy (GA) secondary to AMD, on our business and regulatory strategy, including our plans to pursue development of Zimura in
intermediate AMD;
the timing, costs, conduct and outcome of GATHER2, our ongoing Phase 3 clinical trial evaluating Zimura for the treatment of GA secondary to
AMD, including expectations regarding receipt of topline data from the trial and regarding patient retention, and expectations regarding the
potential for Zimura to receive regulatory approval for the treatment of GA based on the clinical trial results we have received to date and the
future results from the GATHER2 clinical trial and any other trials we or a potential collaborator may conduct;
our plans and expectations for initiating a clinical trial evaluating Zimura for the treatment of intermediate AMD, and for evaluating, obtaining
rights to and developing sustained release delivery technologies for Zimura;
our plans and strategy for the potential commercialization of Zimura, including hiring of medical affairs and commercialization personnel,
building a commercialization infrastructure, including sales, marketing and distribution capabilities, and our expectations regarding the market
dynamics for treatments for GA and other commercial matters;
our ability to establish and maintain arrangements and capabilities for the manufacture of Zimura and our other product candidates, including scale
up and validation of the manufacturing process for Zimura drug substance and drug product, and securing the supply of Zimura drug product and
the polyethylene glycol (PEG) starting material for our expected needs;
the timing, costs, conduct and outcome of STAR, our ongoing Phase 2b screening trial evaluating Zimura for the treatment of autosomal recessive
Stargardt disease, including expectations regarding the recruitment of additional patients for this trial;
our plans and ability to consummate business development transactions, including potential collaboration opportunities for further development
and potential commercialization of Zimura outside the United States and potential collaboration opportunities for further development of IC-100
and IC-200; and in-licenses or other opportunities to acquire rights to additional product candidates or technologies to treat retinal diseases,
including sustained release delivery technologies for Zimura;
the actual and expected effects of the COVID-19 pandemic and related response measures on our business and operations, including the timing,
costs, conduct and outcome of our research and development programs, our supply chain, the work of our third-party vendors and collaborators,
the work and well-being of our employees, and our financial position;
our estimates regarding expenses, future revenues, capital requirements and needs for, and ability to obtain, additional financing;
the timing, costs, conduct and outcome of our ongoing and planned clinical trials, including statements regarding the timing of the initiation and
completion of, and the receipt of results from, such clinical trials, the costs to conduct such clinical trials, and the impact of the results of such
clinical trials on our business strategy;
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the timing, costs, conduct and outcome of our ongoing and planned research and preclinical development activities, including statements regarding
the timing of the initiation and completion of, and the receipt of results from, such activities, the costs to conduct such activities, and the impact of
the results of such activities on our business strategy;
the timing of and our ability to submit investigational new drug applications for, and to submit new drug applications or marketing authorization
applications for and to obtain marketing approval of our product candidates, and the ability of our product candidates to meet existing or future
regulatory standards;
the potential advantages of our product candidates and other technologies that we are pursuing, including our hypotheses regarding complement
factor C5 inhibition and HtrA1 inhibition as potentially relevant mechanisms of action to treat GA and other stages of AMD, and of gene therapy,
including the use of minigenes;
our estimates regarding the number of patients affected by the diseases our product candidates and development programs are intended to treat;
our estimates regarding the potential market opportunity for our product candidates, including our ability to obtain coverage and reimbursement
for those product candidates, if approved;
the rate and degree of potential market acceptance and clinical utility of our product candidates, if approved;
the potential receipt of revenues from future sales of our product candidates, if approved;
our personnel and human capital resources;
our intellectual property position;
the impact of existing and new governmental laws and regulations; and
our competitive position.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and our stockholders should not place
undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in
the forward-looking statements we make. We have included important factors in the cautionary statements included in this Annual Report on Form 10-K,
particularly under the section "Summary of Principal Risk Factors" below and the risk factors detailed further in Item 1A, "Risk Factors" of Part I of this
report and in our Securities and Exchange Commission reports filed after this report, that could cause actual results or events to differ materially from the
forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers,
dispositions, joint ventures or investments we may make.
You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual Report on Form 10-K completely
and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this
Annual Report on Form 10-K are made as of the date of this Annual Report on Form 10-K, and we do not assume any obligation to update any forward-
looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
This Annual Report on Form 10-K includes statistical and other industry and market data that we obtained from industry publications and research,
surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information
has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.
Summary of Principal Risk Factors
The following is a summary of the principal factors that make an investment in our company speculative or risky. This summary does not address all of the
risks and uncertainties that we face. Additional risk and uncertainties not presently known to us or that we presently deem less significant may also impair
our business operations. Additional discussion of the risks summarized in this summary, and other risks that we face, can be found in Item 1A. Risk Factors
section of this Annual Report on
Form 10-K, and should be carefully considered, together with other information in this Annual Report on Form 10-K and
our other filings with the Securities Exchange Commission, before making an investment decision regarding our common
stock. The forward-looking statements discussed above are qualified by these risk factors. If any of the following risks occur,
our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.
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1. We are a development-stage company without any approved products. The value of your investment is highly dependent on the success of Zimura
and our other research and development programs, which carry numerous risks. We are working to transition to being a company capable of
commercializing a pharmaceutical product, if approved, and may not be successful in this transition.
2. We have had a history of operating at significant losses and expect to continue to do so until we can successfully commercialize one or more of
our product candidates, if ever. We may never achieve profitability.
3. We may need additional financing in order to finish developing and start commercializing one or more of our product candidates, if approved.
Securing financing may be challenging and/or dilutive to our shareholders, and if we are unable to secure financing when needed, we may need to
curtail our development programs or planned commercialization activities.
4. The COVID-19 pandemic has adversely affected our business, for example, by impacting the initiation and conduct of our clinical trials, the work
of our contract manufacturing organizations, contract research organizations and other vendors, and aspects of our supply chain. Because of the
ongoing and fluid nature of the pandemic, it will continue to affect our business.
5. We may not be successful in obtaining rights to and developing a sustained release delivery technology for Zimura.
6. Drug development is inherently risky with numerous scientific, technical, regulatory and other challenges. A promising drug candidate can fail at
any time and for any number of reasons.
7. We are pursuing the development of our product candidates using novel mechanisms of action targeting indications for which there are no
approved products. These include, for example, complement inhibition and inhibition of High temperature requirement A serine peptidase 1
protein for GA, and complement inhibition for intermediate AMD and autosomal recessive Stargardt disease. These approaches carry numerous
scientific, regulatory and other risks.
8. Regulatory authorities, including the U.S. Food and Drug Administration, or FDA, and the European Medicines Agency, or EMA, may disagree
with the design of or our analyses or conclusions from our clinical trials of Zimura in GA or our planned development pathway for Zimura in
intermediate AMD. Since receipt of the 12-month results from GATHER1, we have not had any formal interactions with the EMA regarding our
planned regulatory pathway for Zimura in GA and the EMA and other regulatory authorities may disagree with the requirements of the FDA. We
may need to conduct additional clinical trials or nonclinical studies for Zimura in order to obtain marketing approval or reimbursement approval.
9. The results of the GATHER2 trial may not replicate the results of the GATHER1 trial. We may discover safety issues with our product candidates
due to known and currently unknown factors, which could hamper their further development.
10. Manufacturing our product candidates is technically complex, expensive and time consuming. We may face issues with scaling up and validating
the manufacturing process for Zimura. We may not be able to secure adequate manufacturing capacity of Zimura drug product or adequate supply
of the PEG starting material for our future needs, including potential commercial launch. Issues with manufacturing can derail the further
development or commercialization of our product candidates.
11. We face substantial competition from large pharmaceutical companies, smaller biotech companies and others.
12. To commercialize any of our product candidates, if approved, we will need to set up a sales and marketing infrastructure. We have only recently
hired commercialization personnel and will need to continue building our commercial infrastructure. The success of our commercialization efforts
will depend in part on the degree of acceptance of our product candidates by regulatory authorities, patients, the medical community and payors.
13. We do not have any internal manufacturing facilities and rely heavily on our third-party contract manufacturers. They may have different business
priorities than we do and may fail to meet our expectations or follow regulatory requirements, including current good manufacturing practices
requirements. We may need to engage alternative manufacturers or suppliers sooner than we currently expect.
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14. We rely heavily on our third-party contract research organizations as well as our clinical trial sites. They may have different priorities than we do
and may fail to follow regulatory requirements, including good laboratory practice, good clinical practice and other data integrity requirements.
15. We may pursue a collaboration for the further development and potential commercialization of Zimura in one or more territories outside the
United States, and plan to pursue a collaboration for the further development and potential commercialization of IC-100 and IC-200. We may also
pursue a collaboration for the further development of any promising sustained release delivery technologies for Zimura. For any of these, we may
not be able to enter into a collaboration agreement on favorable terms, or at all. Even if we are able to do so, the collaboration may not be
successful.
16. We rely on patents to protect our proprietary position. We may not obtain the patent rights that we seek and/or we may not be able to exclude our
competitors from relevant markets. We may be subject to litigation involving our patents or those of third parties.
17. We are highly dependent on our information security systems and those of third parties we work with. A cybersecurity incident may cause
interruptions to the progress of our development programs and operations, financial or regulatory penalties and/or harm to our reputation.
18. We rely on a limited number of employees to conduct our operations, including supervising our outside vendors. The skills needed to advance our
research and development programs and plan for commercialization of our product candidates are highly specialized. We plan to hire additional
qualified personnel, including commercialization and medical affairs personnel, to support the growth of our business. Hiring these personnel and
retaining existing employees may be challenging.
19. We need to satisfy numerous regulatory requirements in order to secure marketing approval and reimbursement approval, if applicable, for any of
our product candidates. These requirements differ across jurisdictions. Failure to satisfy and maintain those requirements can preclude us from
commercializing our products.
20. We and any commercialization partners are subject to numerous healthcare laws and regulations governing our relationships with patients,
healthcare professionals and third-party payors. Failure to comply with these requirements may adversely affect our business, including as we
prepare for potential commercialization of Zimura.
21. The reimbursement and payment regime for pharmaceutical products in the United States remains in flux, including as a result of the
implementation of and litigation involving the Affordable Care Act. There are ongoing, and often bipartisan, efforts to reduce the prices of
pharmaceutical products.
The trademarks, trade names and service marks appearing in this Annual Report on Form 10-K are the property of their respective owners. We have
omitted the ® and ™ designations, as applicable, for the trademarks named in this Annual Report on Form 10-K after their first reference in this Annual
Report on Form 10-K.
USE OF TRADEMARKS
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Item 1. Business
Overview and Our Strategy
PART I
We are a science-driven biopharmaceutical company focused on the discovery and development of novel treatments for retinal diseases with significant
unmet medical needs. We are committed to having a positive impact on patients’ lives by delivering high-quality, safe and effective treatments designed to
address debilitating retinal diseases, including earlier stages of age-related macular degeneration, or AMD.
Our lead asset is our clinical stage product candidate Zimura® (avacincaptad pegol), a complement C5 inhibitor. We are currently targeting the
following diseases with Zimura:
• Geographic Atrophy, or GA, which is the advanced stage of AMD and is characterized by marked thinning or atrophy of retinal tissue, leading to
irreversible loss of vision;
intermediate AMD, which is an earlier stage of AMD that precedes GA; and
autosomal recessive Stargardt disease, or STGD1, which is an orphan inherited condition characterized by progressive damage to the central
portion of the retina, or the macula, and other retinal tissue, leading to loss of vision.
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In July 2021, we completed patient enrollment for GATHER2, our Phase 3 clinical trial evaluating the safety and efficacy of Zimura for the treatment
of GA secondary to AMD. We also received a written agreement from the U.S. Food and Drug Administration, or the FDA, under a Special Protocol
Assessment, or SPA, for the overall design of GATHER2. We expect topline data from the GATHER2 trial to become available during the second half of
2022, approximately one year after the enrollment of the last patient plus the time needed for database lock and analysis. We also plan to initiate a Phase 3
clinical trial evaluating Zimura for patients with intermediate AMD during the second half of 2022.
In addition to Zimura, we are developing our preclinical product candidate IC-500, a High temperature requirement A serine peptidase 1 protein, or
HtrA1, inhibitor, for GA and potentially other age-related retinal diseases. Based on current timelines, we expect to submit an investigational new drug
application, or IND, to the FDA for IC-500 in mid-2023.
Our portfolio also includes two preclinical stage gene therapy product candidates (IC-100 and IC-200) and several ongoing gene therapy research
programs, each of which uses adeno-associated virus, or AAV, for gene delivery. These AAV mediated gene therapy programs are targeting the following
orphan inherited retinal diseases, or IRDs:
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rhodopsin-mediated autosomal dominant retinitis pigmentosa, or RHO-adRP, which is characterized by progressive and severe bilateral loss of
vision leading to blindness;
IRDs associated with mutations in the BEST1 gene, including Best vitelliform macular dystrophy, or Best disease;
Leber Congenital Amaurosis type 10, or LCA10, which is characterized by severe bilateral loss of vision at or soon after birth;
STGD1; and
IRDs associated with mutations in the USH2A gene, which include Usher syndrome type 2A, or Usher 2A, and USH2A-associated non-syndromic
autosomal recessive retinitis pigmentosa.
As we focus our efforts on and prioritize the development and potential commercialization of Zimura, we have been considering our development
options for IC-100 and IC-200, which we have been developing for RHO-adRP and BEST1-related IRDs, respectively. We currently plan to seek a
collaborator for the future development and potential commercialization of these product candidates.
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Research and Development Pipeline
We have summarized the current status of our ongoing research and development programs in the table below.
*We have an option to exclusively in-license intellectual property resulting from these programs.
2021 Highlights
In 2021, we achieved a number of significant company milestones, including the following:
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In July 2021, we completed patient enrollment in GATHER2, four months ahead of our original schedule. We expect 12-month top-line data from
this trial to become available during the second half of 2022, approximately one year after the enrollment of the last patient plus the time needed
for database lock and analysis.
In July 2021, we received a written agreement from the FDA under a SPA for the overall design of GATHER2. We also had a number of other
interactions with the FDA throughout 2021, which we believe clarified our regulatory pathway and plans for submitting a new drug application, or
NDA, to the FDA for marketing approval of Zimura for the treatment of GA, if the GATHER2 data are positive.
In June 2021, we announced data from post-hoc analyses on the GATHER1 data, in which we evaluated the progression of incomplete Retinal
Pigment Epithelial and Outer Retinal Atrophy, or iRORA, to complete Retinal Pigment Epithelial and Outer Retinal Atrophy, or cRORA, and the
progression of drusen to iRORA or cRORA, in patients receiving Zimura 2 mg as compared to patients in the corresponding sham group. The
post-hoc analysis data show a 19.6% absolute reduction in the rate of progression from drusen to iRORA or cRORA, for the Zimura 2 mg group
as compared to sham at 18 months, representing a relative reduction of 72%. The data also show a 21.8% absolute reduction in the rate of
progression from iRORA to cRORA for the Zimura 2 mg group as compared to sham at 18 months, representing a relative reduction of 52%. We
have been encouraged by the post-hoc analyses data and are planning a Phase 3 clinical trial studying Zimura in patients with intermediate AMD,
which we plan to initiate during the second half of 2022.
In July 2021 and October 2021, we closed two underwritten public offerings in which we sold 13,397,500 shares of our common stock and
10,350,000 shares of our common stock, respectively. The net proceeds from the public offerings, after deducting underwriting discounts and
commissions and other offering expenses payable by us, were approximately $107.8 million and $162.6 million, respectively.
• We continued to hire strategically to support key areas of our business, such as commercial planning, medical affairs and clinical development,
manufacturing, preclinical research, and regulatory affairs and pharmacovigilance, with a total of 37 full-time employees joining our team over the
course of 2021.
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Business Development and Financing Activities
Beginning in 2017, we pursued a business development strategy focused on evaluating various available technologies to treat ophthalmic diseases,
particularly those in the back of the eye, and exploring opportunities to obtain rights to additional products and product candidates employing these
technologies. Our efforts resulted in the expansion of our research and development pipeline, including the addition of IC-500, IC-100, IC-200 and a
number of collaborative gene therapy sponsored research programs.
As we continue the development of our product candidates and programs, prepare for the potential commercialization of Zimura and evaluate our
overall strategic priorities, we will continue to pursue selective business development and financing opportunities that advance us toward our strategic
goals. We plan to continue to evaluate, on a selective and targeted basis, opportunities to potentially obtain rights to additional product candidates and
technologies for retinal diseases, with a focus on sustained release delivery technologies for Zimura. In addition, we continue to explore potential
collaboration and out-licensing opportunities for the future development and potential commercialization of our product candidates, including potential
collaboration opportunities for the future development and potential commercialization of Zimura in one or more territories outside the United States and
collaboration opportunities for the future development and potential commercialization of IC-100 and IC-200.
For information about our follow-on public offerings that we completed in July 2021 and October 2021, please see the Liquidity and Capital
Resources section of Management' s Discussion and Analysis of Financial Condition and Results of Operations set forth in Part I, Item 7 of this Annual
Report on Form 10-K. We expect to continue to pursue capital raising transactions when they are available on terms favorable to us and if the opportunity
advances our strategic goals.
Impact of COVID-19
Beginning in March 2020, the COVID-19 pandemic and measures taken to contain it have affected various aspects of our business and operations,
including our clinical trials, our supply chain, our workforce and the work of our third-party contract manufacturers, contract research organizations, or
CROs, and other vendors. For example, in March 2020, we decided to delay the initiation of patient enrollment in our GATHER2 trial. We completed
patient enrollment for GATHER2 in July 2021, and we and our clinical trial sites have implemented a number of changes to our clinical trial operations to
protect the health and safety of our clinical trial participants and site staff. Additionally, many of our third-party contract manufacturers and CROs limited
their operations and staff and have recently been facing increased demand from clients due to the ongoing uncertainties associated with the COVID-19
pandemic, which resulted in delays to some of our manufacturing and research and development activities. For example, we anticipate that the start of the
IND-enabling toxicology studies we are planning for IC-500 will be later than what we originally planned, primarily due to the limited availability of study
slots at CROs attributable to rising demand for their services as well as increased absenteeism of staff at those CROs in wake of the COVID-19 pandemic
and the recent Omicron variant. In addition, shortages, delays and governmental restrictions arising from the COVID-19 pandemic, including the ongoing
issues with the global supply chain, have disrupted and may continue to disrupt the ability of our contract manufacturers and CROs to source needed
materials.
In March 2020, as a result of the COVID-19 pandemic, we instituted company-wide remote working and we expect to continue working in a
hybrid (partially remote and partially in office) working model for the foreseeable near future. We are continuing to monitor and support the health and
well-being of our employees and their productivity as remote working continues. Starting in the middle of 2021, we began permitting employees to return
to the office on a voluntary basis subject to compliance with our newly implemented health and safety policies.
For a more detailed discussion of the actual and potential impacts to us as a result of the COVID-19 pandemic, see the other sections of this Annual
Report on Form 10-K, including Management's Discussion and Analysis of Results of Operations and Financial Position set forth in Part I, Item 7 and the
Risk Factors set forth in Part I, Item 1A.
Eye Diseases
Eye diseases can be caused by many factors and can affect both the front or back of the eye. In more severe cases, eye diseases can result in total loss of
vision. In the developed world, the most common eye diseases that can result in total loss of vision are those affecting the retina and optic nerve, including
AMD, diabetic retinopathy and glaucoma. These diseases deprive patients of their sight and, as a result, impair their ability to live independently and
perform daily activities. Any improvement in vision, or even a slowing of the rate of progression of vision loss, has a tremendous impact on the quality of
life of people with impaired vision. There are many other eye diseases that are less common but still represent an unmet medical need, particularly orphan
IRDs that are associated with mutations in a single gene, referred to as monogenic, that lead to retinal degeneration and vision loss, generally in younger
patients. We believe that these disease areas present several potential
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opportunities for ophthalmic drug development. A 2014 report from Prevent Blindness, a patient advocacy group, estimated that the total real annual costs
in the United States related to eye diseases and vision problems expressed in constant 2014 dollars would increase from $145 billion in 2014 to $376 billion
by 2050.
Age Related Macular Degeneration, including Geographic Atrophy and intermediate AMD
AMD is an age-related disease characterized by progressive degenerative abnormalities in the macula, a small area in the central portion of the retina
responsible for central vision. AMD is characteristically a disease of the elderly and is the leading cause of visual loss in individuals over 50 years of age in
developed countries. Based on a 2016 epidemiology paper published in Eye and Vision, we estimate that currently approximately 11 million individuals in
the United States and 170 million individuals worldwide have a form of AMD. Because of increasing life expectancy in developed and developing
countries, the elderly population is expected to grow significantly in coming decades. Projections based on U.S. Census Bureau data suggest that the
number of Americans over the age of 65 will more than double to approximately 80 million by the middle of this century. In the absence of adequate
prevention or treatment measures, the number of cases of AMD with visual loss is expected to grow in parallel with the aging population, leading to a
major public health challenge with significant socioeconomic implications.
AMD, at its early stages, presents with abnormalities in the retinal pigment epithelium, or the RPE, and yellow-white deposits under the RPE known as
drusen, which generally become larger and more numerous as AMD progresses. The RPE is a layer of cells within the retina on which photoreceptors, the
cells in the retina that are responsible for capturing light and converting it to electrochemical signals to the brain, are dependent for nutrients, waste disposal
and other needs. As the disease progresses with age to the advanced stage, it generally progresses as either the non-neovascular or dry form of AMD or the
neovascular or wet form of the disease. In the dry form of AMD, the eventual loss of photoreceptors, RPE cells and associated capillary blood vessels in
the macula results in marked thinning and/or atrophy of retinal tissue. This advanced stage of dry AMD is called GA. In the wet form of AMD, abnormal
new blood vessels originate beneath the retina, in a layer called the choroid, and invade into the overlying retinal layers, through a process called choroidal
neovascularization, or CNV. The macula of patients diagnosed with the wet form of AMD, who are usually treated with currently approved standard of care
anti-vascular endothelial growth factor, or anti-VEGF, therapies, can continue to atrophy resulting in GA, which suggests that in many AMD patients,
regardless of whether they have the dry or the wet form, the final anatomic outcome leading to loss of vision is GA.
GA is a significant cause of bilateral, irreversible and severe loss of functional vision. Many individuals with GA experience dark spots in their field of
vision, referred to as scotoma, even if their central vision remains normal. As a result, GA has a major impact on the functional vision, quality of life, and
independence of affected individuals. The median time for development of central GA from the time of diagnosis is two and a half years with the condition
expected to develop in the fellow eye within approximately seven years. Based on a comprehensive epidemiology study published in 2004 in Archives of
Ophthalmology, we estimate that there are currently approximately 1.5 million people in the United States with GA. Furthermore, based on a study
published in 2015 in the American Journal of Ophthalmology, we estimate that approximately 159,000 people in the United States develop GA each year.
Although anti-VEGF therapy is available for treatment of wet AMD, no FDA or European Medicines Agency, or EMA, approved treatment is currently
available for GA.
Before the development of central GA or wet AMD, many AMD patients experience a less advanced form of the disease, commonly referred to as
intermediate AMD. Intermediate AMD is typically characterized by the presence of extensive medium-size drusen (>63 µm and <125 µm in height) and/or
one or more large drusen (>125 µm in height). While most of these patients have well preserved best corrected visual acuity, or BCVA, and are otherwise
asymptomatic, many experience other visual disturbances such as blurred vision while reading or difficulty with adapting to seeing in low light. We
estimate that by 2039, there will be approximately six million individuals with drusen in the United States and eight million individuals with drusen in
France, Germany, Italy, Spain and United Kingdom, which we refer to as the EU5 countries, on a combined basis. Intermediate AMD is a subset of drusen.
The absence of treatment options for GA and many other stages of AMD, including intermediate AMD, represents an area of urgent unmet medical need
and a major public health concern for the expanding elderly population.
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Inherited Retinal Diseases
IRDs are a group of eye disorders caused by one or more inherited gene mutations that result in lack of functional proteins necessary for normal vision.
Generally, IRDs are severe and progressive and will result in vision loss or blindness, either at birth or in early childhood, or gradually over time. IRDs are
generally orphan diseases, meaning that these diseases affect fewer than 200,000 individuals in the United States. Partially due to their orphan nature, there
are no approved treatment options available for most IRDs. Recently, gene therapies have emerged as potential therapies for monogenic IRDs, where a
mutation to a single gene has been identified as the cause.
Humans generally inherit a complete set of genes from each of their parents, and therefore have two copies, or alleles, for each gene, either of which may
carry a mutation, and either, or both, of which may be expressed in particular cells throughout the body. An inherited condition is referred to as autosomal
recessive when the subject must inherit mutated alleles from each parent for the condition to manifest. An inherited condition is referred to as autosomal
dominant when the subject must only inherit one mutated allele from either parent for the condition to manifest. The predominant or standard, non-mutated
form of a gene is referred to as the wildtype form, and the protein resulting from expression of the wildtype gene is referred to as wildtype protein. In
autosomal recessive conditions, because both alleles for a particular gene carry a mutation, the subject cannot produce any wildtype protein, and instead the
proteins that are expressed, if any, have either limited or no function. In autosomal dominant conditions, a number of factors may contribute to the
condition:
•
•
•
a subject may express only the mutant allele and not the wildtype allele, resulting in production of only protein with limited or no function and not
the wildtype protein;
a subject may be expressing both alleles, but because of the mutation on one of the alleles, the amount of functional protein may not be sufficient;
or
the protein expressed by the mutant allele may be toxic to the cells in which it is produced.
Stargardt Disease
Stargardt disease is an IRD that causes progressive damage to the macula and retina, leading to loss of vision in children and adolescents. The most
common form of Stargardt disease is STGD1, the autosomal recessive form. STGD1 is caused by mutations in the ABCA4 gene, which is responsible for
making a protein that helps to clear byproducts resulting from the visual cycle from inside photoreceptor cells in the eye.
Multiple sources, including the National Eye Institute and Genetics Home Reference, both of which are affiliated with the U.S. National Institutes of
Health, or NIH, estimate the prevalence of Stargardt disease to be between 1 in 8,000 and 1 in 10,000, implying that in the United States and the EU5 on a
combined basis there are currently a total of 62,000 to 77,000 affected persons. There are currently no therapies approved by the FDA or EMA to treat
Stargardt disease. The FDA has recognized Stargardt disease as an orphan disease, with several treatments in development having received orphan drug
designation from the FDA.
Rhodopsin-Mediated Autosomal Dominant Retinitis Pigmentosa
RHO-adRP is a form of retinitis pigmentosa, or RP. RP is the most prevalent IRD and is typically characterized by the initial degeneration of the rod
photoreceptors, which are responsible for low light vision and peripheral vision. The degeneration of the rod photoreceptors over time leads to the
degeneration of the cone photoreceptors, which are the photoreceptors in the central part of the retina that are responsible for color and sharp vision. This
degeneration causes night blindness and severe and progressive visual impairment. Although often diagnosed during adolescence or young adulthood, most
RP patients become legally blind by age 40.
Rhodopsin is a biological pigment found in the rod photoreceptors that is extremely sensitive to light and thus is crucial for low light vision. There are
more than 150 identified mutations in RHO, the gene that encodes for rhodopsin. The presence of a mutated RHO gene is linked to the occurrence of RHO-
adRP.
Based on disease prevalence rates contained in a study published in the Archives of Ophthalmology in 2007, we estimate that in the United States and
EU5 on a combined basis, there are a total of approximately 11,000 affected persons with RHO-adRP. There is currently no FDA or EMA approved therapy
to treat RHO-adRP.
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BEST1-Related IRDs
The BEST1 gene encodes for a multifunctional protein known as bestrophin-1, or BEST1, which regulates chemical transport and signaling in RPE cells
and helps maintain homeostasis in the subretinal space, the space between the photoreceptors and the RPE. The most common BEST1-related IRD is Best
disease, which is generally autosomal dominant and generally affects individuals in both eyes. In Best disease, the lack of functional BEST1 protein results
in the formation of egg yolk-like lesions in the macula that, over time, progress to macular atrophy and permanent loss of vision. In addition, because there
are over 200 known mutations in the BEST1 gene, there are other BEST1-related IRDs being studied, including autosomal dominant and autosomal
recessive forms.
Based on disease prevalence rates contained in a study published in Ophthalmic Genetics in 2017, we estimate that in the United States and EU5 on a
combined basis, there are a total of approximately 10,000 to 40,000 affected persons with BEST1-related IRDs, the substantial majority of whom we
believe have the autosomal dominant form of Best disease. There are currently no FDA or EMA approved therapies to treat any BEST1-related IRD.
Leber Congenital Amaurosis Type 10
Leber Congenital Amaurosis, or LCA, is an IRD that manifests at birth or early in childhood. It is characterized by early onset of vision loss in children
leading to blindness. Affected individuals often manifest symptoms such as roving eye movements, deep-set eyes and sensitivity to bright light. There are
multiple types of LCA, which are associated with mutations in different genes. The most common type is LCA10, which is caused by mutations in the
CEP290 gene. Mutations in the CEP290 gene are believed to lead to the abnormal function and potentially loss of photoreceptor cells.
Based on disease prevalence rates contained in a study published in the American Journal of Human Genetics in 2006, we estimate that in the United
States and EU5 on a combined basis, there are a total of approximately 2,700 to 4,100 affected persons with LCA10. There is currently no FDA or EMA
approved therapy to treat LCA10.
USH2A-Related IRDs
The USH2A gene encodes for a protein called usherin. Usherin is believed to be important in the development and maintenance of cells in the retina and
the inner ear. There are two principal IRDs associated with mutations in the USH2A gene: Usher 2A and USH2A-associated nonsyndromatic autosomal
recessive retinitis pigmentosa. Usher 2A is an autosomal recessive syndrome characterized by hearing loss from birth and progressive vision loss, due to
RP, that begins in adolescence or adulthood. USH2A-associated nonsyndromatic autosomal recessive retinitis pigmentosa is a genetic condition that
manifests as vision loss without associated hearing loss.
Based on a study published in Experimental Eye Research in 2004, we estimate that in the United States and EU5 on a combined basis, there are a total
of approximately 20,000 to 62,000 affected persons with USH2A-related IRDs. There are currently no FDA or EMA approved therapies to treat Usher 2A
or USH2A-associated nonsyndromatic autosomal recessive retinitis pigmentosa.
Zimura
We are currently developing our product candidate Zimura, a C5 complement inhibitor, for the treatment of GA and intermediate AMD, both of which
are different stages of AMD, and STGD1. Zimura is a chemically-synthesized, pegylated RNA aptamer. Aptamers are short molecules made up of a single
stranded nucleic acid sequence or an amino acid sequence. The specific three-dimensional structure of an aptamer, which results from its specific sequence,
allows it to bind molecular targets with high selectivity and specificity. Zimura is a pegylated aptamer, which means that polyethylene glycol, or PEG, a
common biochemical compound attached to drugs to increase their duration of action in the human body and to decrease immune response, is linked to the
chemically-synthesized strand of RNA.
The Complement System and Its Potential Role in AMD and STGD1
The complement system consists of a series of proteins that are involved in the defense of the body against infectious agents, or pathogens, and other
foreign proteins. The complement system modulates a variety of immune and inflammatory responses to these pathogens and foreign proteins. Under
normal circumstances, complement proteins, together with antibodies and white blood cells, act beneficially to protect the body by removing the pathogens
and foreign proteins, along with other cellular debris. The complement system is generally tightly regulated, achieving the proper balance of activation and
inhibition depending on the body’s requirements. Poorly regulated or aberrant activation of the complement system, without a balanced or
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proportional inhibition of complement proteins, may result in a variety of pathological conditions. For example, in a study published in Histology and
Histopathology in 2012, researchers found that human retinal drusen deposits, which are the hallmark of AMD, contained components of complement
proteins.
The complement system is generally activated via one of three biological pathways commonly referred to as the classical pathway, the alternative
pathway and the lectin pathway. These pathways eventually converge with the generation of an enzyme known as C3 convertase. C3 convertase cleaves, or
separates, a serum protein called C3, into C3a and C3b. C3b is an important element of the body’s immune system, as it binds to pathogens and makes
them susceptible to destruction by white blood cells. C3b also cleaves complement protein C5. The cleavage of C5 results in the formation of the terminal
complement fragments C5a and C5b. A study published in the Journal of Biological Chemistry in 2015 concluded that C5a primes RPE cells for
inflammasome activation in the presence of waste products from the visual cycle. Inflammasomes are intracellular protein structures that lead to cell death.
Other studies have shown the presence of inflammasomes inside the RPE cells of post-mortem eyes of patients with GA. Formation of C5b, in combination
with serum proteins C6, C7, C8 and C9, leads to the generation of C5b-9, referred to as membrane attack complex, or MAC, which has been shown to
cause cell death. In particular, various studies have shown that MAC, together with the presence of lipofuscin, a yellow-brown waste byproduct from the
visual cycle that is commonly found in the RPE cells of AMD patients, interferes with the proper functioning of RPE cells, leading to their dysfunction and
death.
A simplified illustration of the complement system and the relationships between the complement proteins appears below:
Although the causes of AMD are not completely understood—in addition to advanced age, there are environmental and genetic risk factors that
contribute to the development of AMD including ocular pigmentation, dietary factors, a positive family history for AMD, high blood pressure and smoking
—a body of recent scientific literature suggests that complement system activation may also contribute to the pathogenesis of AMD. A study published in
the Journal of Immunology in 2015 concluded that MAC accumulation in RPE cells leads to mitochondrial damage and cellular dysfunction, which we
believe eventually leads to RPE cell death. Additionally, a study published in the American Journal of Ophthalmology in 2002 described the presence of
MAC in post-mortem human donor eyes with dry AMD and GA. A study published in Nature Communications in 2021 used patient-derived induced
pluripotent stem cells to show that local activation of the complement system could induce drusen formation in RPE cells and that the inhibition of C5a
could mitigate AMD-like pathology in the RPE cells. We believe these findings suggest that inhibition of the complement system, especially an inhibitor
that prevents the cleavage of C5 into C5a and C5b, could prevent RPE cell death and potentially other pathological causes of AMD.
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The pathogenesis of STGD1, which is caused by a mutation in the ABCA4 gene, also may involve activation of the complement system. With a defective
copy of the ABCA4 protein, waste byproducts that a normal ABCA4 protein would otherwise help to clear accumulate in the RPE. Waste byproducts that
accumulate in the RPE are referred to as bisretinoids. We believe that the accumulation of bisretinoids in RPE cells leads to activation of the complement
system and the accumulation of MAC. In RPE cells, MAC is normally cleared by lysosomes, which are organelles within cells responsible for waste
degradation and disposal. Bisretinoid accumulation leads to lysosomal dysfunction, potentially preventing the clearance of MAC. MAC accumulation also
negatively impacts energy production by mitochondria inside RPE cells. Bisretinoid and MAC accumulation may lead to RPE cell deterioration and
contribute to the subsequent loss of photoreceptor cells, leading to a decrease in vision over time.
In April 2017, Proceedings of the National Academy of Sciences, or PNAS, published a study reporting on the effects of complement system modulation
in the RPE of a mouse model of Stargardt disease. The researchers injected recombinant AAV containing the coding sequence for CRRY, a protein that
inhibits complement system activation, into albino ABCA4 mutant mice, which led to a two-fold reduction in the accumulation of bisretinoids and a 30%
increase in the number of photoreceptor nuclei at one year. The study findings indicate that the inhibition of complement activation in the albino ABCA4
mutant mice leads to healthier RPE cells as compared to RPE cells of untreated mice. Researchers at Duke University published a 2013 paper in
Investigative Ophthalmology & Visual Science, in which they found in an in vitro experiment that RPE cell damage resulting from the combination of
complement system activation and visual cycle waste was more damaging than either component individually. When complement factor C5 was blocked,
there was a significant improvement in RPE cell viability in vitro. Based on the data from these in vitro and in vivo experiments, we believe molecules
involved in the inhibition or regulation of the complement system and MAC activation are prime targets for therapeutic intervention in STGD1.
Zimura is designed to target and inhibit the cleavage of complement protein C5 and the formation of the terminal fragments, C5a and C5b. By inhibiting
the formation of complement system terminal fragments, Zimura may decrease the activation of inflammasomes and decrease the formation of MAC,
thereby potentially avoiding or slowing the degeneration of RPE cells and providing the rationale as a potential therapy for various stages of AMD and
STGD1.
Our Zimura Clinical Programs
The following is a brief description of the completed GATHER1 trial, the ongoing GATHER2 and STAR trials and the planned intermediate AMD trial,
and their current status:
• GATHER1 (GA secondary to AMD - completed): an international, randomized, double-masked, sham controlled, multi-center Phase 2/3 clinical
trial evaluating the safety and efficacy of Zimura for the treatment of GA secondary to AMD. We enrolled 286 patients in this trial across multiple
treatment groups, including various Zimura doses and sham control groups, and patients were treated and followed for 18 months. In October
2019, we announced positive 12-month data from this trial and in June 2020, we completed this trial and announced 18-month data from this trial,
which supported the 12-month data. In this trial, the treatment effect was observed as early as 6 months, with an increase in the absolute difference
of the mean change in GA growth for treatment with either Zimura 2 mg or Zimura 4 mg, as compared to sham, at each subsequent time point,
suggesting the progressive benefit of continuous treatment with Zimura.
• GATHER2 (also known as ISEE2008; GA secondary to AMD - ongoing): an international, randomized, double-masked, sham controlled, multi-
center Phase 3 clinical trial evaluating the safety and efficacy of Zimura for the treatment of GA secondary to AMD. In July 2021, we completed
patient enrollment with a total of 448 patients enrolled. Patients were randomized on a 1:1 basis into either a treatment group with monthly
intravitreal injections of Zimura 2 mg or a sham control group. As agreed to with the FDA in connection with the SPA, the primary efficacy
endpoint will be the mean rate of growth (slope) estimated based on GA area measured by fundus autofluorescence, or FAF, in at least three
timepoints: baseline, month 6 and month 12. We plan to analyze the primary efficacy endpoint at 12 months, and treat and follow patients for 24
months. We expect 12-month top-line data to be available during the second half of 2022, approximately one year following the enrollment of the
last patient plus the time needed for database lock and analysis.
•
Planned intermediate AMD trial: We expect this trial to be an international, randomized, double-masked, sham-controlled, multi-center Phase 3
trial with approximately 200 patients per treatment group. We expect to follow and treat patients for 24 months. We are currently evaluating other
aspects of the design of this trial, including patient inclusion criteria and primary efficacy endpoints. We plan to obtain feedback from regulatory
authorities on our plans for this trial and our development strategy in this indication, before initiating this trial during the second half of 2022.
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•
STAR (also known as OPH2005; STGD1 - ongoing): an international, randomized, double-masked, sham controlled, multi-center Phase 2b
clinical trial evaluating the safety and efficacy of Zimura for the treatment of STGD1. We initially enrolled 95 patients in this trial, none of whom
have remaining study visits. In July 2020, we reopened enrollment in this trial in the United States. We continue to enroll patients and plan to
enroll approximately 25 additional patients, with the goal of enrolling a total of approximately 120 patients. We have been and will remain masked
until results are analyzed for all the patients in this trial. We expect data from this trial to become available after the top-line data from the
GATHER2 trial.
In addition to the GATHER1 trial, we have completed multiple clinical trials evaluating various doses of Zimura in age-related retinal diseases,
including:
• OPH2001, a Phase 1/2a clinical trial of various doses of Zimura for the treatment of GA, with a total of 47 patients enrolled;
• OPH2000: a Phase 1/2a clinical trial of various doses of Zimura administered in combination with Lucentis® (ranibizumab), an anti-vascular
endothelial growth factor, or anti-VEGF, agent, for the treatment of wet AMD, with a total of 60 patients enrolled;
• OPH2007, a Phase 2a clinical trial of various doses of Zimura administered in combination with Lucentis for the treatment of wet AMD, with a
total of 64 patients enrolled and treated; and
• OPH2002: a very small Phase 2a clinical trial of Zimura in combination with anti-VEGF agents for the treatment of idiopathic polypoidal
choroidal vasculopathy, or IPCV, in patients for whom anti-VEGF monotherapy had failed.
Over 350 patients have been treated with Zimura in these completed clinical trials, with treatment durations extending up to 18 months. All doses
of Zimura administered in these trials were well-tolerated, with only a single occurrence of an adverse event, mild subcapsular cataract, assessed to be
drug-related by participating investigators.
Zimura is administered by intravitreal injection. Patients receiving intravitreal injections typically receive topical numbing drops or injection of a
numbing agent prior to the injection. The administering physician also typically rinses the ocular surface with an antiseptic solution. By injecting the active
agent into the vitreous cavity, the physician delivers the agent in close vicinity to the active disease site while minimizing the risk for systemic exposure to
non-ocular tissues.
An intravitreal injection results in elevation of intraocular pressure, or IOP, which is usually transient. In our clinical trials, the IOP is monitored after
each intravitreal injection. Certain of the dosing regimens we are evaluating in STAR involve multiple intravitreal injections administered on the same day.
Based on our clinical experience to date, we have not seen any meaningful or sustained increase in IOP in clinical trials involving multiple intravitreal
injections on the same day, and we believe that multiple intravitreal injections likely could be delivered safely on the same day.
Our Zimura clinical experience to date, as well as our ongoing and planned clinical trials for Zimura, are described in greater detail below.
Zimura - GA Trials
GATHER1: Completed Clinical Trial Assessing the Safety and Efficacy of Various Doses of Zimura for GA Secondary to AMD
In October 2019, we announced 12-month data from the GATHER1 trial and in June 2020, we completed and announced 18-month data from this trial.
The primary efficacy analysis was performed at the 12-month time point. Pursuant to the clinical trial protocol, patients continued to be treated and
followed through month 18. We remained masked regarding the treatment group to which each individual patient was randomized throughout the duration
of the trial. Following the conclusion of the trial, we have continued to review and analyze the unmasked, individual patient data from this trial. In June
2021, July 2021 and February 2022, we announced data from additional post-hoc analyses that we performed.
Trial Design and Enrollment
A total of 286 patients were enrolled across two parts of the trial.
Part 1. In Part 1 of the trial, 77 patients were randomized into one of three treatment groups in a 1:1:1 ratio as follows:
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Cohort
Patients
Zimura 1 mg
26
Zimura 2 mg
25
Sham
26
In Part 1 of the trial, Zimura was administered by monthly intravitreal injections, while patients in the sham control group received monthly sham
injections. In 2017, based on the announcement of positive data from a competitor studying a different complement inhibitor in a Phase 2 clinical trial in
GA and following review of additional third-party clinical trial data and further statistical analysis, we modified the trial design to change the total number
of patients to be enrolled, to change the primary efficacy endpoint from a vision endpoint to an anatomic endpoint, to shorten the time point for the primary
efficacy analysis to month 12 and to include a Zimura 4 mg dose group. The patients who were enrolled in Part 1 remained in the trial following these
modifications and we remained masked regarding the treatment group to which each patient was randomized.
Part 2. In Part 2 of the trial, we enrolled 209 additional patients, who were randomized into one of three treatment groups in a 1:2:2 ratio as follows:
Cohort
Patients
Zimura 2 mg
42
Zimura 4 mg
83
Sham
84
In Part 2 of the trial, patients in the Zimura 2 mg group received one intravitreal injection of Zimura 2 mg and one sham injection at each monthly visit;
patients in the Zimura 4 mg group received two intravitreal injections of Zimura 2 mg at each monthly visit; and patients in the sham control group
received two sham injections at each monthly visit. In its current formulation, doses of Zimura above 2 mg would require more than one intravitreal
injection.
The primary efficacy endpoint was the mean rate of growth of GA over 12 months, while secondary efficacy endpoints evaluated mean changes in
patients' visual acuity in different lighting conditions over the same period.
Key Inclusion and Exclusion Criteria
In order to determine eligibility to participate in the trial, the location and size of each patient’s GA was assessed using FAF images. FAF is a common
imaging technique used by retina specialists for photographing and documenting the size of GA present in the back of the eye, or fundus. Autofluorescence
refers to the natural emission of light by biological structures. In FAF images, areas of atrophy are characterized by lower autofluorescence. An
independent masked reading center assessed FAF images throughout the trial, including at baseline to determine eligibility.
2
2
The fovea is the central portion of the macula where visual acuity is the highest. We sought to enroll patients whose GA was located, in whole or in part,
within 1500 microns of the foveal center but that did not enter the foveal center. A disc area is the size of the area of the retina where a standard sized optic
nerve emerges, which is generally accepted to be 2.5 mm . We sought to enroll patients with a total GA area of between 1 and 7 disc areas (or 2.5 mm to
17.5 mm ) inclusive. If the GA was multifocal, meaning it was not continuous and had multiple locations, at least one focal lesion needed to measure at
least 0.5 disc areas (or 1.25 mm ). Each patient's BCVA was also assessed using the Snellen equivalent scale, which equates the detail a patient can see at a
distance of 20 feet with the detail an individual with 20/20 vision can see at a greater distance. For example, a patient with 20/50 vision sees at 20 feet what
a person with 20/20 vision would see at 50 feet. To be eligible to participate in the trial, patients' BCVA in the study eye was initially required to be
between 20/25 and 20/100 inclusive during Part 1 of the trial. As part of the modifications we made for Part 2 of the trial, we expanded the inclusion
criteria to include patients whose BCVA in the study eye was between 20/25 and 20/320 inclusive. BCVA on the Snellen equivalent scale can be equated to
a number of letters of vision on the Early Treatment of Diabetic Retinopathy Study, or ETDRS, chart. BCVAs of 20/25, 20/100 and 20/320 on the Snellen
equivalent scale are equivalent to 80 ETDRS letters, 50 ETDRS letters and 25 ETDRS letters, respectively.
2
2
Patients were stratified across treatment groups by baseline BCVA, baseline GA area and the baseline pattern of autofluorescence at the margins of the
GA lesion, referred to as the junctional zone. Stratification for baseline characteristics is a method for allocating patients to treatment groups to ensure that
there are approximately the same ratio of patients with a given baseline characteristic in each treatment group as the overall randomization ratio. For vision,
patients were stratified based on whether their vision was above or below 50 ETDRS letters. For GA area, patients were stratified based on whether their
GA area was above or below 4 disc areas. For autofluorescence pattern, patients were stratified based on several well-known patterns that have been
described in the scientific literature.
As part of the modifications for Part 2 of the trial, we amended the clinical trial protocol to provide that patients in any arm of the trial who developed
CNV in the study eye would be removed from the trial and any future study treatments and assessments, since we did not believe, at the time of the
modifications, that GA lesions for patients with CNV in the study eye could be reliably measured with FAF images.
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Additionally, patients who had a prior history of intravitreal treatment for any indication in either eye were excluded, as well as patients with any ocular
condition in the study eye that could affect central vision or otherwise confound assessments.
Baseline Characteristics
2
We collected baseline characteristics for all patients participating in the trial. GA area was measured based on the area of GA in square millimeters
(mm ). Reported scientific literature indicates that the rate of GA growth may be dependent on the baseline lesion size, with larger GA lesions generally
growing faster than smaller lesions, subject to an overall plateau effect as the GA grows to consume almost the entire macula. For this reason, patients were
stratified in this trial based on their baseline lesion size. To further mitigate for the impact of baseline lesion size on the growth of GA, a square root
transformation was performed. It is reported in the scientific literature and accepted in the field that using the square root of the lesion size for calculating
the mean change in size over time mitigates for the impact of the baseline lesion size. We used the square root transformation of GA area, measured in
millimeters (mm), to perform the assessment of the primary efficacy endpoint in the GATHER1 trial.
Although GA can be associated with profound and irreversible vision loss, the vision loss that patients experience is not necessarily linearly correlated to
the progression of GA. The specific location of the GA within patients' retinas can affect patients' vision differently. In general, patients whose GA expands
into the fovea experience vision loss that is disproportionate to the vision loss experienced by patients whose GA does not expand into the fovea. Further,
patients with GA may demonstrate good visual acuity but poor functional vision if their GA results in dark spots, referred to as scotomas, in their central
visual field. Patients with scotomas may be able to read a vision chart letter-by-letter, especially if their GA has not entered the fovea, but they may have
trouble reading a paragraph of text or driving, as these activities of daily living draw upon a field of vision that is broader than a single point of focus. For
this reason, and based on our prior interactions with the FDA, we believe the efficacy assessment that is most likely to demonstrate clinical relevance for an
investigational product across a heterogeneous GA patient population is reduced rate of growth in GA. If an investigational product can slow the growth of
GA, it has the potential to preserve, or slow the loss of, functional vision for patients whose GA is expanding into critical areas of their central visual field,
which would be clinically meaningful.
In addition to baseline GA area, it has been reported in the scientific literature that GA that is non-subfoveal, or that has not impacted the foveal center, is
positively correlated with a higher rate of GA area progression and growth. We believe that once a GA lesion expands into the fovea, the rate of growth
may be slowed. In addition, once GA expands to encompass the central fovea, additional progression can be limited in the central region of the retina, with
any continued expansion occurring predominantly in the outer part of the retina.
In addition to measuring the area of GA, we followed patients for changes in their vision (BCVA), as measured both at a standard light level, or
luminance, and lower light level, or low luminance (LL BCVA), measured in each case by ETDRS letters. Testing for visual acuity serves as an important
safety assessment to assure that the decrease in visual acuity in the Zimura treatment groups was not different from the sham control groups. Because we
believe that BCVA is not the optimal assessment to evaluate the impact of GA on patients’ functional vision, we included vision in the prespecified
statistical analysis as a secondary, and not as a primary, endpoint.
For patients within each treatment group, where a numerical measurement was collected, we calculated the mean and standard deviation, or SD, for each
measurement. SD is a statistical measure of the variability of a particular measurement within a patient population. Generally, two-thirds of all patients fall
within approximately one SD, plus or minus, of the mean for any particular measurement.
The baseline characteristics are presented below for each treatment group in each Part of the trial. These baseline characteristics include the ITT, or
intent-to-treat, population, which includes all patients who were randomized in the trial and who received at least one dose of study drug in the relevant
treatment group. Based on these data, we believe that the baseline characteristics were generally balanced across the treatment groups.
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Cohort
Mean age, years (SD)
Female gender, number (%)
Active smokers, number (%)
Caucasian race, number (%)
Iris color:
Light
Medium
Dark
Mean intraocular pressure, mmHg (SD)
Non-subfoveal GA, number (%)
Mean GA area, mm (SD)
2
Mean Sq. Root of GA area, mm (SD)
Bilateral GA, number (%)
Mean BCVA, ETDRS letters (SD)
Mean LL BCVA, ETDRS letters (SD)
Patients with Hyperautofluorscence (%)
Height, cm (SD)
Weight, kg (SD)
12-Month Data
12-Month Safety Data
Part 1
Zimura 1 mg
(N = 26)
Zimura 2 mg
(N = 25)
Sham
(N = 26)
78.1 (8.4)
18 (69.2%)
7 (26.9%)
25 (96.2%)
17 (65.4%)
7 (26.9%)
2 (7.7%)
14.5 (2.8)
22 (84.6%)
77.7 (9.6)
18 (72.0%)
10 (40.0%)
25 (100%)
16 (64.0%)
6 (24.0%)
3 (12.0%)
14.6 (2.6)
20 (80.0%)
6.60 (3.35)
2.471 (0.717)
25 (100%)
71.6 (7.5)
43.0 (19.7)
25 (100%)
165.9 (8.6)
75.6 (14.9)
7.33 (3.73)
2.623 (0.687)
25 (96.2%)
71.3 (7.5)
36.7 (21.2)
26 (100%)
164.9 (12.1)
74.7 (15.6)
73.8 (8.0)
15 (57.7%)
6 (23.1%)
25 (96.2%)
13 (50.0%)
7 (26.9%)
6 (23.1%)
15.0 (1.9)
23 (88.5%)
7.37 (4.32)
2.591 (0.827)
26 (100%)
70.5 (8.0)
38.1 (22.7)
25 (96.2%)
168.7 (12.0)
81.9 (17.8)
Part 2
Zimura 2 mg
(N = 42)
Zimura 4 mg
(N = 83)
Sham 4 mg
(N = 84)
79.4 (10.7)
27 (64.3%)
15 (35.7%)
42 (100%)
29 (69.0%)
9 (21.4%)
4 (9.5%)
14.1 (2.4)
42 (100%)
7.77 (4.01)
2.705 (0.684)
42 (100%)
69.4 (11.3)
33.1 (21.3)
41 (97.6%)
164.9 (11.0)
80.8 (22.3)
79.2 (8.3)
58 (69.9%)
26 (31.3%)
82 (98.8%)
54 (65.1%)
22 (26.5%)
7 (8.4%)
15.2 (2.5)
81 (97.6%)
7.90 (4.18)
2.715 (0.732)
83 (100%)
69.5 (9.8)
36.8 (20.9)
82 (98.8%)
163.7 (10.6)
76.2 (18.2)
78.2 (9.0)
61 (72.6%)
29 (34.5%)
82 (97.6%)
57 (67.9%)
21 (25.0%)
6 (7.1%)
14.9 (2.5)
82 (97.6%)
7.45 (3.89)
2.636 (0.709)
83 (98.8%)
68.3 (11.0)
33.9 (18.8)
83 (98.8%)
163.7 (9.3)
78.4 (17.8)
Based on our review of the safety data to date, Zimura was generally well tolerated after 12 months of administration. Over this 12-month time period,
there were no investigator-reported ocular serious adverse events, no Zimura-related adverse events, no cases of Zimura-related intraocular inflammation,
no cases of Zimura-related increased intraocular pressure, no cases of endophthalmitis, and no discontinuations attributed by investigators to Zimura in the
trial. The numbers below are based on investigator-reported adverse events occurring up through the month 12 time point for all patients.
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The number of patients with one or more serious, systemic, treatment emergent adverse events, or TEAEs, organized by MedDRA system organ class, a
standard method of reporting adverse events, are set forth in the table below:
Patients with One or More Serious TEAEs in Any Organ Class
Cardiac disorders
Gastrointestinal disorders
General disorders and administration site conditions
Hepatobiliary disorders
Infections and infestations
Injury, poisoning and procedural complications
Metabolism and nutrition disorders
Musculoskeletal and connective tissue disorders
Benign, malignant and unspecified neoplasms (including cysts and
polyps)
Nervous system disorders
Psychiatric disorders
Respiratory, thoracic and mediastinal disorders
Zimura 1
mg
(N = 26)
1 (3.8%)
1 (3.8%)
0
0
0
0
0
1 (3.8%)
0
1 (3.8%)
0
0
Part 1
Zimura 2
mg
(N = 25)
0
1 (4.0%)
0
1 (4.0%)
1 (4.0%)
1 (4.0%)
0
0
0
1 (4.0%)
0
1 (4.0%)
Sham
(N = 26)
0
1 (3.8%)
0
1 (3.8%)
0
0
1 (3.8%)
0
0
1 (3.8%)
1 (3.8%)
0
Zimura 2
mg
(N = 42)
0
0
1 (2.4%)
0
1 (2.4%)
1 (2.4%)
0
0
0
1 (2.4%)
0
0
Part 2
Zimura 4
mg
(N = 83)
2 (2.4%)
2 (2.4%)
0
1 (1.2%)
6 (7.2%)
3 (3.6%)
0
0
1 (1.2%)
3 (3.6%)
0
2 (2.4%)
Sham 4 mg
(N = 84)
3 (3.6%)
6 (7.1%)
0
0
2 (2.4%)
2 (2.4%)
0
2 (2.4%)
2 (2.4%)
1 (1.2%)
1 (1.2%)
3 (3.6%)
The number of patients with one or more systemic TEAEs, including serious systemic TEAEs, identified by the investigator as related to the study drug
(Zimura or sham) are set forth in the table below:
Reported Systemic TEAEs Related to Zimura or Sham
Subjects with at least one TEAE
Zimura 1
mg
(N = 26)
Part 1
Zimura 2
mg
(N = 25)
0
0
Sham
(N = 26)
0
Zimura 2
mg
(N = 42)
Part 2
Zimura 4
mg
(N = 83)
Sham 4 mg
(N = 84)
0
0
0
The number of patients with one or more ocular TEAEs in the study eye are set forth in the table below:
Reported Ocular TEAEs in Study Eyes
Eye disorders
Eye disorders related to injection procedure
Zimura 1
mg
(N = 26)
12 (46.2%)
3 (11.5%)
Part 1
Zimura 2
mg
(N = 25)
8 (32.0%)
4 (16.0%)
Zimura 2
mg
(N = 42)
Part 2
Zimura 4
mg
(N = 83)
24 (57.1%)
14 (33.3%)
50 (60.2%)
36 (43.4%)
Sham
(N = 26)
4 (15.4%)
2 (7.7%)
Sham 4 mg
(N = 84)
33 (39.3%)
23 (27.4%)
All of the above TEAEs that were not related to the injection procedure were also not related to the study drug. The number of patients with one or more
ocular TEAEs in the study eye, identified by the investigator as related to the study drug (Zimura or sham) is set forth in the table below:
Reported Ocular TEAEs in the Study Eye Related to Zimura or Sham
Subjects with at least one TEAE
Zimura 1
mg
(N = 26)
Part 1
Zimura 2
mg
(N = 25)
0
0
Sham
(N = 26)
0
Zimura 2
mg
(N = 42)
Part 2
Zimura 4
mg
(N = 83)
Sham 4 mg
(N = 84)
0
0
0
Incidence of CNV. During the first 12 months of this trial, the incidence of investigator reported CNV in the untreated fellow eyes was 10 patients (3.5%)
and in the study eyes was 3 patients (2.7%) in the sham group, 1 patient (4.0%) in the Zimura 1 mg group, 6 patients (9.0%) in the Zimura 2 mg group, and
8 patients (9.6%) in the Zimura 4 mg group.
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Statistical Analysis for Efficacy Measures
GATHER1 was designed as a Phase 2b screening trial based on the criteria described by Drs. Thomas Fleming and Barbara Richardson in their
publication regarding clinical trial design in the context of microbicides for the prevention of HIV in the Journal of Infectious Disease in 2004. A screening
trial uses the same primary efficacy endpoint as an anticipated Phase 3 clinical trial that would be used to support potential marketing approval. However,
screening trials generally have a considerably smaller sample size than the anticipated Phase 3 clinical trial. Because it is particularly important to avoid
false negative outcomes in a screening trial, screening trials may have higher false positive error rates than would typically be allowed in a Phase 3 trial.
A Phase 2b screening trial has three possible outcomes:
•
•
•
If the estimated effect size indicates low levels of benefit, the experimental intervention would be judged as not plausibly more efficacious than
the sham control, and should be discarded in its current dosage in the indication evaluated;
If the estimated effect size is moderate but clinically relevant, with a relatively low likelihood of being achieved (for example, a probability of less
than 10%) if there truly were no effect, the experimental intervention would be judged as plausibly more efficacious than the sham control and
should be evaluated definitively in subsequent Phase 3 clinical trials; or
If the estimated effect size is clinically relevant and reaches the traditional threshold for statistical significance, as was the case in the GATHER1
trial for both the Zimura 2 mg and Zimura 4 mg dose groups as compared to the corresponding sham control groups, the trial could potentially
serve as one of the two pivotal trials typically required for marketing approval.
A properly designed Phase 2b screening trial has a considerable likelihood of ruling out ineffective or harmful interventions, while providing encouraging
(or even statistically significant) evidence of benefit that likely would require confirmation by one additional, independent Phase 3 trial.
For the primary and secondary efficacy analyses we evaluated the ITT population in accordance with a prespecified statistical analysis plan.
The statistical evidence from the GATHER1 trial regarding the comparison of Zimura 2 mg to sham control is provided by data from both Part 1, with a
1:1 randomization ratio of patients receiving Zimura 2 mg (25 patients) and sham (26 patients), as well as data from Part 2, with a 1:2 randomization ratio
of patients receiving Zimura 2 mg (42 patients) and sham (84 patients), for a total of 67 patients receiving Zimura 2 mg and 110 patients receiving
sham. While we believe it is appropriate to use the aggregate data from Parts 1 and 2 in the analysis of the relative effects of Zimura 2 mg as compared to
sham, it would not be appropriate to simply pool the data from patients in both Parts 1 and 2, in particular, because the randomization fraction differs across
these two parts of the trial. However, based on the randomization procedures used in each part of the trial, for purposes of statistical comparisons, within
Part 1 of the trial, the 25 patients receiving Zimura 2 mg should be comparable to the 26 patients receiving sham. Similarly, for purposes of statistical
comparisons, within Part 2 of the trial, the 42 patients receiving Zimura 2 mg should be comparable to the 84 patients receiving sham. The efficacy of
Zimura 2 mg was therefore evaluated through an analysis which included a regression factor by trial part. The statistical analysis for the Zimura 4 mg group
as compared to sham compares data for patients from Part 2 of the trial only. Data from patients receiving Zimura 1 mg in Part 1 of the trial was not part of
the prespecified statistical analysis for the efficacy endpoints.
The prespecified statistical analysis plan for the primary and secondary endpoints of this trial used the mixed-effects repeated measures model, or MRM,
to compare data for the Zimura 2 mg and Zimura 4 mg groups to the corresponding sham groups. Repeated measures models are often used when the same
outcome is measured at several time points for each patient. These models make use of all available data points to estimate the measurement of interest, the
mean rate of change of GA growth, without making overly restrictive assumptions. In addition, these models are generally robust to missing data under the
assumption that data are missing at random. During the course of a clinical trial, patients may withdraw from the clinical trial because their condition is
asymptomatic, because patients believe that continued participation in the trial is not justified based on the time commitment or treatment burden, such as
receiving monthly intravitreal injections, at the recommendation of the investigator or because the protocol requires it. Additionally, patients may not come
to a scheduled visit at which key assessments are scheduled to be taken or patient data may not be evaluable because of poor image quality or data
recording errors. Early withdrawal, missed visits and unevaluable data all result in data missing from the final data set for a clinical trial. Although the
protocol called for collection of FAF images of GA at baseline, at month 6 and at month 12, for patients who withdrew from the trial before month 12, the
study protocol required the collection of an FAF image to provide a measurement of GA at the time of withdrawal, which was included in the primary
analysis so long as it was taken within the month prior to either the month 6 or month 12 time point. Because the MRM model would only need
measurements from at least two different
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time points for analysis purposes, one of which must be the baseline, we were able to include in the primary analysis all patients who had GA
measurements at baseline and within the month prior to either month 6 or month 12, or both.
The following table sets forth for the data in the primary statistical analysis the number of patients for whom GA measurements were missing for
purposes of performing this analysis. Patients whose GA measurements were missing at baseline, or at both month 6 and month 12, could not be included
in the primary analysis. All other patients were included in the primary analysis.
Cohort
Missing GA measurement at BL, M6 and M12
Missing GA measurement at M6 and M12 only
Missing GA measurement at BL only
Total patients excluded from MRM analysis
Missing GA measurement at M6 only
Missing GA measurement at M12 only
No missing GA measurements
Total patients included in MRM analysis
(a)
BL = Baseline; M6 = Month 6; M12 = Month 12
(a) = complete observations
Zimura 2 mg
(N = 67)
0 (0%)
8 (11.9%)
0 (0%)
8 (11.9%)
1 (1.5%)
10 (14.9%)
48 (71.6%)
59 (88.0%)
Sham 2 mg
(N = 110)
0 (0%)
11 (10.0%)
0 (0%)
11 (10%)
7 (6.4%)
9 (8.1%)
83 (75.5%)
99 (90.0%)
Zimura 4 mg
(N = 83)
0 (0%)
17 (20.5%)
1 (1.2%)
18 (21.7%)
3 (3.6%)
11 (13.3%)
51 (61.5%)
65 (78.3%)
Sham 4 mg
(N = 84)
0 (0%)
5 (6.0%)
0 (0%)
5 (6.0%)
6 (7.1%)
7 (8.3%)
66 (78.6%)
79 (94.1%)
In total, 53 (18.5%) patients withdrew from the trial during the first 12 months. Of the patients who withdrew during the first 12 months, 2 patients were
from the Zimura 1 mg group (7.7% withdrawals), 12 patients were from the combined Zimura 2 mg group (17.9% withdrawals), 25 patients were from the
Zimura 4 mg group (30.1% withdrawals) and 14 patients were from the combined sham group (12.7% withdrawals). GA measurements for patients who
withdrew from the study prior to the 12 month time point may have been included in the MRM analysis, as detailed in the table above.
Sensitivity analyses. We performed several sensitivity analyses to assess the impact of missing data on the robustness of the GATHER1 trial results. The
analyses we performed were based on approaches that the FDA generally recommends sponsors of investigational products use to evaluate their clinical
data. Based on these analyses, and accounting for the data missing from our data set because of patient withdrawals or for other reasons, the statistical
analysis for the 12 month data from the GATHER1 trial appear to be robust. Descriptions of these sensitivity analyses and their outcomes are summarized
below. For a description of the thresholds we used to determine statistical significance on the primary efficacy endpoint, see the paragraph below the tables
below under "Primary Efficacy Endpoint Data."
• A "shift imputation" approach, in which missing data are imputed, or replaced, by values calculated from similar patients with observed values,
plus a defined shift. The analysis is repeated assuming a progressively larger shift with each iteration. The analysis becomes increasingly
conservative as the shift increases (because missing values are replaced by worse values than would have been observed, had the values not been
missing). The shift is increased until a tipping point is reached and statistical significance is lost. If significance is lost for smaller shift values, the
results of the analyses are sensitive to missing data, whereas if significance is lost for larger shift values, the results of the analyses are robust to
missing data.
A shift of at least 0.05 mm in terms of square root of GA growth was required to lose statistical significance for both the Zimura 2 mg and Zimura
4 mg groups. The difference between the Zimura treatment groups and the corresponding sham groups, in terms of mean change of square root of
GA growth, was 0.11 mm for the Zimura 2 mg group and 0.12 mm for the Zimura 4 mg group, so a shift of 0.05 mm represents more than 40% of
the observed treatment effect, which is large.
• Arbitrary imputation approaches, in which missing data are replaced by:
◦
◦
the mean value of the same treatment group, which seems a reasonable imputation approach since it replaces missing values by the mean of
all observed values in the same treatment group;
the mean value of the comparator treatment group, which is a very conservative approach. If there is a treatment effect, missing values in the
sham control group are replaced by better values, on average, from the Zimura treatment group, while missing values in the Zimura treatment
group are replaced by worse values, on average, from the sham control group;
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◦
◦
the mean value of both treatment groups, which is a conservative approach because it assumes no treatment effect for missing values; and
the mean value of the sham control group, which is also a conservative approach because it draws only upon data from the sham control
group, which by definition did not have any treatment benefit.
Statistical significance for the reduction in mean rate of GA growth for the Zimura 2 mg and Zimura 4 mg groups as compared to the
corresponding sham groups was retained for all arbitrary imputation approaches.
• A “pattern mixture model imputation” approach, which is a technically complex model and is especially useful when data are suspected to be
missing “not at random”.
Statistical significance for the reduction in mean rate of GA growth for the Zimura 2 mg and Zimura 4 mg groups as compared to the
corresponding sham groups was retained for the pattern mixture model imputation approach, which suggests again that the results of the analyses
are robust to missing data, even if these data had been missing not at random.
Based on our sensitivity analyses, and accounting for the data missing from our data set because of patient withdrawals or for other reasons, we believe the
statistical analysis for the 12 month data from the GATHER1 trial is robust.
Primary Efficacy Endpoint Data
The prespecified primary efficacy endpoint was an anatomic endpoint, the mean change in rate of GA growth over 12 months, as measured by FAF
based on readings at three time points: baseline, month 6 and month 12, calculated using the square root transformation of the GA area. The readings were
performed by an independent masked reading center. The primary efficacy endpoint data are summarized in the following table:
Mean Rate of Change in GA Area from Baseline to Month 12
(MRM Analysis) (Square Root Transformation)
Mean Change in GA (mm)
Cohort
(a)
Cohort
(a)
Mean Change in GA (mm)
Zimura 2 mg
(N = 67)
(b)
0.292
Zimura 4 mg
(N = 83)
0.321
Sham 2 mg
(N = 110)
(b)
0.402
Sham 4 mg
(N = 84)
0.444
Difference
0.11
Difference
0.124
P-value
(c)
0.0072
P-value
(c)
0.0051
% Difference
27.38%
% Difference
27.81%
(a) Based on the least squares mean from the MRM model.
(b) These least squares means are estimates from the MRM model, drawing on all available data, including data from groups with different randomization
ratios in Part 1 and Part 2, and should not be interpreted as directly observed data.
(c) Reflects statistically significant p-value; Hochberg procedure was used for significance testing.
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The analysis of the mean change in GA growth for Zimura 2 mg as compared to Sham 2 mg was adjusted for the fact that this dose of Zimura was tested
in the two parts of the trial, which had different randomization ratios. The least squares mean changes in GA in Part 1 and Part 2 are shown separately in
the following table:
Mean Rate of Change in GA Area from Baseline to Month 12
(MRM Analysis) (Square Root Transformation)
Cohort
Part 1
Mean Change in GA (mm)
(a)
(a) Based on the least squares mean from the MRM model.
Cohort
Part 2
Mean Change in GA (mm)
(a)
(a) Based on the least squares means from the MRM model.
Zimura 2 mg
(N = 25)
0.329
Zimura 2 mg
(N = 42)
0.308
Sham 2 mg
(N = 26)
0.42249
Sham 2 mg
(N = 84)
0.42245
Difference
0.093
Difference
0.114
When the data from the Zimura 2 mg comparisons from each Part of the trial are analyzed using the MRM model, which includes a regression factor by
part, the mean difference in GA growth over 12 months between the Zimura 2 mg and sham control groups is 0.110 mm.
Statistical significance is established by performing statistical analysis on a data set to assess the degree to which an observed outcome is likely to be
associated with variability in the studied patient population or chance as compared to the impact of the investigational product being studied. A higher
degree of statistical significance is associated with a lower p-value. Typically, a two-sided p-value of 0.05 or less represents statistical significance when
performing only a single prespecified primary analysis for a single primary endpoint. However, when multiple doses of a drug are tested, a more stringent
statistical method that accounts for multiple comparisons must be applied. For this purpose, we used the Hochberg multiple comparison procedure to assess
the statistical significance of the results observed in the GATHER1 trial. Under the Hochberg procedure, it is necessary to use a stricter standard for
statistical significance (a two-sided p-value of 0.025 or less) for any particular dose. For GATHER1, the results for the primary efficacy endpoint observed
for both the Zimura 2 mg and Zimura 4 mg groups, as compared to the corresponding sham group, achieved p-values of 0.0072 and 0.0051, respectively,
both of which are less than 0.025, indicating that both results were statistically significant.
Observed GA Data (non-square root transformation)
In addition to analyzing the mean rate of change in GA area at month 12 using the square root transformation of the GA area (measured in millimeters
(mm)), we also analyzed the mean rate of change in GA area using the observed GA area (without the square root transformation, measured in square
millimeters (mm )), with the MRM model. This descriptive analysis was also part of the prespecified statistical analysis plan for this trial. The observed
mean GA area data for the Zimura 2 mg and Zimura 4 mg groups as compared to the corresponding sham control groups are summarized in the following
table:
2
Mean Rate of Change in GA Area from Baseline to Month 12
(MRM Analysis) (Observed)
2
Mean Change in GA (mm )
Cohort
(a)
2
Mean Change in GA (mm )
Cohort
(a)
Zimura 2 mg
(N = 67)
(b)
1.592
Zimura 4 mg
(N = 83)
2.061
Sham 2
(N = 110)
(b)
2.290
Sham
(N = 84)
2.77
Difference
% Difference
0.697
30.45%
Difference
% Difference
0.709
25.59%
(a) Based on the least squares mean from the MRM model.
(b) These least squares means are estimates from the MRM model, drawing on all available data, including data from groups with different randomization
ratios in Part 1 and Part 2, and should not be interpreted as directly observed data.
Secondary Efficacy Endpoints Data
The prespecified secondary endpoints in this trial were the mean change in BCVA from baseline to month 12 and the mean change in LL BCVA from
baseline to month 12, both as measured by ETDRS letters. Testing for visual acuity serves as an important safety assessment to assure that the decrease in
visual acuity in the Zimura treatment groups was not different
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from the sham control groups. Because we believe that BCVA is not the optimal assessment to evaluate the impact of GA on patients’ functional vision, we
included vision in the prespecified statistical analysis as a secondary, and not as a primary, endpoint.
The GATHER1 trial was not designed to reliably assess differences in mean changes in BCVA or LL BCVA with statistical significance. Data for the
secondary endpoints are summarized in the following tables:
Mean Change in BCVA from Baseline to Month 12
(MRM Analysis) (ETDRS letters)
Cohort
(a)
Mean Change in BCVA
Cohort
(a)
Mean Change in BCVA
Zimura 2 mg
(N = 67)
(b)
-7.90
Zimura 4 mg
(N = 83)
-3.79
Sham 2 mg
(N = 110)
(b)
-9.29
Sham 4 mg
(N = 84)
-3.51
Difference
1.39
Difference
-0.28
(a) Based on the least squares mean from the MRM model.
(b) These least squares means are estimates from the MRM model, drawing on all available data, including data from groups with different randomization
ratios in Part 1 and Part 2, and should not be interpreted as directly observed data.
Mean Change in LL BCVA from Baseline to Month 12
(MRM Analysis) (ETDRS letters)
Cohort
Mean Change in LL BCVA
(a)
Cohort
Mean Change in LL BCVA
(a)
Zimura 2 mg
(N = 67)
(b)
-1.03
Zimura 4 mg
(N = 83)
1.53
Sham 2 mg
(N = 110)
(b)
-1.41
Sham 4 mg
(N = 84)
2.97
Difference
0.38
Difference
-1.44
(a) Based on the least squares mean from the MRM model.
(b) These least squares means are estimates from the MRM model, drawing on all available data, including data from groups with different randomization ratios
in Part 1 and Part 2, and should not be interpreted as directly observed data.
Zimura 1 mg 12-Month Efficacy Data
Efficacy data from patients receiving Zimura 1 mg was not part of the prespecified statistical analysis. The total number of patients randomized to the
Zimura 1 mg group (26 patients) is relatively small, and the trial was not powered to reliably assess differences in outcomes for these patients as compared
to patients in the sham control group in Part 1 (26 patients). However, we performed descriptive analyses on the 12 month data for patients in the Zimura 1
mg as compared to the patients in the sham control group in Part 1 of the trial to aid our assessment of whether a dose response relationship was present
across treatment groups included in the clinical trial.
GA area data for the Zimura 1 mg group and the sham group from Part 1 of the trial are summarized in the following tables:
Summary of GA Area (mm) and Mean Percentage Change from Baseline to Month 12
(Square Root Transformation)
Cohort
Mean Sq. Root of GA at BL, mm (SD)
Mean Sq. Root of GA at M12, mm (SD)
Difference
Mean % Change (SD)
(a)
Zimura 1 mg
(N = 26)
2.591 (0.827)
3.055 (0.604)
0.464
14.48% (8.2%)
Sham Part 1
(N = 26)
2.623 (0.687)
3.021 (0.722)
0.398
16.49% (7.2%)
BL = Baseline; M12 = Month 12
(a) Mean % Change in GA area is an average of the percentage change in GA area observed for each patient.
Although the sample size for the Zimura 1 mg group is small, we believe the apparent reduction in mean percentage change in GA area from baseline to
month 12 in the Zimura 1 mg group as compared to the sham control group in Part 1, when
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combined with the statistically significant results observed for the primary efficacy endpoint for the Zimura 2 mg and Zimura 4 mg groups as compared to
their corresponding sham control groups, suggest a potential dose response relationship across treatment groups.
18-Month Data
The primary purpose of the 18 month time point was to gather additional safety data. This trial was not designed to assess, and the prespecified statistical
analysis plan for the trial did not include assessing, the statistical significance of the 18 month efficacy data for the treatment groups as compared to the
corresponding sham control groups. The reduction in the mean rate of GA growth over 18 months was 28.11% for the Zimura 2 mg group as compared to
the corresponding sham control group and 29.97% for the Zimura 4 mg group as compared to the corresponding sham control group. The descriptive p-
values for the treatment effects at month 18 were p=0.0014 for the Zimura 2 mg group and p=0.0021 for the Zimura 4 mg group. The analysis of the 18-
month efficacy data is descriptive only.
GA Growth Data over 18 Months
The mean rate of change in GA growth over 18 months was measured by FAF based on readings at four time points (baseline, month 6, month 12
and month 18) and was calculated using the square root transformation of the GA area. The FAF images were assessed by an independent masked reading
center. The prespecified statistical analysis plan used MRM to compare data for the Zimura 2 mg and Zimura 4 mg groups to the corresponding sham
groups. Detailed data are shown below (the p-values for the 18 month statistical analyses are descriptive in nature):
Mean Rate of Change in Geographic Atrophy (GA) Area from Baseline to Month 18
(Square Root Transformation)
Cohort
Mean Change in GA (mm)
(a)
Cohort
Mean Change in GA (mm)
(b)
Zimura 2 mg
(N = 67)
0.430
Zimura 4 mg
(N = 83)
0.391
Sham
(N = 110)
0.599
Sham
(N = 84)
0.559
Difference
% Difference
0.168
28.11%
Difference
% Difference
0.167
29.97%
P-Value
(Descriptive)
0.0014
P-Value
(Descriptive)
0.0021
(a) Based on least squares means from MRM model, drawing on all available data at the month 18 time point, including data from groups with different
randomization ratios in Part 1 and Part 2, and should not be interpreted as directly observed data.
(b) These least squares means are estimates of the MRM model, drawing on all available data, at the month 18 time point.
The graphs below illustrate the difference in mean rate of GA growth between each of the Zimura 2 mg and Zimura 4 mg treatment groups and their
corresponding sham control groups based on the MRM analysis at both 12 months and 18 months.
Primary Efficacy Endpoint Met at 12 Months
Decrease in GA Growth Over 18 Months
Zimura 2 mg vs Sham
(Square Root Transformation)
Zimura 2 mg vs Sham
(Square Root Transformation)
ITT Population; Based on the least squares means from MRM model drawing on all available data at the respective 12 month and 18 month analysis time points, including data from groups with
different randomization ratios in Part 1 and Part 2, and should not be interpreted as directly observed data; Hochberg procedure used for significance testing for 12 month data.
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Primary Efficacy Endpoint Met at 12 Months
Decrease in GA Growth Over 18 Months
Zimura 4 mg vs Sham
(Square Root Transformation)
Zimura 4 mg vs Sham
(Square Root Transformation)
ITT Population; Based on the least squares means from the MRM model drawing on all available data at the respective 12 month and 18 month analysis time points; Hochberg procedure used for
significance testing for 12 months data.
18-Month Zimura 2 mg GA Data by Part
Consistent with the analysis performed at 12 months, the analysis of the mean change in GA growth for Zimura 2 mg as compared to the corresponding
sham control group over 18 months was adjusted for the fact that this dose of Zimura was tested in both Part 1 and Part 2 of the trial, each of which had
different randomization ratios.
The least squares mean changes in GA in Part 1 and Part 2 at month 18 are shown separately in the following table:
Mean Rate of Change in GA Area from Baseline to Month 18
(MRM Analysis) (Square Root Transformation)
Cohort
Part 1
Cohort
Part 2
Mean Change in GA (mm)
(a)
Zimura 2 mg
(N = 25)
0.464
(a) Based on the least squares mean from the MRM model.
Mean Change in GA (mm)
(a)
Zimura 2 mg
(N = 42)
0.440
(a) Based on the least squares means from the MRM model.
Sham
(N = 26)
0.635
Sham
(N = 84)
0.608
Difference
% Difference
0.170
26.84%
Difference
% Difference
0.168
27.67%
When the data for the Zimura 2 mg groups from each Part of the trial as compared to the corresponding sham control groups are analyzed using the
MRM model, which includes a regression factor by part, the mean difference in GA growth over 18 months between the Zimura 2 mg and sham control
groups is 0.168 mm, representing a 28.11% relative benefit in the Zimura 2 mg group as compared to the corresponding sham control group.
Observed 18-Month GA Data (non-square root transformation)
In addition to analyzing the mean rate of change in GA area at month 18 using the square root transformation of the GA area (measured in millimeters
(mm)), we also analyzed the mean rate of change in GA area using the observed GA area (without the square root transformation, measured in square
millimeters (mm )), with the MRM model. This descriptive
2
24
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analysis was also part of the prespecified statistical analysis plan for this trial. The observed mean GA area data for the Zimura 2 mg and Zimura 4 mg
groups as compared to the corresponding sham control groups are summarized in the following table:
Mean Rate of Change in GA Area from Baseline to Month 18
(MRM Analysis) (Observed)
2
Mean Change in GA (mm )
Cohort
(a)
2
Mean Change in GA (mm )
Cohort
(a)
Zimura 2 mg
(N = 67)
(b)
2.431
Zimura 4 mg
(N = 83)
2.460
Sham 2
(N = 110)
(b)
3.587
Sham
(N = 84)
3.486
Difference
% Difference
1.156
32.24%
Difference
% Difference
1.026
29.44%
(a) Based on the least squares mean from the MRM model.
(b) These least squares means are estimates from the MRM model, drawing on all available data, including data from groups with different randomization
ratios in Part 1 and Part 2, and should not be interpreted as directly observed data.
18-Month Visual Acuity Data
In addition to analyzing mean change in GA area, we also performed pre-specified analyses of the mean change in BCVA from baseline to month 18 and
the mean change in LL BCVA from baseline to month 18, both as measured by ETDRS letters. Testing for visual acuity serves as an important safety
assessment to assure that the decrease in visual acuity in the Zimura treatment groups was not clinically different from the sham control groups.
The GATHER1 trial was not designed to reliably assess differences in mean changes in BCVA or LL BCVA with statistical significance. Data for the
mean change in BCVA and LL BCVA at month 18 are summarized in the following tables:
Mean Change in BCVA from Baseline to Month 18
(MRM Analysis) (ETDRS letters)
Cohort
(a)
Mean Change in BCVA
Cohort
(a)
Mean Change in BCVA
Zimura 2 mg
(N = 67)
(b)
-12.7
Zimura 4 mg
(N = 83)
-4.27
Sham
(N = 110)
(b)
-15.1
Sham
(N = 84)
-7.07
Difference
2.37
Difference
2.80
(a) Based on the least squares mean from the MRM model.
(a) These least squares means are estimates from the MRM model, drawing on all available data, including data from groups with different randomization
ratios in Part 1 and Part 2, and should not be interpreted as directly observed data.
Mean Change in LL BCVA from Baseline to Month 18
(MRM Analysis) (ETDRS letters)
Cohort
Mean Change in LL BCVA
(a)
Cohort
Mean Change in LL BCVA
(a)
Zimura 2 mg
(N = 67)
(b)
-2.72
Zimura 4 mg
(N = 83)
2.85
Sham
(N = 110)
(b)
-3.10
Sham
(N = 84)
1.68
Difference
0.37
Difference
1.17
(a) Based on the least squares mean from the MRM model.
(b) These least squares means are estimates from the MRM model, drawing on all available data, including data from groups with different randomization ratios
in Part 1 and Part 2, and should not be interpreted as directly observed data.
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Zimura 1 mg 18-Month Efficacy Data
We performed descriptive analyses on the 18 month data for patients in the Zimura 1 mg group as compared to the patients in the sham control group in
Part 1 of the trial.
The mean rate of change in GA area for the Zimura 1 mg group and the corresponding sham group from Part 1 of the trial over 18 months is summarized
in the following table:
Summary of GA Area (mm) and Mean Percentage Change from Baseline to Month 18
(Square Root Transformation)
Cohort
Mean Sq. Root of GA at BL, mm
Mean Sq. Root of GA at M18, mm
Difference
Mean % Change
(a)
Zimura 1 mg
(N = 26)
2.591
3.258
0.667
21.91%
Sham
(N = 26)
2.623
3.230
0.607
23.87%
BL = Baseline; M18 = Month 18
(a) Mean % change in GA area is an average of the percentage change in GA area observed for each patient.
Although the sample size for the Zimura 1 mg group is small, we believe the apparent reduction in mean percentage change in GA area from baseline to
month 18 in the Zimura 1 mg group as compared to the sham control group, when compared with the results observed in the Zimura 2 mg and Zimura 4 mg
groups as compared to their corresponding sham control groups, may suggest a potential dose response relationship across treatment groups.
18-Month Safety Data
Based on our review of the safety data in the trial, Zimura was generally well tolerated after 18 months of administration. During the trial, there were no
investigator-reported Zimura-related adverse events, no Zimura-related intraocular inflammation, no Zimura-related increased intraocular pressure, no
cases of endophthalmitis, and no discontinuations attributed by investigators to Zimura in the trial. Through month 18, the reported incidence of CNV in
the untreated fellow eye was 11 patients (3.8%), and in the study eye was 3 patients (2.7%) in the sham control group, 2 patients (7.7%) in the Zimura 1 mg
group, 8 patients (11.9%) in the Zimura 2 mg group, and 13 patients (15.7%) in the Zimura 4 mg group. The most frequently reported ocular adverse events
were related to the injection procedure. The numbers below are based on investigator-reported adverse events occurring during the 18-month duration of
the trial for all patients.
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The number of patients with one or more serious TEAEs organized by MedDRA system organ class are set forth in the table below:
Patients with One or More Serious TEAEs in Any Organ Class
Blood and lymphatic system disorders
Cardiac disorders
Eye disorders
Gastrointestinal disorders
General disorders and administration site conditions
Hepatobiliary disorders
Infections and infestations
Injury, poisoning and procedural complications
Metabolism and nutrition disorders
Musculoskeletal and connective tissue disorders
Benign, malignant and unspecified neoplasms (including cysts and
polyps)
Nervous system disorders
Psychiatric disorders
Respiratory, thoracic and mediastinal disorders
Vascular disorders
Zimura 1
mg
(N = 26)
0
1 (3.8%)
0
1 (3.8%)
0
0
0
0
0
1 (3.8%)
0
1 (3.8%)
0
0
0
Part 1
Zimura 2
mg
(N = 25)
0
0
0
1 (4.0%)
0
1 (4.0%)
1 (4.0%)
1 (4.0%)
0
0
0
1 (4.0%)
0
1 (4.0%)
0
Sham
(N = 26)
0
1 (3.8%)
0
2 (7.7%)
0
1 (3.8%)
0
1 (3.8%)
2 (7.7%)
0
1 (3.8%)
2 (7.7%)
1 (3.8%)
0
0
Zimura 2
mg
(N = 42)
0
1 (2.4%)
1 (2.4%)
0
1 (2.4%)
0
2 (4.8%)
1 (2.4%)
0
0
1 (2.4%)
2 (4.8%)
0
0
0
Part 2
Zimura 4
mg
(N = 83)
1 (1.2%)
2 (2.4%)
1 (1.2%)
2 (2.4%)
0
1 (1.2%)
8 (9.6%)
3 (3.6%)
0
0
1 (1.2%)
3 (3.6%)
0
2 (2.4%)
0
Sham 4 mg
(N = 84)
0
3 (3.6%)
0
6 (7.1%)
0
0
2 (2.4%)
2 (2.4%)
0
3 (3.6%)
3 (3.6%)
2 (2.4%)
1 (1.2%)
5 (6.0%)
1 (1.2%)
Of the reported serious TEAEs that were eye disorders, one TEAE was an ischaemic optic neuropathy (in the Zimura 2 mg group) and one TEAE was a
retinal detachment (in the Zimura 4 mg group). Neither of these TEAEs were reported as related to Zimura.
The number of patients with one or more TEAEs, including serious TEAEs, identified by the investigator as related to the study drug (Zimura or sham)
are set forth in the table below:
Reported TEAEs Related to Zimura or Sham
Subjects with at least one TEAE
Zimura 1
mg
(N = 26)
Part 1
Zimura 2
mg
(N = 25)
0
0
Sham
(N = 26)
0
Zimura 2
mg
(N = 42)
Part 2
Zimura 4
mg
(N = 83)
Sham 4 mg
(N = 84)
0
0
0
The number of patients with one or more ocular TEAEs in the study eye are set forth in the table below:
Reported Ocular TEAEs in Study Eyes
Eye disorders
Eye disorders related to injection procedure
Zimura 1
mg
(N = 26)
Part 1
Zimura 2
mg
(N = 25)
12 (46.2%)
4 (15.4%)
11 (44.0%)
5 (20.0%)
Zimura 2
mg
(N = 42)
Part 2
Zimura 4
mg
(N = 83)
28 (66.7%)
18 (42.9%)
61 (73.5%)
46 (55.4%)
Sham
(N = 26)
6 (23.1%)
2 (7.7%)
Sham 4 mg
(N = 84)
39 (46.4%)
24 (28.6%)
The number of patients with one or more ocular TEAEs in the study eye, identified by the investigator as related to the study drug (Zimura or sham) is
set forth in the table below:
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Reported Ocular TEAEs in the Study Eye Related to Zimura or Sham
Zimura 1
mg
(N = 26)
Part 1
Zimura 2
mg
(N = 25)
0
0
Sham
(N = 26)
0
Zimura 2
mg
(N = 42)
Part 2
Zimura 4
mg
(N = 83)
Sham 4 mg
(N = 84)
0
0
0
Subjects with at least one TEAE
In addition to us collecting investigator-reported adverse events, the independent masked reading center performed multi-modal imaging analysis. Multi-
modal imaging analysis is a process used to assess patient retinal findings by reviewing different image types, in this case optical coherence tomography, or
OCT, images and fluorescein angiography, to provide a more comprehensive view of the patient's retinal tissue. OCT is an ultra-high resolution imaging
technology commonly used to visualize the retinal tissue. OCT is capable of rendering images in multiple dimensions and from multiple perspectives, and
is an imaging technique commonly used by retinal specialists to diagnose, treat and follow patients with CNV. Fluorescein angiography is a technique that
involves injection of a fluorescent dye into the systemic circulation and capturing images showing the circulating dye during transit through the retinal
circulation using a specialized camera. In this trial, the reading center's multi-modal imaging analysis identified one additional case of macular CNV for a
patient in the Zimura 4 mg group at month 12. Because this patient's investigator did not detect the CNV, the patient remained in the trial through month
18.
Post-hoc Analysis of GATHER1 Data in connection with the GATHER2 SPA
In parallel discussions with those for the GATHER2 SPA, the FDA indicated that, as part of a future NDA for Zimura, the results from GATHER1
will be considered using the original prespecified primary efficacy endpoint analysis, as described above, together with a post-hoc analysis using the same
FDA-preferred method that will be used for the GATHER2 trial (mean rate of growth (slope) estimated based on GA area measured by FAF in the relevant
timepoints). The 12 month and 18 month results of this post-hoc analysis, as compared to the results of the original prespecified analysis for GATHER1, for
the Zimura 2 mg and Zimura 4 mg treatment arms as compared to their corresponding sham arms, are described below. Safety results from GATHER1 were
not impacted as part of this analysis.
Although we believe that the results of the post-hoc analysis from the GATHER1 trial are consistent with the positive results from the original
prespecified analysis from the trial, any analyses, whether prespecified or post-hoc, that are intended to
support an application for marketing approval are a matter of review for the FDA and other regulatory authorities.
Zimura 2 mg Data
MRM Analysis
12 Month Sq. Rt. Transformation:
Mean Rate of Change in GA Area (mm)
Mean Rate of GA Growth (Slope) (mm)
12 Month Observed Data:
2
Mean Rate of Change in GA Area (mm )
2
Mean Rate of GA Growth (Slope) (mm )
18 Month Sq. Rt. Transformation:
Mean Rate of Change in GA Area (mm)
Mean Rate of GA Growth (Slope) (mm)
18 Month Observed Data:
2
Mean Rate of Change in GA Area (mm )
2
Mean Rate of GA Growth (Slope) (mm )
Explanatory notes:
Zimura 2 mg
(N = 67)
Sham
(N = 110)
Difference
% Difference
P-Value
0.292
0.283
1.592
1.221
0.430
0.451
2.431
1.914
0.402
0.392
2.29
1.889
0.599
0.607
3.587
2.951
0.110
0.109
0.697
0.668
0.168
0.156
1.156
1.037
27.38%
27.73%
30.45%
35.37%
28.11%
25.75%
32.24%
35.13%
0.0072
0.0063
(a)
(b)
0.0059
0.0050
(b)
(b)
0.0014
0.0027
(b)
(b)
0.0009
0.0023
(b)
(b)
•
the estimates for the Zimura 2 mg group vs. sham are from the MRM model, drawing on all available data, including data from groups with
different randomization ratios in Part 1 and Part 2 of the trial, and should not be interpreted as directly observed data;
(a)
(b)
indicates prespecified primary endpoint; statistically significant;
indicates descriptive p-value.
Zimura 4 mg Data
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MRM Analysis
12 Month Sq. Rt. Transformation:
Mean Rate of Change in GA Area (mm)
Mean Rate of GA Growth (Slope) (mm)
12 Month Observed Data:
2
Mean Rate of Change in GA Area (mm )
2
Mean Rate of GA Growth (Slope) (mm )
18 Month Sq. Rt. Transformation:
Mean Rate of Change in GA Area (mm)
Mean Rate of GA Growth (Slope) (mm)
18 Month Observed Data:
2
Mean Rate of Change in GA Area (mm )
2
Mean Rate of GA Growth (Slope) (mm )
Zimura 4 mg
(N = 83)
Sham
(N = 84)
Difference
% Difference
P-Value
0.321
0.307
2.061
1.674
0.391
0.373
2.460
2.142
0.444
0.416
2.770
2.273
0.559
0.512
3.486
3.010
0.124
0.109
0.709
0.599
0.167
0.139
1.026
0.868
27.81%
26.31%
25.59%
26.34%
29.97%
27.11%
29.44%
28.82%
0.0051
0.0100
(a)
(b)
0.0082
(b)
0.0147
(b)
0.0021
0.0086
(b)
(b)
0.0034
(b)
0.0106
(b)
Explanatory notes:
(a)
(b)
indicates prespecified primary endpoint; statistically significant;
indicates descriptive p-value.
Zimura 2 mg Data by Part
As previously discussed, we enrolled patients for the GATHER1 trial in two different parts, Part 1 and Part 2, with different dosages and
randomization ratios in each Part. Twenty-five patients receiving Zimura 2mg were enrolled in Part 1 of the trial and 42 patients receiving Zimura 2mg
were enrolled in Part 2 of the trial.
Below are the month 12 and month 18 results for the Zimura 2 mg group as compared to its corresponding sham group, for both Part 1 and Part 2 of
the trial, using both the original prespecified primary efficacy endpoint analysis for the GATHER1 trial and the post-hoc analysis using the FDA-preferred
method that will be used for the GATHER2 trial:
Part 1 Only Data
MRM Analysis
12 Month Sq. Rt. Transformation:
Mean Rate of Change in GA Area (mm)
Mean Rate of GA Growth (Slope) (mm)
12 Month Observed Data:
2
Mean Rate of Change in GA Area (mm )
2
Mean Rate of GA Growth (Slope) (mm )
18 Month Sq. Rt. Transformation:
Mean Rate of Change in GA Area (mm)
Mean Rate of GA Growth (Slope) (mm)
18 Month Observed Data:
2
Mean Rate of Change in GA Area (mm )
2
Mean Rate of GA Growth (Slope) (mm )
Part 2 Only Data
MRM Analysis
12 Month Sq. Rt. Transformation:
Zimura 2 mg
(N = 25)
Sham
(N = 26)
Difference
% Difference
0.329
0.307
1.910
1.655
0.464
0.446
2.789
2.482
0.422
0.423
2.593
2.238
0.635
0.630
4.103
3.393
0.093
0.116
0.683
0.584
0.170
0.184
1.314
0.911
22.07%
27.39%
26.35%
26.08%
26.84%
29.23%
32.03%
26.85%
Zimura 2 mg
(N = 42)
Sham
(N = 84)
Difference
% Difference
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Mean Rate of Change in GA Area (mm)
Mean Rate of GA Growth (Slope) (mm)
12 Month Observed Data:
2
Mean Rate of Change in GA Area (mm )
2
Mean Rate of GA Growth (Slope) (mm )
18 Month Sq. Rt. Transformation:
Mean Rate of Change in GA Area (mm)
Mean Rate of GA Growth (Slope) (mm)
18 Month Observed Data:
2
Mean Rate of Change in GA Area (mm )
2
Mean Rate of GA Growth (Slope) (mm )
0.308
0.303
1.743
1.419
0.440
0.474
2.550
2.203
0.422
0.424
2.434
2.154
0.608
0.622
3.649
3.264
0.114
0.121
0.690
0.735
0.168
0.148
1.099
1.061
27.02%
28.51%
28.36%
34.14%
27.67%
23.85%
30.12%
32.51%
Post-Hoc Analysis of GATHER1 data - Foveal Preservation
In February 2022, we announced the results from a post-hoc analysis that evaluated various GA growth parameters to explore the rate of disease
progression within various regions in the fovea in a subset of patients from the GATHER1 trial. The post-hoc analysis evaluated GA growth in five
standardized regions in the retina for patients for whom images were available at relevant time points, which consisted of 47 patients from the Zimura 2 mg
group and 79 patients from the corresponding sham control group. The five regions included the central foveal region, consisting of a 2 mm diameter circle
around the foveal center point, and four quadrants, temporal, nasal, superior and inferior, in a concentric 8 mm diameter circle around the foveal center
point. The accompanying schematic illustrates the five standardized regions:
We observed a reduction in lesion growth in the five standardized regions surrounding and including the central foveal area for patients receiving
Zimura 2 mg as compared to patients receiving sham over a period of 18 months. We believe the results of this subgroup analysis are consistent with the
primary analysis results in the ITT population in the GATHER1 trial. The accompanying graphs illustrate the results:
Decrease in GA growth observed in patients receiving Zimura 2 mg versus patients receiving sham injections in five standardized regions and in line with
circumferential progression found in natural history, square-root transformed (mm)
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OPH2001: Completed Phase 1/2a Clinical Trial of Zimura for GA Secondary to Dry AMD
In 2011, we completed a multicenter, uncontrolled, open label Phase 1/2a clinical trial to evaluate the safety and tolerability of Zimura administered as a
monotherapy in patients with GA. We enrolled 47 patients in this trial. We randomly assigned patients in this trial to one of two dose groups. Patients
received a total of five intravitreal injections of either 0.3 mg or 1 mg of Zimura over a 36-week treatment period. Patients received an intravitreal injection
of Zimura at day 0, week 4, week 8, week 24 and week 36 of the trial, with a final follow-up visit at week 48.
Zimura was generally well-tolerated in this trial. We did not observe any evidence of drug related adverse events. We also did not observe any incidence
of conversion to wet AMD in eyes treated with Zimura. Adverse events were primarily ocular adverse events in the study eye which were related to the
injection procedure.
In addition, we performed assessments of visual acuity to detect any potential decrease in vision associated with intravitreal injections, the administered
drug or natural progression of the disease if left untreated. We did not identify any drug related safety issues through measurements of visual acuity.
Our Phase 1/2a clinical trial was an uncontrolled study with a small sample size and was not powered to detect a difference between Zimura dose groups,
or the efficacy of Zimura monotherapy, with statistical significance. The primary purpose of the study was to assess safety and tolerability. However, during
the more frequent dosing period, which is the first 24 weeks, we observed a trend, in favor of the higher of two dose groups, of a relative reduction in the
mean growth of the GA lesion area, as measured by fundus autofluorescence images read by an independent reading center.
The mean growth from baseline in the GA lesion area during the first 24 weeks of the trial, when the injections were administered more regularly, was
1.00 mm for the 24 patients receiving the 0.3 mg dose and 0.78 mm for the 23 patients receiving the 1 mg dose. When the injections were administered on
a reduced dosing schedule during the subsequent 24 weeks,
2
2
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this relative trend in reduced growth in GA lesion area was no longer present.
The following graph sets forth the mean change in GA lesion area from baseline for the two treatment groups over the course of the trial.
We believe this apparent trend in the relative reduction of mean growth in GA lesion area when Zimura was dosed more frequently, together with the
relative loss of the benefit when Zimura was dosed less frequently, may suggest a possible drug effect.
GATHER2: Ongoing Phase 3 Clinical Trial Assessing Safety and Efficacy of Zimura 2 mg for GA Secondary to AMD
Trial Design
In this trial, we enrolled 448 patients, who were randomized into two groups: a first group receiving monthly administrations of Zimura 2 mg for
12 months, and a second group receiving monthly administrations of sham. In accordance with our SPA with the FDA, the prespecified primary efficacy
endpoint will be the mean rate of growth (slope) estimated based on GA area measured by FAF in at least three timepoints: baseline, month 6 and month
12. At month 12, we are re-randomizing patients in the Zimura 2 mg arm to receive either monthly or every other month administrations of Zimura 2 mg,
and patients receiving monthly administrations of sham will continue to receive monthly administrations of sham. We plan to treat and follow patients for
24 months.
The key ophthalmic inclusion criteria for GATHER2 include the following:
•
•
•
non-foveal GA secondary to dry AMD;
total GA area between 2.5 mm and 17.5 mm , inclusive;
2
2
if GA is multifocal, at least one focal lesion should measure 1.25 mm or greater;
2
• GA in part within 1500 microns from the foveal center; and
•
Snellen equivalent BVCA in the study eye between 20/25 and 20/320, inclusive.
As discussed above, when we initiated the GATHER1 trial, we did not believe that reliable measurements of GA by FAF images for patients with CNV
in the study eye could be performed. Therefore, in the clinical trial protocol for the GATHER1 trial, we indicated that patients in any arm of the trial who
developed CNV in the study eye, as observed by the investigator, would be removed from the trial and any future study treatments and assessments. Based
on third-party clinical data published since the GATHER1 trial commenced and discussions with our independent reading center, we believe that GA for
patients developing CNV in the study eye who receive standard of care anti-VEGF treatment for the CNV, could potentially be assessed by FAF. Based on
the foregoing, the protocol for GATHER2 provides that patients will undergo monthly OCT imaging, and if an investigator suspects that a patient has CNV
or if a patient experiences a decrease in visual acuity, as
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measured by a loss of more than five ETDRS letters between a visit and the immediately prior visit, the independent masked reading center will confirm
whether the patient has CNV using multi-modal imaging. In the event a CNV case is confirmed, the investigator will treat the CNV with one of two anti-
VEGF agents, Lucentis or Eylea® (aflibercept), in accordance with the label for that anti-VEGF agent. These patients will remain in the trial and
measurements of these patients' GA will be included in the primary efficacy analysis if their FAF images can be assessed by the masked reading center.
Trial Conduct
In July 2021, we completed patient enrollment for GATHER2, four months ahead of our original schedule. In response to the COVID-19
pandemic, we and our clinical trial sites implemented a number of initiatives to protect the safety and well-being of our patients and to ensure they are able
to attend their scheduled study visits. We continue to closely monitor the COVID-19 pandemic and the impact it may have on this trial.
In particular, we continue to monitor patient retention in this trial. We are targeting and remain on track for an injection fidelity rate at month 12 of
greater than 90%. The injection fidelity rate for GATHER1 at 12 months was 87%. We believe injection fidelity, which is calculated by dividing the total
number of actual injections for all patients by the total number of expected injections based on the total number of patients enrolled in the trial, to be an
accurate and meaningful measure of patient retention. In addition, more than 84% of the scheduled first-year visits in the GATHER2 trial, which consists of
all study visits up to and including the timepoint for assessing the primary efficacy endpoint, have been completed or elapsed.
We expect top-line data from this trial to be available during the second half of 2022, approximately one year following the enrollment of the last
patient plus the time needed for database lock and analysis. We are actively working with our third-party imaging and other vendors to review and prepare
the GATHER2 data for database lock.
Requirements for Marketing Approval of Zimura in GA
To obtain marketing approval for Zimura for the treatment of GA, we expect that we will need to obtain favorable results from a total of two
independent, adequate and well-controlled pivotal clinical trials, demonstrating the safety and efficacy of Zimura in this indication. To establish efficacy,
we believe it would be sufficient to demonstrate statistically significant results showing a clinically relevant reduction in the rate of growth of GA over 12
months, based on measurements over three time points (baseline, month 6 and month 12) in two independent trials. We selected this measure as the primary
endpoint for the GATHER1 trial based on prior interactions with the FDA, as well as our understanding of clinical trials for other investigational products
in development for the treatment of GA. We designed the GATHER1 trial as a well-controlled screening trial such that, in the event that the prespecified
primary efficacy endpoint results were statistically significant, the trial could potentially serve as one of the two pivotal clinical trials typically required for
marketing approval. Based on the results we have received, the statistical analysis that we have performed and additional discussions we have had with the
FDA, we believe that the safety and efficacy results from the GATHER1 trial would satisfy the FDA’s requirements as one of the two pivotal clinical trials
typically required for marketing approval. In the paragraphs that follow, we describe in detail the basis for our belief about the sufficiency of the GATHER1
trial and, if the data from this trial are positive, the GATHER2 trial, to support an application for marketing approval for GA.
Requirements for Safety Data
Zimura has generally been well tolerated in our clinical trials to date. In the GATHER1 trial, there were no investigator reported ocular serious adverse
events, Zimura-related adverse events, cases of Zimura-related intraocular inflammation, cases of Zimura-related increased intraocular pressure, cases of
endophthalmitis, or discontinuations attributed by investigators to Zimura. We believe the investigator reported CNV rate in the study eye for patients
receiving Zimura as compared to sham and the untreated fellow eyes during the trial is within an acceptable range when compared to published clinical trial
data for another complement inhibitor currently in development for GA. The most frequently reported ocular adverse events in the GATHER1 trial were
related to the injection procedure.
To demonstrate the safety of Zimura to a degree sufficient to support marketing approval, we believe that the FDA and potentially other regulatory
authorities would require data from a minimum of 300 patients having received the dose of Zimura for which we are seeking approval, or a higher Zimura
dose, independent of indication, for a minimum of 12 months, with 24-month safety data available for some portion, but not all, of these 300 patients.
Based on the safety profile of Zimura observed to date and the number of patients treated across our Zimura clinical trials, we believe that the remaining
minimum safety requirements could potentially be satisfied by the GATHER2 trial, in which we plan to treat and follow patients for 24 months.
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Requirements for Efficacy Data
Statistical Significance. In our GATHER1 trial, the reduction in the mean rate of GA growth over 12 months using the square root transformation was
0.110 mm (p-value = 0.0072) for the Zimura 2 mg group as compared to the corresponding sham control group and 0.124 mm (p-value = 0.0051) for the
Zimura 4 mg group as compared to the corresponding sham control group, corresponding to an approximate 27% relative reduction in the mean rate of GA
growth over 12 months when compared with sham. These data for both dose groups were statistically significant. See above under “Primary Efficacy
Endpoint Data” for a discussion of the procedures we used to confirm the statistical significance of these data.
In clinical trials, it is common for data for some number of subjects to be missing for assessments performed throughout the trial. The degree of data that
is missing from a clinical data set can impact the results and conclusions, including their statistical significance. See above under “Statistical Analysis for
Efficacy Measures” for information regarding the GA measurement data that was missing from the analysis of the primary efficacy endpoint in the
GATHER1 trial, as well as a description of the sensitivity analyses we performed. Based on our sensitivity analyses, and accounting for the data missing
from our data set because of patient withdrawals or for other reasons, we believe the statistical analysis for the 12 month data from the GATHER1 trial is
valid.
Although we seek to apply our enrollment criteria consistently, there may be instances when an investigator proposes that a patient participate in the trial
and the reading center determines that, although a patient may not meet all criteria precisely, participation in the trial is warranted based on the overall GA
pattern and size. For example, this can result in the enrollment of patients with baseline GA area slightly below 1 disc area, as was the case with one patient
in each of the Zimura 4 mg group and the Part 2 sham control group (which is part of the comparison for both the Zimura 2 mg and Zimura 4 mg groups) in
the GATHER1 trial. These patients were included in the ITT analysis for our primary efficacy endpoint. The FDA or other regulatory authorities may not
agree with the inclusion of these patients in our statistical analysis.
Clinical Relevance. Clinical relevance refers to an assessment of how meaningful the observed outcome is or would be for patients. The FDA and other
regulatory authorities consult with clinicians in the field of study to advise on the relevance of an observed outcome for patients. Our GATHER1 and
GATHER2 trials use anatomic endpoints measuring the reduction of GA growth as the primary efficacy endpoints. We obtained a written agreement with
the FDA through the GATHER2 SPA that the mean rate of growth (slope) estimated based on GA area, measured by FAF in at least three time points:
Baseline, Month 6, and Month 12, and the design and planned analysis of the GATHER2 trial adequately address the objectives necessary to support a
regulatory submission. Since established literature and clinical experience indicate that patients' functional vision is impacted by the growth of the GA over
time, which ultimately leads to severe vision loss, we believe that reduction of GA growth would have a meaningful impact on the patients’ well-being and
quality of life and therefore is clinically relevant.
Adequate and Well-Controlled. In addition to statistical significance and clinical relevance, pivotal clinical trials must be adequate and well-controlled.
We believe:
•
•
the method of selecting subjects for GATHER1 and GATHER2 was based on the same prospectively defined inclusion and exclusion criteria and
provided adequate assurance that they have GA secondary to AMD;
the randomized method of assigning patients to GATHER1 and GATHER2 treatment groups and corresponding sham control groups minimizes
potential confounding factors and bias, and is intended to ensure comparability of the groups for all pertinent variables; and
• GATHER1 and GATHER2 are appropriately masked. The primary endpoint was objectively measured by an independent masked reading center.
Adequate measures were taken to minimize bias on the part of the subject, the investigator, the reading center and the sponsor.
We believe, based on the above and other aspects of the designs of the two trials and their similar primary efficacy endpoints and statistical
analysis plans, that both trials are adequate and well-controlled to establish the efficacy and safety of Zimura for GA. GATHER2 is intended to provide
independent substantiation of the statistically significant results we observed in GATHER1.
Our Regulatory Pathway Following GATHER1 and GATHER2
Based on the foregoing, assuming that Zimura’s safety profile remains consistent with findings observed to date and subject to regulatory review of the
GATHER1 trial results, we believe that one additional international, randomized, double-masked, sham controlled, Phase 3 clinical trial is needed to
demonstrate the safety and efficacy of Zimura in GA in a manner
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sufficient to support an application for marketing approval from the FDA and EMA in this indication. We designed the GATHER2 trial in accordance with
this belief and understanding. Our belief and understanding of the remaining clinical requirements to demonstrate the safety and efficacy of Zimura for the
treatment of GA in a manner sufficient to support an application for marketing approval from the FDA and EMA is based on our review of the data from
the GATHER1 trial as well as discussions with the FDA. As described above, in parallel discussions with those for the GATHER2 SPA, the FDA indicated
that, as part of a future NDA for Zimura, the results from GATHER1 will be considered using the original prespecified primary efficacy endpoint analysis
(mean rate of change in GA area over 12 months measured by FAF at three timepoints: baseline, month 6 and month 12), together with a post-hoc analysis
using the same FDA-preferred method that we are using for the GATHER2 trial (mean rate of growth (slope) estimated based on GA area measured by
FAF in the relevant timepoints). We believe the GATHER1 data, when analyzed using the FDA's preferred method, are consistent with and supportive of
the results from the original prespecified analysis. However, it is possible that unexpected or inconsistent findings could emerge as we continue to evaluate
the unmasked, individual patient data, which could cause us to evaluate and change our conclusions about this data.
In July 2021, we received a written agreement from the FDA under a SPA for the overall design of GATHER2. We believe that the safety and
efficacy data we will collect from the GATHER2 trial, if positive, would satisfy the FDA’s and could potentially satisfy the EMA's requirements as the
second pivotal clinical trial typically required for marketing approval. If the 12-month results from GATHER2 are positive, we plan to file applications
with the FDA and the EMA for marketing approval of Zimura for GA. Our expectations regarding the minimum clinical requirements to demonstrate the
safety and efficacy of Zimura for GA may change as new regulatory or third party information becomes available. We have not had any interactions to date
with the EMA regarding the GATHER1 data or the design of GATHER2. Ultimately, for the GATHER1 and GATHER2 trials to be accepted as pivotal
trials, the FDA, EMA and other regulatory authorities would need to agree that the overall data package meet the applicable requirements with an
acceptable safety profile and a clinically relevant efficacy outcome with statistical significance, and that the data support an overall favorable benefit-to-
risk determination.
Zimura - Planned Phase 3 Clinical Trial for Patients With Intermediate AMD
Post-hoc Analyses of GATHER1 Data in Drusen, iRORA and cRORA
We conducted additional post-hoc analyses on the GATHER1 data, in which we evaluated the progression of iRORA to cRORA, and the progression
of drusen to iRORA or cRORA, in patients treated with Zimura 2 mg as compared to patients in the corresponding sham group. Drusen, iRORA and
cRORA represent progressive stages of AMD.
The post-hoc analysis data show a 19.6% absolute reduction in the rate of progression from drusen to iRORA or cRORA, for the Zimura 2 mg group
as compared to sham at 18 months, representing a relative reduction of 72%. The data also show a 21.8% absolute reduction in the rate of progression from
iRORA to cRORA for the Zimura 2 mg group as compared to sham at 18 months, representing a relative reduction of 52%. The following graphs illustrate
these results:
Proportion of patients that progress from drusen to iRORA or cRORA (Zimura 2 mg compared to sham)
Proportion of patients that progress from iRORA to cRORA (Zimura 2 mg compared to sham).
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Planned Phase 3 Clinical Trial in Intermediate AMD
We were encouraged by the results of the post-hoc analyses, and plan to initiate a Phase 3 clinical trial studying Zimura in patients with intermediate
AMD. We expect this trial to be an international, randomized, double-masked, sham-controlled, multi-center trial with approximately 200 patients per
treatment group. We expect to treat and follow patients for 24 months. We are currently evaluating other aspects of the design of this trial, including patient
inclusion criteria and primary efficacy endpoints. We plan to obtain feedback from regulatory authorities on our plans for this trial and our development
strategy in this indication, before initiating this trial during the second half of 2022.
Zimura - STGD1 Trials
STAR: Ongoing Phase 2b Clinical Trial of Zimura for STGD1
We initially completed patient enrollment for this clinical trial in February 2019 with a total of 95 patients enrolled, none of whom have any remaining
study visits. In July 2020, we reopened enrollment in this trial in the United States. We continue to enroll patients and plan to enroll approximately 25
additional patients, with the goal of enrolling a total of approximately 120 patients. We continue to monitor the COVID-19 pandemic closely and may need
to slow down or stop patient enrollment in certain geographies depending on the local situation.
All initially enrolled patients were, and any newly enrolled patients are, randomized in a 1:1 ratio as follows:
Zimura 2 mg, followed by Zimura 2mg 14 days later, monthly for three months during an induction phase; followed by Zimura 4 mg,
administered as two injections of Zimura 2 mg on the same day, monthly for 15 additional months during a maintenance phase; and
a sham injection, followed by a sham injection 14 days later, monthly for three months; followed by two sham injections on the same day, monthly
for 15 months.
•
•
We plan to evaluate the primary efficacy endpoint in this trial at 18 months. The primary efficacy endpoint is an anatomic endpoint, the mean rate of
change in the area of ellipsoid zone defect, as measured by en-face OCT. OCT allows the demonstration of various layers of the retinal tissue, including the
ellipsoid zone, which is a part of the photoreceptor cells. Scientific literature correlates defects in the ellipsoid zone with the loss of visual acuity and visual
dysfunction. The ellipsoid zone is rendered in OCT images as a defined layer of photoreceptor cell segments. Areas of defects in the ellipsoid zone can be
detected and measured by en-face OCT, which shows an OCT image from the perspective of looking at the retina head-on.
We have not previously studied Zimura in STGD1 patients and thus do not have any clinical data regarding the effect of Zimura in STGD1. We
previously engaged the Foundation Fighting Blindness to provide us with data from the Foundation's publicly available ProgStar study, the largest natural
history study on Stargardt disease to date. We have used this natural history data, as well as the perspectives of the key opinion leaders involved in the
ProgStar study, as resources to assist in the design of the STAR trial. As STGD1 is an orphan indication, to our knowledge there is only very limited natural
history data currently available regarding the variability of the planned primary efficacy endpoint in the STGD1 patient population we enrolled in this trial.
Given the information above, this trial could be underpowered to demonstrate a potential clinical benefit for Zimura in this indication.
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Similar to GATHER1, STAR is designed to be a Phase 2b screening trial, with the potential to demonstrate statistically significant results depending on
the magnitude of the potential benefit observed. If the results are positive and statistically significant, we believe this trial could potentially serve as a
clinical trial that can support an application for marketing approval. However, we have not yet engaged with the FDA or the EMA about this belief and
expectation.
Even though we have reopened patient enrollment, we have been and plan to remain masked to the treatment condition of all patients in the trial.
In addition, we have not reviewed and do not plan to review or analyze efficacy data for any patients in the trial, until the 18-month data has been collected
and analyzed for all patients enrolled in the trial. We expect data from this trial will be available after the top-line data from the GATHER2 trial.
Zimura - Wet AMD Trials
OPH2000: Completed Phase 1/2a Clinical Trial of Zimura for Wet AMD
In 2009, we completed a multicenter, uncontrolled, ascending dose and parallel group, open-label, first in human Phase 1/2a clinical trial to evaluate the
safety and tolerability of multiple intravitreal injections of Zimura given in combination with multiple doses of Lucentis 0.5 mg in patients with wet AMD.
We enrolled 60 patients in this trial, of which 58 were treatment-naïve patients, and two were treatment-experienced patients.
Patients were treated at one of five Zimura dose levels: 0.03 mg, 0.3 mg, 1 mg, 2 mg and 3 mg. Zimura was generally well tolerated in this trial when
tested in combination with Lucentis. None of the patients experienced any dose limiting toxicities at any of the dose levels tested. We observed only a
single adverse event assessed by the investigators to be related to Zimura, mild subcapsular cataract in one patient in the group treated with Zimura 2 mg.
Despite this event, this patient's visual acuity improved during the study. Adverse events were primarily ocular adverse events in the study eye which were
related to the injection procedure. One patient from the 0.3 mg Zimura treatment group withdrew from the trial as a result of a serious adverse event of
bacteremia unrelated to study drug or injection procedure, which resulted in a subsequent fatality. Another patient from the 0.3 mg treatment group
withdrew from the trial due to the investigator's decision. Systemic adverse events in this trial were not frequently reported. No systemic adverse events
were assessed as drug related.
Our Phase 1/2a clinical trial was an uncontrolled study with a small sample size and was not powered to detect a difference between Zimura dose groups
or the efficacy of Zimura combination therapy with statistical significance. The primary purpose of the study was to assess safety and tolerability. In
addition to our safety assessment, however, we also performed assessments of visual acuity. There was a general trend towards an improvement in visual
acuity seen in all treatment groups. We focused our assessment of vision outcomes on the subgroup of 43 treatment-naïve patients who had received all six
Zimura injections at the same dosage. We observed a mean increase in visual acuity from baseline at all time points for these patients, based on the number
of ETDRS letters the patient could read. For this subgroup, at week 24 of the trial, we noted improvements in mean visual acuity from baseline as follows:
13.6 letters for the 13 patients receiving the 0.3 mg dose, 11.7 letters for the 15 patients receiving the 1 mg dose and 15.3 letters for the 15 patients
receiving the 2 mg dose. In this subgroup, 22 patients (51%) gained at least 15 ETDRS letters, defined as significant visual gain, consisting of six patients
(46%) in the 0.3 mg dose group, seven patients (47%) in the 1 mg dose group and nine patients (60%) in the 2 mg dose group.
OPH2004: Discontinued Phase 2a Trial of Zimura for Treatment-Experienced Wet AMD Patients
During the fourth quarter of 2015, we initiated an open-label Phase 2a clinical trial to evaluate Zimura’s potential role when administered in combination
with anti-VEGF therapy for the treatment of wet AMD in anti-VEGF treatment-experienced patients who did not respond adequately to anti-VEGF
monotherapy. In 2017, following our reassessment of our Zimura development programs, we stopped enrolling patients in this trial as we determined that
we would initiate a new Zimura wet AMD trial, the OPH2007 trial described below, for treatment-naïve patients. One patient continued to receive
treatment in this trial until the first half of 2018. This patient did not experience any drug-related adverse events and there were no unexpected safety
issues.
OPH2007: Completed Phase 2a Clinical Trial of Zimura for Treatment-Naïve Wet AMD Patients
In 2018, we completed a randomized, dose-ranging, open-label, multi-center Phase 2a clinical trial of Zimura in combination with Lucentis 0.5 mg to
evaluate the safety of different dosing regimens of Zimura in combination with an anti-VEGF agent in treating wet AMD. We enrolled and treated a total of
64 treatment-naïve patients for this trial. We assigned patients in this trial to one of four groups:
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•
•
In Groups 1 and 2, consisting of ten patients in each group, patients received monthly combination therapy consisting of Lucentis 0.5 mg followed
by, in Group 1, Zimura 4 mg two days later and in Group 2, Zimura 2 mg on the same day as the Lucentis treatment;
In Groups 3 and 4, consisting of 22 patients in each group, patients received dosages in two phases, consisting of:
◦
◦
first, an induction phase from day one to the second month, during which the patients received Lucentis 0.5 mg followed by Zimura 2 mg
on the same day, followed by Zimura 2 mg fourteen days later; and
second, a maintenance phase from the third month to the fifth month, during which the patients received, in Group 3, Lucentis 0.5 mg
followed by Zimura 2 mg on the same day and in Group 4, Zimura 2 mg followed two days later with Lucentis 0.5 mg and Zimura 2 mg.
From a safety perspective, Zimura combination therapy with Lucentis was generally well tolerated after six months of treatment. The most frequently
reported ocular adverse events were related to the injection procedure. We did not observe any adverse events attributable to Zimura combination therapy.
Our Phase 2a clinical trial was an uncontrolled trial with a small sample size designed to assess safety at different dosages and to detect a potential
efficacy signal. This trial was not designed to detect a statistically significant difference between Zimura dose groups or to evaluate the efficacy of Zimura
combination therapy with statistical significance.
We evaluated the mean change in BCVA at the six-month timepoint as compared to baseline. The data are summarized as follows:
•
•
•
•
In Group 1, the mean change in visual acuity was 9.0 ETDRS letters with a median of 7.0 letters, and 40% of the patients gained greater than or
equal to three lines of vision, or 15 ETDRS letters, defined as significant visual gain;
In Group 2, the mean change in visual acuity was 10.2 ETDRS letters with a median of 16.0 letters, and 60% of patients gained greater than or
equal to 15 ETDRS letters;
In Group 3, the mean change in visual acuity was 10.7 ETDRS letters with a median of 10.0 letters, and 40.9% of patients gained greater than or
equal to 15 ETDRS letters; and
In Group 4, the mean change in visual acuity was 9.9 ETDRS letters with a median of 11.0 letters, and 18.2% of patients gained greater than or
equal to 15 ETDRS letters.
Zimura - IPCV Trials
OPH2002: Completed Phase 2a Clinical Trial of Zimura for IPCV
In late 2014, we initiated a very small, uncontrolled, open-label, Phase 2a clinical trial to evaluate Zimura’s potential role when administered in
combination with anti-VEGF agents for the treatment of IPCV in treatment-experienced patients for whom anti-VEGF monotherapy failed. IPCV is an age-
related disease that is similar to wet AMD and is commonly characterized by leakage under the RPE, subretinal hemorrhage and RPE detachment. We
enrolled four patients in the trial. None of the patients had a greater than 15-ETDRS letter decrease in visual acuity, which is considered a significant loss in
visual acuity, following treatment in this study. None of the patients experienced any drug-related adverse events and there were no unexpected safety
issues from this trial.
OPH2006: Discontinued Phase 2a Trial of Zimura for IPCV
In late 2017, we initiated a randomized, dose-ranging, open-label Phase 2a clinical trial of Zimura in combination with Eylea in treatment-experienced
patients with IPCV. We did not enroll any patients in this clinical trial and decided to discontinue this clinical trial.
IC-500: HtrA1 Inhibitor Product Candidate
In October 2018, we acquired from funds controlled by Versant Ventures a number of HtrA1 inhibitors. In previous experiments conducted before the
acquisition, these HtrA1 inhibitors showed high affinity and specificity for HtrA1 when tested in vitro. In 2020, we selected the lead compound from this
group of HtrA1 inhibitors, which we call IC-500, for
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preclinical development. We are currently developing IC-500 for the treatment of GA and evaluating HtrA1 inhibition as a potential treatment for other
stages of AMD and potentially other age-related retinal diseases.
The HtrA1 gene encodes for an enzyme that may affect cellular structure, function and homeostasis, which is the dynamic equilibrium maintained in
cells and tissue required for normal physiology. Genetic linkage studies, including a study published in Molecular Vision in 2017, show a correlation
between the expression of HtrA1 and a certain set of genes conferring risk for AMD. A study of post-mortem eyes from subjects with AMD published in
EBioMedicine in 2018 found overexpression of HtrA1 in RPE cells as compared to the eyes of non-AMD subjects. Additionally, the overexpression of
HtrA1 was found, in an in vitro experiment published in the same article, to lead to alterations and disruptions in the morphology and function of RPE cells.
Although the causal pathway between expression of HtrA1 and AMD is still not well understood, we believe that these findings suggest that HtrA1
overexpression may play a role in AMD and that molecules involved in the regulation and inhibition of HtrA1 may have therapeutic benefit in the
treatment of GA as well as other stages of AMD and potentially other age-related retinal diseases.
We are continuing the preclinical development of IC-500. In early 2021, we reviewed our IC-500 development program and explored the potential of a
less frequent dosing regimen than monthly dosing. In 2021, we initiated a number of preclinical tolerability and pharmacokinetic studies for IC-500, and
we are planning for IND-enabling GLP toxicology studies. We anticipate that the start of the IND-enabling toxicology studies will be later than what we
originally planned, primarily due to the limited availability of study slots at CROs attributable to rising demand for their services as well as increased
absenteeism of staff at those CROs in wake of the COVID-19 pandemic and the recent Omicron variant.
We have developed a formulation that we believe will be safe and effective for intravitreal administration into the eye, and are conducting current
Good Manufacturing Practices, or cGMP, manufacturing activities for IC-500. Based on current timelines and subject to successful preclinical development
and cGMP manufacturing, we expect to submit an IND to the FDA for IC-500 in mid-2023.
Gene Therapy Research and Development Programs
Since 2017, as we evaluated our strategic priorities and the market for orphan and age-related retinal diseases with unmet medical needs, as well as the
available technologies in development to potentially address these needs, we have been encouraged by the prospects for gene therapy as a potential
treatment option for retinal diseases. We in-licensed two gene therapy product candidates (IC-100 and IC-200) and established collaborative gene therapy
sponsored research programs with three leading academic research institutions in the United States. These sponsored research programs were focused on
generating data to support the preclinical development of our gene therapy product candidates and discovering and developing other novel gene therapy
technologies to treat a number of orphan IRDs.
Since 2021, as we evaluated the results from our preclinical toxicology and efficacy studies for IC-100 and IC-200 and assessed the additional
resources that would be needed to advance those programs in light of our focus on Zimura and other strategic goals, we have been considering our
development options for both product candidates. We are currently planning to seek a collaborator for the future development and potential
commercialization of IC-100 and IC-200. We continue to believe in gene therapy as a promising mechanism of action for the treatment of many retinal
diseases. We continue to advance our minigene research programs, which we have transitioned to us from the University of Massachusetts Medical School,
or UMMS.
The Potential of Gene Therapies for Retinal Diseases
Gene therapy consists of delivering DNA encoding for a functional protein to a target tissue to facilitate protein synthesis using a recipient's existing
cellular machinery. Gene therapy can be used to replace a non-functional protein produced innately by the subject as a result of a genetic mutation or as a
means of producing and delivering a therapeutic protein that would not otherwise be produced within the body. Many IRDs are monogenic, meaning they
are caused by mutations in a single gene, and therefore could potentially be addressed by a gene replacement approach. For genetic diseases where the
mutant protein has toxic effect, we have been encouraged by the potential for a “knockdown” and “replace” approach in which gene therapy not only can
introduce a wildtype version of the gene into the host body but also can suppress the expression of the mutant gene. Furthermore, because gene therapy
may result in a lasting, or even permanent, addition to a host body's genetic code, gene therapy has potential for an extended treatment effect through a
single administration. We therefore believe that gene therapy also holds promise as a potential treatment for age-related and other non-orphan retinal
diseases, especially for diseases where patients might otherwise require chronic therapy over years, if not decades.
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Currently, most gene therapies for application in the eye are administered via subretinal injection. Subretinal injection is a surgical procedure in which
the gene therapy vector is injected by a retinal surgeon into the potential space between the photoreceptors and the RPE and often as close as practicable to
the site of desired protein expression. Once the vector is present in the target tissue area, the process by which the gene of interest is inserted into host cells
by the delivery vehicle can begin. This process is referred to as transduction and the gene therapy delivery vehicle is referred to as a vector.
Gene Therapy Products and AAV Vectors
A gene therapy product typically includes the gene of interest, or transgene, together with a promoter sequence. The composition of the transgene may
differ from that of the wildtype form of the gene—for example, the gene may be modified to increase the expression of the target protein. Promoters are
DNA sequences that are linked to a gene and control the transcription of a gene into RNA in the host body's cells. There are cell-specific promoters, which
tend to drive gene expression in particular cell or tissue types - for example, the RPE and photoreceptors. The choice of the specific promoter that is to be
linked to a given transgene is an important consideration in constructing a gene therapy product.
The promoter-transgene combination is packaged together into a delivery vehicle to facilitate localization within the relevant tissue within the body.
Gene therapies are typically delivered via viral vectors and among those, AAV has become the most common choice for gene therapy applications inside
the eye. AAV is a small, non-pathogenic virus. To create the vector, the DNA encoding the AAV viral genes is removed, disarming the virus, and is
replaced with the therapeutic gene sequence. In addition to AAV, other gene delivery vehicles include vectors derived from lentivirus and non-viral based
vectors.
We are focused on AAV gene therapies, as AAV vectors have generally been found to transduce RPE, photoreceptors and other retinal cells at a high
rate, and their safety profile in humans is relatively well-documented as compared to other delivery vehicles, such as lentiviral vectors. Gene editing
approaches, such as CRISPR, in which the host DNA is modified, altered or removed via therapeutic intervention, are also emerging as a potential
treatment options for genetic diseases. Unlike lentiviral vectors or gene editing approaches, with AAV gene therapy, the delivered genetic cargo does not
incorporate into or alter the host cell's existing DNA and chromosomes, but rather remains separate in the host cell, where it can be transcribed by the host
cell's existing machinery.
There are several naturally-occurring serotypes of AAV, including AAV2, AAV5, AAV8 and AAV9, as well as countless synthetic AAV serotypes. The
AAV genome consists of two genetic sequences: a "Rep" gene that encodes for certain viral life-cycle proteins, and a "Cap" gene that encodes for proteins
that form the viral capsid, which is the outer shell of the AAV. Recombinant AAV vectors can be created by combining the Rep sequence for one AAV
serotype with the Cap sequence for another AAV serotype. For example, a recombinant AAV 2/5 vector is produced using the AAV2 Rep sequence and the
AAV5 Cap sequence to package the transgene inside an AAV5 capsid. Because different capsid proteins have different transduction capabilities within
different types of cells, the selection of the capsid serotype is an important consideration in constructing an AAV gene therapy product.
One of the primary limitations with AAV gene therapy is AAV's packaging capacity: an AAV vector can hold only up to approximately 4,700 base pairs
of DNA, whereas the genes associated with a number of monogenic IRDs, such as the CEP290 gene associated with LCA10 and the ABCA4 gene
associated with STGD1, exceed that size. A possible solution to the size limitation would be to develop a minigene form of transgene that would be small
enough to fit within the packaging capacity of AAV, but large enough for the resulting protein to maintain its function. Another potential limitation for AAV
and other viral vector gene therapies is the potential to trigger an immune response. Because many types of AAV are naturally occurring, gene therapy
patients may have built up neutralizing antibodies to specific AAV serotypes prior to gene therapy administration, which may result in an inflammatory
immune response and tissue damage. The safety profile of AAV, however, is well-documented, and furthermore, the relative isolation of the human eye and
ocular immune system within the body may mitigate the potential immune response from the administration of AAV into the eye. Our current gene therapy
programs, which are described in further detail below, use AAV vectors for delivery of the genetic cargo to cells within the retina.
IC-100: RHO-adRP Product Candidate
In June 2018, we entered into an exclusive global license agreement with the University of Florida Research Foundation, or UFRF, and the University of
Pennsylvania, or Penn, for rights to develop and commercialize IC-100, our novel AAV gene therapy product candidate for the treatment of RHO-adRP.
There are over 150 known mutations in the RHO gene that can result in RHO-adRP. In individuals with RHO-adRP, the rhodopsin that is produced by the
mutant gene is toxic. The construct for our RHO-adRP product candidate combines in a single AAV2/5 vector:
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•
•
a transgene for a highly-efficient, novel short hairpin RNA, or shRNA, designed to target and "knockdown" expression of the subject's innate
rhodopsin, regardless of the specific mutation a subject has, with
a transgene for a healthy rhodopsin protein that is resistant to the shRNA.
Our RHO-adRP construct was tested by investigators at Penn in a naturally occurring canine model of RHO-adRP, resulting in long term, i.e., over 8
months, anatomic and functional preservation of the photoreceptors, which was demonstrated with histology and electrophysiology. The investigators had
initially tested a dual vector construct in which the shRNA and the healthy RHO transgenes were delivered by different AAV vectors. The investigators
found, however, that the dual vector approach caused inflammation and other complications in the retina, leading the investigators to develop this single
vector construct. The results from these experiments were published by scientists at Penn and UF in PNAS in August 2018 in a paper titled: "Mutation-
independent Rhodopsin Gene Therapy by Knockdown and Replacement with a Single AAV Vector."
We worked with a gene therapy contract development and manufacturing organization, or CDMO, to develop a manufacturing process for IC-100, and
this CDMO produced and we released a cGMP batch of IC-100. In addition, we and Penn conducted a number of preclinical studies of IC-100 and a
natural history study of RHO-adRP patients.
We have completed two preclinical toxicology studies of IC-100, one of which was a toxicology and efficacy study in the naturally occurring
canine model of RHO-adRP and the other study was a GLP toxicology study in non-human primates. We tested the same three doses of IC-100 in both
studies. In the canine study, we believe the results demonstrated there was efficacy across all three dose groups. We observed, through clinical examination,
ocular inflammation in the high dose group in the canines and at varying degrees at different dosing levels in the non-human primates. Because of the
different findings across the two species, we planned to discuss with the FDA the results from these toxicology studies and the design of our planned first-
in-human clinical trial before submitting an IND. The FDA advised, in lieu of this meeting, additional discussion should be conducted during the 30-day
IND review period following IND submission.
We have been considering our development options for this product candidate and currently plan to seek a collaborator for the future development
and potential commercialization of IC-100.
IC-200: Product Candidate for BEST1-Related IRDs
In April 2019, we entered into an exclusive global license agreement with Penn and UFRF for rights to develop and commercialize IC-200, our novel
AAV gene therapy product candidate for the treatment of Best disease and other BEST1-related IRDs. Investigators at Penn and UFRF tested IC-200 in a
naturally occurring autosomal recessive canine model for Best disease, resulting in the reversal of subretinal lesions and micro-detachments associated with
the canine disease. The results of this work were published in PNAS in February 2018 in a paper titled: "BEST1 gene therapy corrects a diffuse retina-wide
microdetachment modulated by light exposure." We believe the results from these experiments in a naturally occurring canine disease model with distinct
phenotypic similarities to human Best disease demonstrate the potential therapeutic benefit of IC-200 for BEST1-related IRDs.
We worked with a gene therapy CDMO to develop a manufacturing process for IC-200, and this CDMO produced and we released a cGMP batch of IC-
200. In addition, we and Penn conducted a number of preclinical studies of IC-200 and natural history studies of patients with BEST1-related IRDs, which
included a preclinical toxicology and efficacy study of IC-200 in the naturally occurring canine model of Best disease. We believe the results of the
toxicology and efficacy study show IC-200 had an efficacy effect in these canines with minimal adverse effects from inflammation or other safety issues.
We have been considering our development options for this product candidate and currently plan to seek a collaborator for the future development
and potential commercialization of IC-200.
Minigene Programs
AAV vectors are generally limited as a delivery vehicle by the size of their genetic cargo, which is restricted to approximately 4,700 base pairs of
genetic code. The use of minigenes seeks to deliver a smaller but still functional form of a larger gene packaged into a standard-size AAV delivery vector.
The goal of minigene therapy is to deliver a gene expressing a protein that, although smaller than the naturally occurring protein, is nonetheless functional
for purposes of treating the associated disease.
Starting in 2018, we funded several sponsored research programs at UMMS seeking to use a minigene approach to develop new gene therapies for
several orphan IRDs. These programs (miniCEP290, miniABCA4 and miniUSH2A) are described below. In July 2021, we hired four individuals who were
previously at UMMS and working on these sponsored research programs, including the principal investigator for these programs. We have transitioned the
preclinical research
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activities for these programs from UMMS to us and have established a laboratory for these employees to continue working on these programs and other
preclinical ocular research and development activities.
miniCEP290 Program for LCA10
Our miniCEP290 program is targeting LCA10, which is associated with mutations in the CEP290 gene. The naturally occurring CEP290 gene is
approximately 8,000 base pairs. In a 2018 publication in Human Gene Therapy, researchers at UMMS presented their findings that injection of a CEP290
minigene into a newborn mouse model for LCA10 resulted in rescue of photoreceptor cells, as evidenced by both anatomical and functional measures. The
goal of our sponsored research with UMMS was to create and evaluate other CEP290 minigene constructs in the mouse model and optimize the effect
observed in that publication.
We were encouraged by the results of the sponsored research. One of the new minigene constructs shows five times longer duration of functional rescue
of the photoreceptors as compared to what was observed in the 2018 publication. In July 2019, we entered into a license agreement with the University of
Massachusetts, or UMass, for exclusive development and commercialization rights to this program. UMMS continued experiments to optimize the
constructs, which were delayed during 2020 because of restrictions placed by UMMS on animal research activities as a result of the COVID-19 pandemic.
We have identified a lead construct from this program and are considering preclinical development options.
miniABCA4 Program for STGD1
Our miniABCA4 program is targeting STGD1, which is associated with mutations in the ABCA4 gene. The size of the naturally occurring ABCA4 gene
is approximately 7,000 base pairs. As part of the sponsored research, UMMS generated and evaluated several ABCA4 minigene constructs in both in vitro
and in vivo experiments, which yielded what we believe to be encouraging results. We are conducting additional experiments to optimize the constructs and
assess their efficacy in the mouse model.
UMMS granted us an option to obtain an exclusive license to certain patent applications for this program.
miniUSH2A Program for USH2A-Related IRDs
The miniUSH2A program seeks to develop a mutation independent, minigene therapy for the vision loss associated with USH2A mutations, including
vision loss associated with Usher 2A and USH2A-associated nonsyndromic autosomal recessive retinitis pigmentosa. Some of the activities in this program
were delayed during 2020 as a result of the closure of UMMS animal research laboratories due to the COVID-19 pandemic. UMMS generated and
evaluated several USH2A minigene constructs in in vitro experiments and we are planning to evaluate their efficacy in animals. The animal experiments
have been delayed as a result of transitioning the work from UMMS to us.
UMMS granted us an option to obtain an exclusive license to certain patent applications for this program.
Manufacturing
We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of Zimura, IC-500, IC-100, IC-
200 or any other product candidate we may develop. Although we rely and intend to continue to rely upon third-party contract manufacturing
organizations, or CMOs, to produce our products and product candidates, we have personnel with experience to manage the third-party CMOs that we have
engaged or may engage to produce our product candidates.
Manufacturing of pharmaceutical and biological products is a process that involves procurement of starting materials, chemical synthesis or cell
culture processing in controlled environments, purification and post-production testing and analysis before the product can be released. Manufacturing
processes can be complex and difficult to develop, especially for products such as oligonucleotides and gene therapies. Even when a manufacturing process
is successfully developed, there are challenges associated with scaling up a manufacturing process to produce quantities sufficient for clinical trials or
potential commercial sales and producing high-quality materials consistently using a clearly defined manufacturing process. The manufacture of
pharmaceutical and biological products is subject to FDA review and oversight. Having a well-defined process that can be validated is crucial to obtaining
FDA approval of any product candidate we may bring forward.
Zimura Manufacturing
The process for manufacturing Zimura consists of chemical synthesis, purification, pegylation, purification and finally freeze drying to form a
powder, which is the active pharmaceutical ingredient, or API. Each of these steps involves relatively common unit operations. In a separate process that
follows the freeze drying, the Zimura API is dissolved in a liquid solution
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that includes certain chemicals and then is aseptically filled into vials from which the intravitreal injection solution is drawn. This process of rendering the
API into a liquid solution and placing it into vials is referred to as fill/finish services.
In early 2017, we completed the small scale manufacture of multiple batches of Zimura drug substance that we are using to support clinical drug
supply for the GATHER2 trial and the expanded STAR trial. We are working with our historical contract manufacturer for Zimura drug substance, Agilent
Technologies, Inc., or Agilent, to scale up and potentially validate the manufacturing process for Zimura drug substance. In parallel, we are working with a
new contract manufacturer with the goal of assessing whether this manufacturer can produce Zimura drug substance at an adequate scale for potential
commercial use. We have experienced issues during technology transfer of the existing manufacturing process to this manufacturer, which has resulted in
delays to our timelines with this manufacturer. Subject to successful completion of scale up and validation activities, we currently plan to use Agilent as the
primary source of supply of Zimura drug substance upon launch, if approved, and the new manufacturer as a second source of supply of Zimura drug
substance. Validation requires that we demonstrate that the drug substance produced through the scaled up process can be produced consistently, delivering
quality product within a range of acceptable specifications. We are continuing analytical method development and qualification with our contract
manufacturers and laboratories.
Starting in 2020, we have worked with a contract manufacturer to provide us with additional supply of finished Zimura drug product to support our
needs for the GATHER2 trial and the expanded STAR trial. We believe we have sufficient finished Zimura drug product for these two clinical trials. In
addition, we are working with our historical fill/finish manufacturer, Ajinomoto Bio-Pharma Services, or Ajinomoto, on fill/finish of Zimura drug product
with a new vial, which we believe will allow us to support a more efficient and robust fill/finish operation at a commercial scale. Ajinomoto has produced
finished Zimura drug product using the new vial, which we plan to use for a portion of the second-year study visits for patients in the GATHER2 trial. We
believe Ajinomoto has the capacity to supply us with finished Zimura drug product with the new vial for our expected commercial supply needs upon
launch, if approved.
We order the polyethylene glycol, or PEG, starting material used to make Zimura drug substance from a sole source third-party manufacturer outside
the United States. We currently procure the supply on a purchase order basis and are continuing discussions regarding a long-term supply agreement with
this manufacturer for the PEG starting material. We believe this supplier will have the capacity to supply us with the PEG that we will need for commercial
manufacturing.
Zimura Sustained Release Delivery Technologies
We are exploring lifecycle management initiatives for Zimura with efforts focused on potential sustained release delivery technologies. Our goal is
to derive a formulation of Zimura with a sustained release delivery technology that reduces the frequency of intravitreal injections that a patient must
undergo, while maintaining comparable efficacy and safety to monthly injections. We have been exploring a number of potential sustained release delivery
technologies with various technology providers. Preliminary evaluation of the sustained release delivery technologies and the resulting formulations is
ongoing. We intend to evaluate multiple sustained release delivery technologies for Zimura, and may pursue long-term development collaborations with
technologies that meet our feasibility and other criteria.
IC-500 Manufacturing
The process for manufacturing IC-500 consists of chemical synthesis, purification and spray drying to form a powder, which is the spray dried
active pharmaceutical ingredient, or SDAPI. Each of these steps involves relatively common unit operations. In a separate process that follows the spray
drying, the IC-500 SDAPI is dispersed in a liquid solution to form a suspension that includes certain pharmaceutical excipients and then is aseptically filled
into vials and terminally sterilized. The filled drug product suspension is then diluted to the clinical dose concentration using a diluent. This process of
rendering the SDAPI into a liquid suspension and placing it into vials, from which the intravitreal injection is drawn, is referred to as fill/finishing.
We have engaged multiple contract manufacturers to support the various processes necessary for the scale-up and cGMP manufacturing of IC-500
drug substance and drug product for larger scale batches for potential clinical trials.
Gene Therapy Manufacturing
The manufacture of AAV gene therapies requires the use of high quality starting materials, such as plasmids and cells. Plasmids are circular double-
stranded DNA that can exist separately from chromosomes in cells. A plasmid can be engineered and transfected into cells to express a specific transgene
with different combinations of AAV serotypes. The plasmids and cells are generally sourced from a limited number of qualified suppliers.
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The process for producing AAV vectors typically consists of growing the cells, transfection of the cells with appropriate plasmids and harvesting
the viral vectors from the cell culture. The subsequent purification process is designed to capture, purify and concentrate the viral vector product while
removing process and product-related impurities. The purified AAV vector is then formulated, filtered and filled into vials, from which the injection
solution is drawn.
We obtain the plasmids that are used for IC-100 and IC-200 from a single third-party supplier on a purchase order basis. We worked with a gene
therapy CDMO for preclinical and Phase 1/2 clinical supply of IC-100 and IC-200 drug substance and drug product. This CDMO has produced, and we
have released, a cGMP batch of IC-100 and a cGMP batch of IC-200.
Human Capital
Our Workforce
As of January 31, 2022, we had 94 full-time employees, compared to 57 full-time employees as of January 31, 2021. These employees support key areas
of our business and operations, including commercial planning, medical affairs, clinical development and clinical operations, regulatory affairs and drug
safety, data management, scientific research, process and analytical development, drug substance and drug product manufacturing, quality control,
materials and supply chain management, and quality assurance, as well as our general and administrative functions and public company infrastructure. We
plan to continue to hire strategically to support key areas of our business, including the hiring of medical science liaisons. The following are additional data
about our full-time employees, as of January 31, 2022:
•
•
•
•
•
67 are in research and development, manufacturing and quality control and assurance;
32 have M.D., O.D., Pharm.D. or Ph.D. degrees;
45 self-identify as women;
45 self-identify as racial or ethnic minorities; and
32 reside in a state where we do not have any physical offices (currently, New Jersey, New York and Massachusetts).
In addition to our full-time employees, we engage various consultants and advisors to support key areas of our business, including formulating our
research and development, manufacturing, commercialization and lifecycle management strategies. Many of these consultants and advisors have
specialized expertise that also makes them attractive for other companies. We generally engage them as independent contractors and they are generally free
to work for other companies, subject to the terms of any non-compete arrangements that we enter into with them.
Human Capital Initiatives
During the COVID-19 pandemic, we increased our efforts to support our employees and transitioned to full-time remote working in March 2020.
We conducted numerous surveys over the course of the year to gauge employee sentiment and understand their needs. Throughout the pandemic, we have
provided employees with technology and training sessions to support remote working. We took efforts to enhance company communication, such as
holding weekly company meetings to provide business updates and provide a forum for guest speakers, including several offering education in best
practices for remote working and general wellness. Our employees adopted various software tools to support virtual communication and collaboration, both
internally and with third parties.
Starting in the middle of 2021, we adopted health and safety policies for employees who started voluntarily returning to the office. We have also
adopted a vaccination policy and we provide COVID-19 testing to employees who regularly work in our offices. We continue to provide flexible work
policies to support our employees. We continue to monitor the COVID-19 situation closely and, other than for our laboratory-based employees, currently
expect to continue working predominantly in a hybrid (partially remote, partially in office) working model for the foreseeable near future.
In 2021, we continued to develop our new employee integration and professional development programs. Similar to 2020, most of our newly hired
employees in 2021 joined us as remote- or hybrid-based employees, and we continued to enhance our new employee orientation program. For 2021, we
continued to expand our training programs for new and continuing employees.
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In mid-2020, we formed an employee committee on diversity, equity and inclusion, or CDEI, to assess issues of diversity, equity and inclusion
among our workforce and provide recommendations. In 2021, we worked to implement some of the recommendations from the CDEI, including
conducting trainings on topics such as unconscious bias and interviewing skills. We entered into a corporate sponsorship with Genspace NYC, a
community life sciences lab in Brooklyn, New York. We also rolled out an employee volunteering and company match program.
Sales and Marketing
We expect that our commercial strategy for any of our product candidates, including whether to retain commercial rights and market and sell the product
candidate ourselves or to utilize collaboration, distribution or other marketing arrangements with third parties in some or all geographic markets, will be
determined based on a variety of factors, including the size and nature of the patient population, the disease area, the particular indication for which the
product candidate is approved, the territory in which the product candidate may be marketed and the commercial potential for such product candidate. In
addition, our commercial strategy will vary depending on whether the disease is typically treated by general ophthalmology practitioners, specialists, such
as retina specialists, or other sub-specialists, and the degree and potential degree of acceptance of our product candidate by the relevant physicians in
various markets. For example, in the United States, retina specialists perform most of the medical procedures involving diseases of the back of the eye,
including intravitreal injections. We believe that retina specialists in the United States are sufficiently concentrated such that we could effectively promote
an approved product candidate to these specialists. We also understand that a majority of GA patients in the United States currently are not cared for by
retina specialists and instead see general ophthalmologists (GOs) and optometrists (ODs); this will be a factor in our sales and marketing strategy for
Zimura for GA.
We are working to build our commercial capabilities and infrastructure and develop our sales and marketing strategy for the potential launch of
Zimura in the United States for GA, if approved. If we are successful in expanding the potential label for Zimura to intermediate AMD and/or STGD1,
which, in contrast to GA and other forms of AMD, is a condition affecting a more limited number of individuals, our commercial strategy for Zimura may
change.
Competition
The development and commercialization of new drug products is highly competitive. We face competition with respect to our product candidates
from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies, as well as generic and biosimilar companies,
worldwide. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct
research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. Some of these
competitive products and therapies are based on scientific approaches that are the same as or similar to our approaches, and others are based on entirely
different approaches. We also will face similar competition with respect to any product candidates that we may seek to develop or commercialize in the
future. In particular, many companies are pursuing gene therapy approaches for orphan and age-related retinal diseases.
Based on publicly available information, we are aware of the following research and development programs that may be competitive with programs
we are pursuing. Other competitive programs may exist of which we are not aware.
Competitive considerations for GA or dry AMD:
• We are aware that LumiThera, Inc. has a medical device using its LT-300 light delivery system, which is approved in the European Union for the
treatment of dry AMD. In addition, there are a number of products in preclinical and clinical development by third parties to treat GA or dry
AMD. In general, these product candidates can be categorized based on their proposed mechanisms of action. The mechanisms of action for these
product candidates include complement system and inflammation suppression, visual cycle modulators, antioxidants and neuroprotectants, cell
and gene therapies and vascular perfusion enhancers. We are aware that AstraZeneca PLC (which acquired Alexion Pharmaceuticals, Inc. in
2021), Annexon Inc., Apellis Pharmaceuticals, Inc., or Apellis, Applied Genetic Technologies Corporation, or AGTC, Biogen Inc., Gemini
Therapeutics, Inc., Gyroscope Therapeutics (which was recently acquired by Novartis AG), IONIS Pharmaceuticals, Inc. (in collaboration with
Roche AG), Janssen Pharmaceuticals Inc. (which acquired its program through the acquisition of Hemera Biosciences, LLC), MorphoSys AG,
NGM Biopharmaceuticals Inc. and Novartis AG each have complement inhibitors in development for GA or dry AMD, including, in the cases of
Gemini Therapeutics, Gyroscope Therapeutics and Janssen Pharmaceuticals, complement inhibitor gene therapies and AGTC and Gemini
Therapeutics each has a research program on complement factor H gene therapy. We believe that the most advanced of these programs is Apellis's
pegylated, synthetic peptide targeting complement protein C3, for which Apellis announced top-line data from two Phase 3 clinical trials in
September 2021 and Apellis stated it would file an application for marketing approval with the FDA during the second quarter of 2022.
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Apellis could obtain marketing approval for its product candidate in advance of when we might reasonably expect to obtain marketing approval
for Zimura in GA or IC-500 in GA, if at all. Moreover, we are aware that several other companies, including Abbvie Pharmaceuticals, Inc.,
Allegro Ophthalmics, LLC, Alkeus Pharmaceuticals Inc., Astellas Pharma Inc., Boehringer Ingelheim, Lineage Cell Therapeutics, Inc., Ocugen,
Inc., ONL Therapeutics, Inc., Regenerative Patch Technologies, Roche AG and Stealth BioTherapeutics Corp., are pursuing development
programs for the treatment GA or dry AMD using different mechanisms of action outside of the complement system, including Genentech, Inc.
(an affiliate of Roche AG) and Gemini Therapeutics, which are pursuing HtrA1 inhibition as a mechanism of action. We believe that the most
advanced HtrA1 inhibitor program in development is Genentech's monoclonal antibody HtrA1 inhibitor, which is currently being studied in a
Phase 2 clinical trial and whose results are expected to become available in 2022 or 2023.
Competitive considerations for Stargardt disease:
•
There are a number of products in preclinical research and clinical development by third parties to treat Stargardt disease. We are aware that
AGTC, Alkeus Pharmaceuticals, Inc., Beam Therapeutics Inc., Biogen, Generation Bio Co., Kubota Vision Inc. (formerly Acucela), Lin
BioScience, Inc., ProQR Therapeutics N.V., or ProQR, and Spark Therapeutics (a subsidiary of Roche AG) each have research or development
programs in Stargardt disease. Three of these programs, Alkeus, Kubota and Lin BioScience, are exploring the use of oral therapeutics, while
AGTC, Nightstar and Spark are each using a gene therapy approach, Beam is using a base editing approach, and ProQR is using an RNA-based
approach. Kubota’s product candidate, to which the FDA and the EMA granted orphan drug designation in August 2020, is in Phase 3
development while Alkeus’s product candidate is in Phase 2 development. In addition, several academic organizations have early stage programs
in Stargardt disease.
Competitive considerations for RHO-adRP:
• We are aware that ProQR is developing an RNA-based therapeutic for RHO-adRP, for which it is currently conducting a Phase 1/2 clinical trial.
Ocugen, Inc. is developing a preclinical gene therapy for RHO-adRP, for which the FDA granted orphan drug designation in July 2020. In
addition, Biogen has a preclinical AAV gene therapy program in RHO-adRP. Editas Medicine, Inc. is also developing a preclinical gene editing
product candidate for this disease. We are also aware that multiple academic institutions have early stage gene therapy development programs in
RHO-adRP.
Competitive considerations for BEST1-related IRDs:
• We are aware that Biogen has a preclinical AAV gene therapy program for one or more BEST1-related IRDs.
Competitive considerations for LCA10:
• We are aware that Editas Medicine, Inc. has a gene editing program for LCA10, for which a Phase 1/2 clinical trial is ongoing, ProQR is
developing an RNA-based therapeutic for LCA10 that is currently in Phase 2/3 development, Generation Bio Co. has a preclinical program that
utilizes ceDNA technology to target LCA10 and Oxford Biomedica plc is developing a lentiviral gene therapy program for LCA10 that is in
preclinical development. In addition, several academic institutions have preclinical programs in LCA10.
Competitive considerations for USH2A-related IRDs:
•
There are a number of products in preclinical research and clinical development by third parties to treat USH2A-related IRDs. We are aware that
ProQR is pursuing two RNA based approaches for different mutations causing Usher 2A, one of which is currently in Phase 1/2 clinical
development and the other of which is in preclinical development. We are also aware that Editas Medicine, Inc., Odylia Therapeutics and Wave
Life Sciences, Inc. are exploring potential programs in USH2A-related IRDs.
Intellectual Property
Our success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, technology and know-how, to operate
without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. We seek to protect our proprietary position,
among other methods and where patent protection is available, by filing U.S. and certain foreign patent applications related to our proprietary technology,
inventions and improvements that are important to the development of our business, and by maintaining our issued patents. For our collaborative gene
therapy sponsored research programs, we have generally relied on our university collaborators to perform
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research and generate data to support new patent applications, and to file, prosecute and maintain any patents or patent applications resulting from the
sponsored research with our input. We also rely upon trade secrets, know-how, continuing technological innovation and in-licensing opportunities to
develop and maintain our proprietary position.
Our patent portfolio includes the following:
•
patents and patent applications in-licensed from Archemix Corp., or Archemix:
•
•
patents covering Zimura's composition-of-matter, which have issued in the United States, the countries covered by the European
Patent Organisation, which we refer to as the EPO Countries, Japan and certain other jurisdictions, and which are expected to expire
in the United States and the EPO Countries in 2025 and elsewhere, including China and Japan, in 2026; and
patents covering the treatment of certain complement mediated disorders with Zimura, Zimura for use in a method of treating certain
complement mediated disorders or a composition comprising Zimura for treating certain complement mediated disorders, which
have issued in the United States, the EPO Countries, Japan and certain other jurisdictions, and which are expected to expire in the
EPO Countries in 2025 and elsewhere, including the United States and Japan, in 2026; and
•
patents and patent applications owned by IVERIC bio, Inc.:
•
•
patent applications covering formulations, methods of use for treating GA, Stargardt disease and other conditions, and other
proprietary technology relating to Zimura, which have resulted in claims covering methods of using Zimura to treat GA that have
been allowed by the USPTO and are expected to expire in 2034, and others are pending in the United States, the EPO Countries,
Japan and certain other jurisdictions, which, if granted, are expected to expire in 2034; and
patent applications covering methods of using Zimura to treat intermediate AMD and other forms of AMD, which are pending under
the Patent Cooperation Treaty, or PCT, and which, if granted, are expected to expire in 2041; and
•
patents and patent applications owned by our subsidiary Orion Ophthalmology LLC, or Orion:
•
three families of composition-of-matter and method-of-treatment patent applications covering IC-500 and other HtrA1 inhibitors
owned by Orion, some of which have resulted in issued patents in the United States or claims that have been allowed by the USPTO,
as well as issued patents or allowed claims in other jurisdictions, all of which are expected to expire in 2037, and others are pending
in the United States, the EPO Countries, Japan and certain other jurisdictions, which, if granted, are expected to expire in 2037; and
•
patents and patent applications in-licensed from UFRF and Penn:
•
•
•
patents covering composition-of-matter and method-of-treatment relating to IC-100 and the proprietary RHO-adRP AAV technology
of UFRF and Penn, which have issued in the United States and are expected to expire in 2037, and applications covering the same
subject matter that are pending in the United States, EPO countries, Japan and certain other jurisdictions, which, if granted, are
expected to expire in 2037; and
two families of composition-of-matter and method-of-treatment patent applications relating to the proprietary RHO-adRP AAV
technology of UFRF and Penn, one family of which is pending in the United States, and both families are pending in the EPO
Countries, Japan and certain other jurisdictions, which, if granted, are expected to expire in 2037 and 2039, respectively; and
patent applications covering composition-of-matter and method-of-treatment relating to proprietary BEST1 AAV technology from
UFRF, which are pending in the United States, the EPO Countries, Japan and certain other jurisdictions, and which, if granted, are
expected to expire in 2039; and
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•
patent applications covering methods of treating autosomal dominant BEST1-related IRDs and autosomal recessive BEST1-related
IRDs, which are pending under the PCT, and which, if granted, are expected to expire in 2041; and
•
patent applications in-licensed from UMass:
•
two families of composition-of-matter and method-of-treatment patent applications relating to certain proprietary minigene
technology for the treatment of diseases associated with mutations in the CEP290 gene, which are pending in the United States, the
EPO Countries and China, and which, if granted, are expected to expire in 2038 and 2040, respectively.
The term of individual patents depends upon the legal term for patents in the countries in which they are granted. In most countries, including the
United States, the patent term is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. In
the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays
by the U.S. Patent and Trademark Office in examining and granting a patent, or may be shortened if a patent or patent application claims patentably
indistinct subject matter as another commonly owned patent or patent application having an earlier expiration date and the patentee terminally disclaims the
portion of the term beyond such earlier expiration date. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration
date of a U.S. patent as partial compensation for the length of time a drug is undergoing clinical development or under regulatory review while the patent is
in force. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent
applicable to each regulatory review period may be extended and only those claims covering the approved drug, a method for using it or a method for
manufacturing it may be extended.
Similar provisions are available in the EPO Countries and certain other foreign jurisdictions to extend the term of a patent that covers an approved
drug. In the future, if and when our product candidates receive approval by the FDA or foreign regulatory authorities, we expect to apply for patent term
extensions on issued patents covering those products, depending upon the length of the clinical trials for each drug and other factors. The expiration dates
referred to above are without regard to any patent term adjustments or potential patent term extension or other market exclusivity that may be available to
us. See "—Government Regulation and Product Approvals" below for a description of market exclusivity mechanisms that may be available to us.
We may rely, in some circumstances, upon trade secrets to protect our technology. However, trade secrets can be difficult to protect. We seek to
protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants, scientific advisors and
contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and
physical and electronic security of our information technology systems.
Licensing and Other Arrangements
We are party to a number of license, acquisition, option and other agreements that have granted us rights to develop our product candidates and conduct
our research and development programs. These agreements generally impose license fee, milestone payment, royalty payment and diligence obligations on
us. Our material in-license and acquisition agreements are described below.
In the future, we may enter into additional acquisition or license agreements, particularly if we choose to acquire or in-license additional product
candidates or other technologies, including sustained release delivery technologies for Zimura, and further expand our product pipeline. We expect that any
future acquisition or license agreements would impose similar obligations on us. In the future, we may also enter into agreements to out-license intellectual
property to our collaboration and research partners to assist in the development and, if approved, commercialization of our product candidates, including
for the future development and potential commercialization of IC-100 and IC-200. We may out-license certain rights to any of our product candidates if we
believe the arrangement could assist us in the development or potential commercialization of such product candidate and would otherwise help us pursue
our business plan and strategic goals.
Zimura - Archemix C5 License Agreement
In September 2011, we entered into an amended and restated exclusive license agreement with Archemix relating to anti-C5 aptamers, which we
refer to as the C5 License Agreement. The C5 License Agreement superseded a July 2007 agreement between us and Archemix. Under the C5 License
Agreement, we hold exclusive worldwide licenses, subject to
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certain pre–existing rights, under specified patents and technology owned or controlled by Archemix to develop, make, use, sell, offer for sale, distribute
for sale, import and export pharmaceutical products comprised of or derived from an anti-C5 aptamer for the prevention, treatment, cure or control of
human indications, diseases, disorders or conditions of the eye, adnexa of the eye, orbit and optic nerve, other than certain expressly excluded applications.
Financial Terms
In connection with the C5 License Agreement, as amended, we paid Archemix an upfront licensing fee of $1.0 million and issued to Archemix an
aggregate of 2,000,000 shares of our series A-1 preferred stock and 500,000 shares of our series B-1 preferred stock. We have paid Archemix an aggregate
of $9.0 million in fees based on our achievement of specified clinical milestone events under the C5 License Agreement, including two milestone payments
of $1.0 million and $6.0 million triggered by the positive 12-month data from, and by completion of, the GATHER1 trial, which we paid in March 2020
and October 2020, respectively.
Under the C5 License Agreement, for each anti-C5 aptamer product that we may develop under the agreement, including Zimura, we are obligated
to make additional payments to Archemix of up to an aggregate of $50.5 million if we achieve specified development, clinical and regulatory milestones,
with $24.5 million of such payments relating to a first indication, $23.5 million of such payments relating to second and third indications and $2.5 million
of such payments relating to sustained delivery applications. Under the C5 License Agreement, we are also obligated to make additional payments to
Archemix of up to an aggregate of $22.5 million if we achieve specified commercial milestones based on net product sales of all anti-C5 products licensed
under the agreement. We are also obligated to pay Archemix a double-digit percentage of specified non-royalty payments we may receive from any
sublicensee of our rights under the C5 License Agreement. We are not obligated to pay Archemix a running royalty based on net product sales in
connection with the C5 License Agreement.
Diligence Obligations
We are required to exercise commercially reasonable efforts in developing and commercializing at least one anti-C5 aptamer product and in
undertaking actions required to obtain regulatory approvals necessary to market such product in the United States, the European Union, and Japan, and in
such other markets where we determine that it is commercially reasonable to do so.
Term and Termination
Unless earlier terminated, the C5 License Agreement will expire upon the latest of 12 years after the first commercial sale in any country of the
last licensed product, the expiration of the last-to-expire valid claim of the licensed patents that covers a licensed product, and the date on which no further
payments of sublicensing income are to be received by us.
Either we or Archemix may terminate the C5 License Agreement if the other party materially breaches the agreement and the breach remains
uncured for a specified period. Archemix may also terminate the C5 License Agreement, or may convert our exclusive license under the agreement to a
non-exclusive license, if we challenge or assist a third party in challenging the validity or enforceability of any of the patents licensed under the agreement.
We may terminate the agreement at any time and for any or no reason effective at the end of a specified period following our written notice of termination
to Archemix.
IC-500 - Inception 4 Merger Agreement
In October 2018, we acquired IC-500 and a number of other HtrA1 inhibitors through our acquisition of Inception 4, Inc., or Inception 4, which was
previously a privately held biotechnology company controlled by funds owned by Versant Ventures. We and Inception 4 entered into an agreement and plan
of merger, which we refer to as the Inception 4 Merger Agreement, pursuant to which we acquired Inception 4 through a merger transaction, referred to as
the Inception 4 Merger. Following the Inception 4 Merger, Inception 4 was merged into our wholly-owned subsidiary Orion, which currently owns the
rights to IC-500 and the other HtrA1 inhibitors acquired in the Inception 4 Merger.
As upfront consideration for the Inception 4 Merger, the former equityholders of Inception 4 received 5,044,201 shares of our common stock, and in
December 2018, they received an additional 130,526 shares of our common stock following finalization of customary post-closing adjustments. As part of
the transaction, we received approximately $6.1 million in cash.
Contingent Consideration
In addition, pursuant to the Inception 4 Merger Agreement, the former equityholders of Inception 4 will be entitled to receive contingent future payments
from us based on the achievement of certain clinical and regulatory milestones of up to an
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aggregate maximum amount of $105 million, with $45 million of such potential payments relating to GA and $60 million of such potential payments
relating to wet AMD. These future milestone payments will be payable in the form of shares of our common stock, calculated based on the price of our
common stock over a five-trading day period preceding the achievement of the relevant milestone, unless and until the issuance of such shares would,
together with all other shares issued in connection with the Inception 4 Merger, exceed an overall maximum limit of approximately 7.2 million shares,
which is equal to 19.9% of the number of issued and outstanding shares of our common stock as of the close of business on the business day prior to the
closing date of the Inception 4 Merger, and will be payable in cash thereafter.
Diligence Obligation
We agreed to use commercially reasonable efforts to perform the activities described in an agreed-upon development plan outlining certain activities for
developing at least one HtrA1 inhibitor for the treatment of GA. Our maximum aggregate liability for any and all breaches of our obligation under the
Inception 4 Merger Agreement to use commercially reasonable efforts to develop an HtrA1 inhibitor is limited to $5 million.
Other Terms and Conditions
The Inception 4 Merger Agreement contains customary representations, warranties and covenants for both Inception 4 and our company as the purchaser.
The representations and warranties generally survived until the first anniversary of the closing date, with certain specified representations and warranties
surviving to 30 months after the closing date and other specified representations and warranties surviving to the expiration of the applicable statute of
limitations. The Inception 4 Merger Agreement also contains customary indemnification provisions whereby the former equityholders of Inception 4 will
indemnify us and certain affiliated parties for any losses arising out of breaches of the representations, warranties and covenants of Inception 4 under the
Inception 4 Merger Agreement; pre-closing tax matters; appraisal claims of former Inception 4 stockholders; any pre-closing indebtedness or expenses not
previously adjusted for at the closing; fraud with respect to representations and warranties of Inception 4; and certain other matters.
License Agreement with UFRF and Penn for IC-100
In June 2018, we entered into an exclusive global license agreement with UFRF and Penn, which we refer to as the RHO-adRP License Agreement.
Under the RHO-adRP License Agreement, UFRF and Penn granted us a worldwide, exclusive license under specified patent rights and a worldwide, non-
exclusive license under specified know-how, including specified preclinical data, to manufacture, develop and commercialize certain AAV gene therapy
products for the treatment of rhodopsin-mediated diseases. The rights granted under the RHO-adRP License Agreement included certain patent rights
covering IC-100, our novel AAV gene therapy product candidate intended to treat RHO-adRP.
We may grant sublicenses of the licensed patent rights and know-how without the consent of the UFRF and Penn to certain affiliates and to
biopharmaceutical companies that have a minimum market capitalization at the time such sublicense is granted and may otherwise grant sublicenses of the
licensed patent rights and know-how with the consent of UFRF and Penn, not to be unreasonably withheld.
Diligence Obligations
We agreed to use commercially reasonable efforts to pursue an agreed-upon development plan with the intent to develop a licensed product for sale
within at least the United States and two major European countries and, subject to obtaining marketing approval, to commercialize a licensed product in at
least the United States and two major European countries. In addition, we agreed to meet specified development and commercial milestones with respect to
a licensed product by specified dates, as the same may be extended under the terms of the RHO-adRP License Agreement.
Financial Terms
In June 2018, we paid a $0.5 million upfront license issuance fee in connection with entry into the agreement, as well as accrued patent prosecution
expenses of approximately $30 thousand. Under the agreement, we agreed to pay an annual license maintenance fee in the low double-digit thousands of
dollars, which will be payable on an annual basis until the first commercial sale of a licensed product. In addition, we agreed to reimburse UFRF for the
costs and expenses of patent prosecution and maintenance related to the licensed patent rights.
We further agreed to pay UFRF, on behalf of both licensors, up to an aggregate of $23.5 million if we achieve specified clinical, marketing
approval and reimbursement approval milestones with respect to a licensed product and additionally, up to an aggregate of $70.0 million if we achieve
specified commercial sales milestones with respect to a licensed product.
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We are also obligated to pay UFRF, on behalf of both licensors, royalties at a low single-digit percentage of net sales of licensed products. Such royalties
are subject to customary reductions for lack of patent coverage and loss of regulatory exclusivity. In addition, such royalties with respect to any licensed
product in any country may be offset by a specified portion of any royalty payments actually paid by us with respect to such licensed product in such
country under third-party licenses for patent rights or other intellectual property rights that are necessary to manufacture, develop and commercialize the
licensed product in such country. Our obligation to pay royalties under the RHO-adRP License Agreement will continue on a licensed product-by-licensed
product and country-by-country basis until the latest of:
•
•
•
the expiration of the last-to-expire licensed patent rights covering a licensed product in the country of sale;
the expiration of regulatory exclusivity covering a licensed product in the country of sale; and
ten years from the first commercial sale of the applicable licensed product in the country of sale.
Beginning on the earlier of the calendar year following the first commercial sale of a licensed product and the first business day of 2031, we are also
obligated to pay certain minimum royalties, not to exceed an amount in the low hundreds of thousands of dollars on an annual basis, which minimum
royalties are creditable against our royalty obligation with respect to net sales of licensed products due for the year in which the minimum royalty is paid.
If we or an affiliate sublicenses any of the licensed patent rights to a third party, we will be obligated to pay UFRF, on behalf of both licensors, a low
double-digit percentage of the consideration received in exchange for such sublicense, with the applicable percentage based upon the stage of development
of the sublicensed product at the time we or the applicable affiliate enters into the sublicense.
If we receive a rare pediatric disease priority review voucher from the FDA in connection with obtaining marketing approval for a licensed product and
we subsequently use such priority review voucher in connection with a different product candidate, we will be obligated to pay UFRF, on behalf of both
licensors, aggregate payments in the low double-digit millions of dollars based on certain marketing approval and commercial sales milestones with respect
to such other product candidate. In addition, if we sell such a priority review voucher to a third party, we will be obligated to pay UFRF, on behalf of both
licensors, a low double-digit percentage of any consideration received from such third party in connection with such sale.
Term and Termination
Unless earlier terminated by us, the RHO-adRP License Agreement will expire upon the expiration of our obligation to pay royalties to UFRF on net
sales of licensed products. We may terminate the agreement at any time for any reason upon prior written notice to UFRF. Penn or UFRF may terminate the
agreement if we materially breach the agreement and do not cure such breach within a specified cure period, if we experience a specified insolvency event,
if we cease to carry on the entirety of our business related to the licensed patent rights, if we cease for more than four consecutive quarters to make any
payment of earned royalties on net sales of licensed products following the commencement of commercialization thereof, unless such cessation is based on
safety concerns that we are actively attempting to address, or if we or an affiliate challenges or assists a third party in challenging the validity, scope,
patentability, and/or enforceability of the licensed patent rights.
Following any termination of the agreement prior to expiration of the term of the agreement, all rights to the licensed patent rights and know-how
granted to us will revert to UFRF and Penn.
License Agreement with Penn and UFRF for IC-200
In April 2019, we entered into an exclusive global license agreement, which we refer to as the BEST1 License Agreement, with Penn and UFRF. We
entered into the BEST1 License Agreement by exercising our exclusive option rights under an option agreement that we previously entered into with Penn
and UFRF in October 2018. Under the BEST1 License Agreement, Penn and UFRF granted us a worldwide, exclusive license under specified patent rights
and specified know-how and a worldwide, non-exclusive license under other specified know-how to research, develop, manufacture and commercialize
certain AAV gene therapy products, including IC-200, for the treatment of Best disease and other BEST1-related IRDs.
We have agreed to use commercially reasonable efforts to pursue an agreed-upon development plan with the intent to develop a licensed product
for sale within at least the United States and two major European countries and, subject to obtaining marketing approval, to commercialize such product in
at least the United States and two major European countries. In addition, we have agreed to meet specified development and regulatory milestones with
respect to a licensed product by specified dates, as the same may be extended under the terms of the agreement.
We may grant sublicenses of the licensed patent rights and know-how, without the consent of Penn or UFRF, to certain affiliates and to
biopharmaceutical companies that have a minimum market capitalization at the time such sublicense is
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granted, and may otherwise grant sublicenses to the licensed patent rights and know-how with the consent of Penn and UFRF, not to be unreasonably
withheld.
Financial Terms
In May 2019, we paid Penn, for the benefit of Penn and UFRF, a $0.2 million upfront license issuance fee, which was recorded as a research and
development expense, and we paid UFRF accrued patent prosecution expenses of approximately $18 thousand, which was recorded as a general and
administrative expense. We have also agreed to pay Penn, for the benefit of Penn and UFRF, an annual license maintenance fee in the low double-digit
thousands of dollars, which fee will be payable on an annual basis until the first commercial sale of a licensed product. In addition, we have agreed to pay
Penn, for the benefit of Penn and UFRF, a one-time patent grant fee in the low triple-digit thousands of dollars, upon the issuance of a U.S. patent that
claims inventions disclosed in the licensed patent rights or know-how or inventions generated under certain related sponsored research agreements with
Penn or UFRF, and that is exclusively licensed to us. Furthermore, we have agreed to reimburse Penn and UFRF for the costs and expenses of patent
prosecution and maintenance related to the licensed patent rights.
We have further agreed to pay Penn, for the benefit of Penn and UFRF, up to an aggregate of $15.7 million if we achieve specified clinical,
marketing approval and reimbursement approval milestones with respect to one licensed product, and up to an aggregate of an additional $3.1 million if we
achieve these same milestones with respect to a different licensed product. In addition, we have agreed to pay Penn, for the benefit of Penn and UFRF, up
to an aggregate of $48.0 million if we achieve specified commercial sales milestones with respect to one licensed product, and up to an aggregate of an
additional $9.6 million if we achieve these same milestones with respect to a different licensed product.
We are also obligated to pay Penn, for the benefit of Penn and UFRF, royalties at a low single-digit percentage of net sales of licensed products.
Such royalties are subject to customary deductions, credits, and reductions for lack of patent coverage and loss of regulatory exclusivity. In addition, such
royalties with respect to any licensed product in any country may be offset by a specified portion of any royalty payments actually paid by us with respect
to such licensed product in such country under third-party licenses to patent rights or other intellectual property rights that are necessary to research,
develop, manufacture and commercialize the licensed product in such country. Our obligation to pay royalties under the BEST1 License Agreement will
continue on a licensed product-by-licensed product and country-by-country basis until the latest of:
•
•
•
the expiration of the last-to-expire licensed patent rights covering the sale of the applicable licensed product in the country of sale;
the expiration of regulatory exclusivity covering the applicable licensed product in the country of sale; and
10 years from the first commercial sale of the applicable licensed product in the country of sale.
Beginning on the earlier of the calendar year following the first commercial sale of a licensed product and calendar year 2032, we are also obligated to pay
certain minimum royalties, not to exceed an amount in the mid tens of thousands of dollars on an annual basis, which minimum royalties are creditable
against our royalty obligation with respect to net sales of licensed products due in the year the minimum royalty is paid.
If we or any of our affiliates sublicense any of the licensed patent rights to a third party, we will be obligated to pay Penn, for the benefit of Penn
and UFRF, a high single-digit to a mid ten's percentage of the consideration received in exchange for such sublicense, with the applicable percentage based
upon the stage of development of the sublicensed product at the time we or the applicable affiliate enters into the sublicense.
If we receive a rare pediatric disease priority review voucher from the FDA in connection with obtaining marketing approval for a licensed
product and we subsequently use such priority review voucher in connection with a different product candidate outside the scope of the BEST1 License
Agreement, we will be obligated to pay Penn, for the benefit of Penn and UFRF, aggregate payments in the low double-digit millions of dollars based on
certain approval and commercial sales milestones with respect to such other product candidate. In addition, if we sell such a priority review voucher to a
third party, we will be obligated to pay Penn, for the benefit of Penn and UFRF, a high single-digit percentage of any consideration received from such third
party in connection with such sale.
Term and Termination
The BEST1 License Agreement, unless earlier terminated by us or Penn or UFRF, will expire upon the expiration of our obligation to pay royalties
to Penn, for the benefit of Penn and UFRF, on net sales of licensed products. Before the effectiveness of an IND for a licensed product, we may terminate
the BEST1 License Agreement with respect to such licensed product or in its entirety, at any time for any reason upon prior written notice to Penn and
UFRF. Following the effectiveness of an IND for a licensed product, we may terminate the BEST1 License Agreement with respect to such licensed
product by
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providing Penn prior written notice and a certification that we are ceasing all use, research and development and commercialization of such licensed
product, subject to certain limited exceptions. We may also terminate the BEST1 License Agreement if Penn or UFRF materially breaches the BEST1
License Agreement and does not cure such breach within a specified cure period.
Penn or UFRF may terminate the BEST1 License Agreement if we materially breach the BEST1 License Agreement and do not cure such breach
within a specified cure period, if we experience a specified insolvency event, if we cease to carry on the entirety of our business related to the licensed
patent rights, if we cease for more than four consecutive quarters to make any payment of earned royalties on net sales of licensed products following the
commencement of commercialization thereof, unless such cessation is based on safety concerns that we are actively attempting to address, or if we, any of
our affiliates or any of our sublicensees challenge or assist a third party in challenging the validity, scope, patentability, and/or enforceability of the licensed
patent rights. If we materially breach certain diligence obligations under the BEST1 License Agreement with respect to only one licensed product, then
Penn and UFRF may only terminate our rights and licenses under the BEST1 License Agreement for such licensed product, but not for other licensed
products.
Following any termination of the BEST1 License Agreement prior to expiration of the term of the BEST1 License Agreement, all rights to the
licensed patent rights and know-how that Penn and UFRF granted to us will revert to Penn and UFRF.
License Agreement with UMass for the miniCEP290 Program
In July 2019, we entered into an Exclusive License Agreement, which we refer to as the miniCEP290 License Agreement, with UMass. We
entered into the miniCEP290 License Agreement by exercising our exclusive option rights under an option agreement and a sponsored research agreement
that we previously entered into with UMass in February 2018. Under the miniCEP290 License Agreement, UMass granted us a worldwide, exclusive
license under specified patent rights and specified biological materials and a non-exclusive license under specified know-how to make, have made, use,
offer to sell, sell, have sold and import products for the treatment of diseases associated with mutations in the CEP290 gene, including LCA10. We may
grant sublicenses of the licensed patent rights and know-how without the consent of UMass.
We have agreed to use diligent efforts to develop licensed products and to introduce such licensed products into the commercial market. Subject to
obtaining marketing approval, we agreed to make any approved licensed product reasonably available to the public. In addition, we have agreed to meet
specified development and regulatory milestones with respect to a licensed product by specified dates, as the same may be extended under the terms of the
miniCEP290 License Agreement.
Financial Terms
In July 2019, we issued to UMass 75,000 shares of our common stock following execution of the miniCEP290 License Agreement pursuant to an
exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended, or the Securities Act. In September 2019, we paid
UMass a $0.4 million upfront license fee, which was recorded as a research and development expense, and we paid UMass accrued patent prosecution
expenses of approximately $18 thousand, which was recorded as a general and administrative expense.
We have also agreed to pay UMass an annual license maintenance fee in the low double-digit thousands of dollars, which fee will be payable on
an annual basis until the expiration of the royalty term for the licensed products. Furthermore, we have agreed to reimburse UMass for the costs and
expenses of patent prosecution and maintenance related to the licensed patent rights.
We have further agreed to pay UMass up to an aggregate of $14.75 million in cash and issue up to 75,000 shares of our common stock if we
achieve specified clinical and regulatory milestones with respect to a licensed product. In addition, we have agreed to pay UMass up to an aggregate of
$48.0 million if we achieve specified commercial sales milestones with respect to a licensed product.
We are also obligated to pay UMass royalties at a low single-digit percentage of net sales of licensed products. Our obligation to pay royalties
under the miniCEP290 License Agreement will continue on a licensed product-by-licensed product and country-by-country basis until the later of: (a) the
expiration of the last-to-expire licensed patent rights covering the sale of the applicable licensed product in the country of sale, or (b) 10 years from the first
commercial sale of the applicable licensed product in the country of sale. Beginning with the calendar year following receipt of marketing approval for a
licensed product, we are also obligated to pay certain minimum royalties, not to exceed an amount in the mid-double-digit thousands of dollars on an
annual basis, which minimum royalties are creditable against our royalty obligation with respect to net sales of licensed products due in the year the
minimum royalty is paid.
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If we or any of our affiliates sublicenses any of the licensed patent rights or know-how to a third party, we will be obligated to pay UMass a high
single-digit to a mid-tens percentage of the consideration received in exchange for such sublicense, with the applicable percentage based upon the stage of
development of the licensed products at the time we or the applicable affiliate enters into the sublicense.
If we receive a rare pediatric disease priority review voucher, or a priority review voucher, from the FDA in connection with obtaining marketing
approval for a licensed product, and we subsequently use such priority review voucher in connection with a different product candidate outside the scope of
the miniCEP290 License Agreement, we will be obligated to pay UMass a low-tens percentage of the fair market value of the priority review voucher at the
time of approval of such product candidate and a low-twenties percentage of the fair market value of the priority review voucher at the time of achievement
of a specified commercial sales milestone for such other product candidate. In addition, if we sell such a priority review voucher to a third party, we will be
obligated to pay UMass a low-thirties percentage of any consideration received from such third party in connection with such sale.
Term and Termination
The miniCEP290 License Agreement, unless earlier terminated by us or UMass, will expire upon the expiration of our obligation to pay royalties
to UMass on net sales of licensed products. We may terminate the miniCEP290 License Agreement at any time for any reason upon prior written notice to
UMass. We may also terminate the miniCEP290 License Agreement if UMass materially breaches the miniCEP290 License Agreement and does not cure
such breach within a specified cure period.
UMass may terminate the miniCEP290 License Agreement if we materially breach the miniCEP290 License Agreement and do not cure such
breach within a specified cure period.
Following any termination of the miniCEP290 License Agreement prior to expiration of the term of the miniCEP290 License Agreement, all
rights to the licensed patent rights and know-how that UMass granted to us will revert to UMass.
Government Regulation and Product Approvals
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, pricing, quality control, approval, packaging, storage,
recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical
products. The processes for obtaining marketing approvals in the United States and in foreign countries and jurisdictions, along with subsequent
compliance with applicable statutes and regulations and other legal requirements of regulatory authorities, require the expenditure of substantial time and
financial resources.
Review and Approval of Drugs and Biologics in the United States
In the United States, the FDA approves and regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing
regulations. Biologic products, including gene therapy products, are licensed for marketing under the Public Health Service Act, or PHSA. A company,
institution, or organization which takes responsibility for the initiation and management of a clinical development program for such products, and for their
regulatory approval, is typically referred to as a sponsor. The failure to comply with requirements under the FDCA or PHSA and other applicable laws 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 letters, product recalls, product seizures, total or partial suspension of production or distribution, 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 or other governmental entities, including state agencies.
A drug candidate must be approved by the FDA through a new drug application, or NDA. A biologic candidate is licensed by the FDA through
approval of a biologic license application, or BLA. A sponsor seeking approval to market and distribute a new 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, or
GLP, regulations;
completion of the manufacture, under current Good Manufacturing Practices, or cGMP, conditions, of the drug substance and drug product
that the sponsor intends to use in human clinical trials along with required analytical and stability testing;
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•
•
•
•
•
•
•
•
•
design of a clinical trial protocol and submission to the FDA of an IND, which must take effect before human clinical trials may begin;
approval by an independent institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated at
that clinical site;
performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safety
and efficacy of the proposed drug product for each indication for which the sponsor is seeking approval and the safety, potency and purity of a
candidate biologic product for each indication for which the sponsor is seeking approval;
preparation and submission to the FDA of an application requesting marketing approval for one or more proposed indications;
review 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 application; and
compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy,
or REMS, and the potential requirement to conduct post-approval studies.
Preclinical Studies
Before a sponsor begins testing a drug or biologic with potential therapeutic value in humans, the product candidate must undergo preclinical
testing. Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, and the purity and stability of the substance, as well
as in vitro and animal studies to assess the potential safety and activity of the product candidate 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 and the United States
Department of Agriculture’s Animal Welfare Act, if applicable.
The IND and IRB Processes
An IND is an exemption from the FDCA that allows an unapproved product to be shipped in interstate commerce for use in an investigational
clinical trial and a request for FDA authorization to administer an investigational product to humans. Such authorization must be secured prior to interstate
shipment and administration of any product candidate that is not the subject of an approved application. In support of a request for an IND, sponsors must
submit a protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, the results
of the preclinical tests, together with manufacturing information, analytical data and any available clinical data or literature and plans for clinical trials,
among other things, are submitted to the FDA as part of an IND. The FDA requires a 30-day waiting period after the filing of each IND before clinical
trials may begin. This waiting period is designed to allow the FDA to review the IND to determine whether human research subjects will be exposed to
unreasonable health risks. At any time during this 30-day period, or thereafter, the FDA may raise concerns or questions about the conduct of the trials as
outlined in the IND and impose a clinical hold or partial clinical hold. In this case, the IND sponsor and the FDA must resolve any outstanding concerns
before clinical trials can begin or re-commence.
In addition to the foregoing IND requirements, an IRB or ethics committee 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 re-approve the
study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to
study subjects. An IRB must operate in compliance with FDA regulations. An IRB can suspend or terminate approval of a clinical trial at its institution, or
an institution
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it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with
unexpected serious harm to patients.
Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data safety
monitoring board or committee, or DSMB. This group provides authorization as to whether or not a trial may move forward at designated check points
based on certain available data from the study to which only the DSMB may access. Suspension or termination of development during any phase of clinical
trials can occur if it is determined that the participants are being exposed to an unacceptable health risk. Other reasons for suspension or termination may be
made by the sponsor based on evolving business objectives and/or competitive climate.
Human Clinical Trials in Support of an Application
Clinical trials involve the administration of an 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 inclusion and
exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated.
Human clinical trials are typically conducted in four sequential phases, which may overlap or be combined:
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Phase 1. The product candidate is initially introduced into a small number of healthy human subjects or, in certain indications, patients with
the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain
an early indication of its effectiveness and to determine optimal dosage.
Phase 2. The product candidate 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. Phase
2a clinical trials tend to be smaller pilot studies for the purpose of demonstrating biological activity and clinical "proof of concept." Phase 2b
studies tend to be larger studies focused on finding the optimal dosage and may be controlled.
Phase 3. These clinical trials are commonly referred to as “pivotal” studies, which denotes a study that presents the data that the FDA or other
relevant regulatory agency will use to determine whether or not to approve a product candidate. The product candidate 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, identify adverse effects, establish the overall risk–benefit profile of
the product and to provide adequate information for the labeling of the product.
Phase 4. Post-approval studies may be required to be conducted after initial marketing approval. These studies are used to gain additional
experience from the treatment of patients in the intended therapeutic indication.
A clinical trial may combine the elements of more than one phase and the FDA often requires more than one Phase 3 trial to support marketing
approval of a product candidate. A company’s designation of a clinical trial as being of a particular phase is not necessarily indicative that the study will be
sufficient to satisfy the FDA requirements of that phase because this determination cannot be made until the protocol and data have been submitted to and
reviewed by the FDA. Moreover, a pivotal trial is a clinical trial that is believed to satisfy FDA requirements for the evaluation of a product candidate’s
safety and efficacy such that it can be used, alone or with other pivotal or non-pivotal trials, to support regulatory approval. Generally, pivotal trials are
Phase 3 trials, but they may be Phase 2 trials if the design provides a well-controlled and reliable assessment of clinical benefit, particularly in an area of
unmet medical need.
Progress reports detailing the safety results of the clinical trials must be submitted at least annually to the FDA 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 to humans exposed to the product candidate; and any
clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The FDA, the
sponsor or the DSMB may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being
exposed to an unacceptable health risk.
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Finally, sponsors of clinical trials are required to register and disclose certain clinical trial information on a public registry (clinicaltrials.gov)
maintained by the U.S. National Institutes of Health, or NIH. In particular, information related to the product, patient population, phase of investigation,
study sites and investigators and other aspects of the clinical trial is made public as part of the registration of the clinical trial. Both NIH and the FDA have
recently signaled the government’s willingness to begin enforcing those requirements against non-compliant clinical trial sponsors. The failure to submit
clinical trial information to clinicaltrials.gov, as required, is a prohibited act under the FDCA with violations subject to potential civil monetary penalties of
up to $10,000 for each day the violation continues.
Expanded Access to an Investigational Drug for Treatment Use
Expanded access, sometimes called “compassionate use,” is the use of investigational new drug products outside of clinical trials to treat patients
with serious or immediately life-threatening diseases or conditions when there are no comparable or satisfactory alternative treatment options. Expanded
access allows a patient to obtain an investigational new drug when enrolling in a clinical trial for that drug is difficult or not feasible for the patient. FDA
regulations allow access to investigational drugs under an IND by the sponsor or the treating physician for treatment purposes on a case-by-case basis in
certain circumstances, subject to FDA approval. There is no obligation for a sponsor to make its drug products available for expanded access. In April
2020, we adopted an expanded access policy, which is, as required by the 21st Century Cures Act, or Cures Act, available on our website.
In addition, the Right to Try Act, signed into law in May 2018, provides a federal framework for certain patients to access certain investigational
new drug products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances,
eligible patients can seek treatment without enrolling in clinical trials and without needing FDA approval under the expanded access program. There is no
obligation for a drug manufacturer to make its drug products available to eligible patients under the Right to Try Act.
Manufacturing and Other Regulatory Requirements
Concurrent with clinical trials, sponsors usually complete additional animal safety studies, develop additional information about the chemistry and
physical characteristics of the product candidate and finalize a process for manufacturing commercial quantities of the product candidate in accordance
with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other
criteria, the sponsor must develop methods for testing the identity, strength, quality, and purity of the finished product. Additionally, appropriate packaging
must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration
over its shelf life.
Specifically, the FDA’s regulations require that pharmaceutical products be manufactured in specific approved facilities and in accordance with
cGMPs. The cGMP regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of components and
product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records
and reports and returned or salvaged products. Manufacturers and other entities involved in the manufacture and distribution of approved pharmaceuticals
are required to register their establishments with the FDA and some state agencies, and they are subject to periodic unannounced inspections by the FDA
for compliance with cGMPs and other requirements. Inspections must follow a “risk-based schedule” that may result in certain establishments being
inspected more frequently. Manufacturers may also have to provide, on request, electronic or physical records regarding their establishments. Delaying,
denying, limiting, or refusing inspection by the FDA may lead to a product being deemed to be adulterated. Changes to the manufacturing process,
specifications or container closure system for an approved product are strictly regulated and often require prior FDA approval before being implemented.
The FDA’s regulations also require, among other things, the investigation and correction of any deviations from cGMP and the imposition of reporting and
documentation requirements upon the sponsor and any third-party manufacturers involved in producing the approved product.
Special Regulations and Guidance Governing Gene Therapy Products
The FDA has defined a gene therapy product as one that mediates its effects by transcription and/or translation of transferred genetic material
and/or by integrating into the host genome and which is administered as nucleic acids, viruses, or genetically engineered microorganisms. The products
may be used to modify cells in vivo or transferred to cells ex vivo prior to administration to the recipient.
The FDA has issued various guidance documents regarding gene therapies, including final guidance documents released in January 2020 relating
to chemistry, manufacturing and controls information for gene therapy INDs, long-term
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follow-up after the administration of gene therapy products, gene therapies for rare diseases and gene therapies for retinal disorders. Although the FDA has
indicated that these and other guidance documents it previously issued are not legally binding, we believe that our compliance with them is likely necessary
to gain approval for any gene therapy product candidate we may develop. The guidance documents provide additional factors that the FDA will consider at
each of the above stages of development and relate to, among other things, the proper preclinical assessment of gene therapies; the proper design of tests to
measure product potency in support of an IND or BLA application; and measures to observe delayed adverse effects in subjects who have been exposed to
investigational gene therapies when the risk of such effects is high. Further, the FDA usually recommends that sponsors observe subjects for potential gene
therapy-related delayed adverse events for a 15-year period, including a minimum of five years of annual examinations followed by 10 years of annual
queries, either in person or by questionnaire. We expect the FDA to issue additional guidance on gene therapies.
Special Protocol Assessment Agreements
A Special Protocol Assessment, or SPA, agreement is an agreement between a drug manufacturer and the FDA on the design and size of studies
and clinical trials that can be used for approval of a drug or biological product. The FDA’s guidance on such agreements states that an agreement may not
be changed by the manufacturer or the agency unless through a written agreement of the two entities or if FDA determines a substantial scientific issue
essential to determining the safety or effectiveness of the drug. The protocols that are eligible for SPA agreements are: animal carcinogenicity protocols,
final product stability protocols and clinical protocols for Phase 3 trials whose data will form the primary basis for an efficacy claim.
The FDA may meet with sponsors, provided certain conditions are met, for the purpose of reaching an SPA agreement on the design and size of
clinical trials intended to form the primary basis of an efficacy claim in a marketing application. If a sponsor makes a reasonable written request to meet
with the FDA for the purpose of reaching agreement on the design and size of a clinical trial, then the FDA will meet with the sponsor. If an agreement is
reached, the FDA will reduce the agreement to writing and make it part of the administrative record. An agreement may not be changed by the sponsor or
FDA after the trial begins, except with the written agreement of the sponsor and FDA, or if the director of the FDA reviewing division determines that “a
substantial scientific issue essential to determining the safety or effectiveness of the drug” was identified after the testing began. If a sponsor and the FDA
meet regarding the design and size of a clinical trial and the parties cannot agree that the trial design is adequate to meet the goals of the sponsor, the FDA
will clearly state the reasons for the disagreement in a letter to the sponsor.
Review of a Product Candidate by the FDA
If clinical trials are successful, the next step in the development process is the preparation and submission to the FDA of an application for
marketing approval. The application is the vehicle through which sponsors formally propose that the FDA approve a new drug for marketing and sale in the
United States for one or more indications. The application must contain a description of the manufacturing process and quality control methods, as well as
results of preclinical tests, toxicology studies, clinical trials and proposed labeling, among other things. Every new product must be the subject of an
approved application before it may be commercialized in the United States. Under federal law, the submission of most applications is subject to an
application user fee, which for federal fiscal year 2022 is $3,117,218 for an application requiring clinical data. The sponsor of an approved application is
also subject to an annual program fee, which for fiscal year 2022 is $369,413. Certain exceptions and waivers are available for some of these fees, such as
an exception from the application fee for products with orphan designation and a waiver for certain small businesses.
Following submission of an application, the FDA conducts a preliminary review of an application within 60 calendar days of its receipt and must
inform the sponsor by that time or before whether the application is sufficiently complete to permit substantive review. In the event that FDA determines
that an application does not satisfy this standard, it will issue a Refuse to File, or RTF, determination to the sponsor. The FDA may request additional
information rather than accept an application for filing. 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. Under the Prescription Drug User Fee Act, or PDUFA, the FDA has
agreed to specified performance goals and timelines in the review process of applications, which goals and timelines depend on the type of product
candidate for which review is sought and whether the sponsor has applied for and received from the FDA any special review status for the particular
product candidate allowing for expedited review. Special review status is available for certain products that are intended to address an unmet medical need
in the treatment of a serious or life–threatening disease or condition under one of the following FDA-designations: fast track designation, breakthrough
therapy designation, priority review designation and regenerative medicine advanced therapy designation. The review process and the PDUFA goal date
may be extended by the FDA for three additional months to consider new information or clarification provided by the sponsor to address an outstanding
deficiency identified by the FDA following the original submission.
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In connection with its review of an application, the FDA typically will inspect the facility or facilities where the product is or will be
manufactured, stored, packaged and tested. These pre–approval inspections may cover all facilities associated with an application submission, including
component manufacturing (e.g., active pharmaceutical ingredients), finished 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 application, the FDA will typically inspect one
or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.
In addition, as a condition of approval, the FDA may require a sponsor 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.
The FDA is required to refer an application for a novel product candidate 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.
Under the Pediatric Research Equity Act, or PREA, an application or supplement thereto must contain data that are adequate to assess the safety
and effectiveness of the 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 Food and Drug Administration Safety and Innovation Act, or
FDASIA, in 2012, sponsors must also submit pediatric study plans prior to the submission of the assessment data required under PREA. These plans are
subject to FDA review before beginning the pediatric study. Product candidates that have received orphan designation are generally exempt from the
requirements of PREA. In addition, a sponsor may apply for a waiver of the PREA requirements, which the FDA has indicated it will automatically grant
for certain diseases that do not affect pediatric populations, including AMD.
The FDA’s Decision on an Application
The FDA reviews an application to determine, among other things, whether the product is safe and whether it is effective for its intended use(s),
with the latter determination being made on the basis of substantial evidence. The FDA has interpreted this evidentiary standard to require at least two
adequate and well-controlled clinical investigations to establish effectiveness of a new product. Under certain circumstances, however, the FDA has
indicated that a single trial with certain characteristics and additional information may satisfy this standard.
After evaluating the application and all related information, including the advisory committee recommendations, if any, and inspection reports of
manufacturing facilities and clinical trial sites, the FDA will issue either a Complete Response Letter, or CRL, or an approval letter. To reach this
determination, the FDA must determine that the expected benefits of the proposed product outweigh its potential risks to patients. This “benefit-risk”
assessment is informed by the extensive body of evidence about the product’s safety and efficacy in the NDA or potency, purity and safety in a BLA.
A CRL 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 application, 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 a CRL is issued, the sponsor will have one year to respond to the deficiencies identified by the FDA, at which time the FDA can deem the
application withdrawn or, in its discretion, grant the sponsor an additional six month extension to respond.
If the FDA approves a product, it may limit the approved indications for use of 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 product’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.
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Fast Track, Breakthrough Therapy, Priority Review and Regenerative Advanced Therapy Designations and Accelerated Approval; Rare Pediatric
Disease Priority Review Voucher Program
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, priority review designation
and regenerative advanced therapy designation. The FDA may also approve certain products based on an accelerated basis. None of these expedited
programs changes the standards for approval, but each may help expedite the development or approval process governing product candidates.
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
products, for the treatment of a serious or life–threatening disease or condition, and if the product 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 application 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. However, the FDA’s time period goal for reviewing a fast track application does
not begin until the last section of the application 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 April 2020, the FDA granted fast track designation to Zimura for the
treatment of GA secondary to dry AMD.
FDASIA 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 products, 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.
The FDA may designate a product for priority review if it is a product 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 product 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 product 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.
With passage of the Cures Act, Congress authorized the FDA to accelerate review and approval of products designated as regenerative advanced
therapies. A product is eligible for this designation if it is a regenerative medicine therapy that is intended to treat, modify, reverse or cure a serious or life-
threatening disease or condition and preliminary clinical evidence indicates that the product candidate has the potential to address unmet medical needs for
such disease or condition. The benefits of a regenerative advanced therapy designation include early interactions with the FDA to expedite development
and review, benefits available to breakthrough therapies, and potential eligibility for priority review and accelerated approval based on surrogate or
intermediate endpoints.
The FDA may grant accelerated approval to a product for a serious or life–threatening condition that provides meaningful therapeutic advantage to
patients over existing treatments based upon a determination that the product 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 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. Products granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.
The FDA may award priority review vouchers, or PRVs, to sponsors of rare pediatric disease product applications that meet certain criteria. A rare
pediatric disease is a rare disease where the disease is serious or life-threatening with the serious or life-threatening manifestations primarily affecting
individuals from age zero to 18. A sponsor who receives approval for a drug or biologic for a rare pediatric disease may qualify for a PRV, which the
sponsor may redeem to receive priority review of a
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subsequent marketing application for a different product. In lieu of using the PRV for one of its own product candidates, a sponsor may sell that voucher for
use by a third party. Current prices for these PRVs range in the hundreds of millions of dollars. The current rare pediatric disease priority review voucher
program will expire on September 30, 2024, although a drug designated as a rare pediatric disease treatment by September 30, 2024 can still receive a
priority review voucher but no later than September 30, 2026.
Post-Approval Requirements
Products 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 label changes, or
changing the manufacturing process for the approved product, are subject to additional testing and/or FDA review and approval.
In addition, manufacturers and other entities involved in the manufacture and distribution of approved products are required to register their
establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance
with cGMP requirements. 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, sponsors and
manufacturers must continue to spend time, money, and effort in the area of production and quality control to maintain cGMP compliance. Further, the
FDA will conduct laboratory research related to the safety, purity, potency and effectiveness of pharmaceutical products.
Once an approval is granted, the FDA may restrict, suspend or 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:
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fines, warning letters or holds on post-approval clinical trials;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Products may be promoted
only for the approved indications and in accordance with the provisions of the approved label. Although health care providers may prescribe products for
off-label uses in their professional judgment, manufacturers are prohibited from soliciting, encouraging or promoting unapproved uses of a product.
Generic Drugs and Exclusivity
Under the Hatch-Waxman Amendments to the FDCA, the FDA is authorized to approve generic drugs that are shown to contain the same active
ingredients as, and is bioequivalent to, drugs previously approved by the FDA pursuant to NDAs, which are also known as reference listed drugs, or RLDs.
To obtain approval of a generic drug, a sponsor must submit an abbreviated new drug application, or ANDA, to the FDA. An ANDA sponsor does not
generally rely on its own preclinical or clinical data to demonstrate safety and effectiveness but instead can rely on preclinical and clinical testing
previously conducted by the sponsor of the RLD. The ANDA sponsor must show that the generic version is identical to the RLD with respect to a number
of factors, including the active ingredient, and that the generic version is "bioequivalent" to the RLD. Physicians, pharmacists and third-party payors
generally consider an approved generic drug to be fully substitutable for the RLD.
The FDA is also authorized to approve an alternative type of NDA under Section 505(b)(2) of the FDCA. This type of application allows the
sponsor 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
sponsor for approval of the application “were not conducted by or for the sponsor and for which the sponsor has not obtained a right of reference or use
from the person by or for whom the investigations were conducted.”
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Sponsors of RLDs are required to list in the FDA's Orange Book each patent with claims covering the RLD or approved methods of using the RLD. An
ANDA sponsor is required to certify to the FDA concerning any such patents, which may be a certification that the listed patent is invalid, unenforceable or
will not be infringed by the new product, which is known as a Paragraph IV certification. An ANDA sponsor that makes a Paragraph IV certification must
notify the sponsor of the RLD, who may then initiate a patent infringement lawsuit in response to the notice of Paragraph IV certification. The filing of a
lawsuit within 45 days of receipt of a Paragraph IV certification notice prevents the FDA from approving the ANDA until the earliest of 30 months after
receipt of the Paragraph IV certification, expiration of the patent or a decision in the infringement case that is favorable to the ANDA sponsor.
Market and data exclusivity provisions under the FDCA can delay the submission or the approval of certain drug applications for competing
products, including generic drugs. The FDCA provides a five-year period of non-patent data exclusivity within the United States to the first sponsor to gain
approval of an NDA for a New Chemical Entity. A drug is a New Chemical Entity if the FDA has not previously approved any other new drug containing
the same active moiety, which is the molecule responsible for the pharmacological activity of the drug substance. This interpretation was confirmed with
enactment of the Ensuring Innovation Act in April 2021. During the exclusivity period, the FDA may not accept for review an ANDA or an NDA under
Section 505(b)(2) of the FDCA, or an 505(b)(2) NDA, submitted by another company that references the previously approved drug. However, an ANDA or
505(b)(2) NDA may be submitted after four years if it contains a Paragraph IV certification.
The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA, or supplement to an existing NDA or 505(b)(2) NDA
if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the sponsor, are deemed by the FDA to be essential to
the approval of the application or supplement. Three-year exclusivity may be awarded for changes to a previously approved drug product, such as new
indications, dosages, strengths or dosage forms of an existing drug. This three-year exclusivity covers only the conditions of use associated with the new
clinical investigations and, as a general matter, does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for generic versions of the original,
unmodified drug product. The five-year and three-year exclusivities will not delay the submission or approval of a full NDA; however, a sponsor
submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical
trials necessary to demonstrate safety and effectiveness.
Biosimilars and Exclusivity
The Patient Protection and Affordable Care Act, or ACA, included a subtitle called the Biologics Price Competition and Innovation Act of 2009,
or BPCIA. The BPCIA established a regulatory scheme authorizing the FDA to approve biosimilars and interchangeable biosimilars. A biosimilar is a
biological product that is highly similar to an existing FDA-licensed "reference product." To date, the FDA has approved a number of biosimilars and the
first interchangeable biosimilar product was approved on July 30, 2021 and a second product previously approved as a biosimilar was designated as
interchangeable in October 2021. The FDA has also issued numerous guidance documents outlining its approach reviewing and licensing biosimilars and
interchangeable biosimilars under the PHSA.
Under the BPCIA, a manufacturer may submit an application for licensure of a biologic product that is biosimilar to a reference product. In order
for the FDA to approve a biosimilar product, it must find that there are no clinically meaningful differences between the reference product and proposed
biosimilar product in terms of safety, purity and potency. For the FDA to approve a biosimilar product as "interchangeable" with a reference product, the
agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product, and for products administered
multiple times, that the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or
risks of diminished efficacy relative to exclusive use of the reference biologic.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date of approval of the
reference product. The FDA may not approve a biosimilar product until 12 years from the date on which the reference product was approved. Even if a
product is considered to be a reference product eligible for exclusivity, another company could market a competing version of that product if the FDA
approves a full BLA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to
demonstrate the safety, purity and potency of their product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable
products. Since the passage of the BPCIA, there have been recent government proposals to reduce the 12-year reference product exclusivity period, but
none has been enacted to date. At the same time, many states have passed laws or amendments to laws, including laws governing pharmacy practices,
which are state-regulated, involving biosimilars.
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Patent Term Extension
A patent claiming a new drug product, its method of use or its method of manufacture may be eligible for a limited patent term extension, also
known as patent term restoration, under the Hatch-Waxman Amendments, which permits a patent restoration of up to five years for patent term lost during
product development and FDA regulatory review. Patent term extension is generally available only for drug products whose active ingredient has not
previously been approved by the FDA. The restoration period granted is typically one-half the time between the effective date of an IND and the
submission date of a marketing approval application, plus the time between the submission date of a marketing approval application and the ultimate
approval date. Patent term extension 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 United States Patent and Trademark Office (USPTO) reviews and approves the application for any patent term extension in consultation
with the FDA.
Orphan Drug Designation and Exclusivity
Under the Orphan Drug Act, the FDA may designate a product as an “orphan drug” if it is intended to treat a rare disease or condition, 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 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 drug designation before submitting an application for the product and the rare disease or condition. If the request is granted,
the FDA will disclose the identity of the therapeutic agent and its potential use. Orphan drug designation does not shorten the PDUFA goal dates for the
regulatory review and approval process, although it does convey certain advantages such as tax benefits and exemption from the PDUFA application fee.
If a product with orphan designation 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 drug exclusivity. Orphan drug
exclusivity means that the FDA may not approve another sponsor’s marketing application for the same product for the same indication for seven years,
except in certain limited circumstances. Orphan exclusivity does not block the approval of a different product for the same rare disease or condition, nor
does it block the approval of the same product for different indications. In September 2021, the FDA issued final guidance describing its current thinking
on when a gene therapy product is the “same” as another product for purposes of orphan exclusivity. Under the guidance, if either the transgene or vector
differs between two gene therapy products in a manner that does not reflect “minor” differences, the two products would be considered different drugs for
orphan drug exclusivity purposes. The FDA indicated that it will determine whether two vectors from the same viral class are the same on a case-by-case
basis and may consider additional key features in assessing sameness. If a product designated as an orphan drug ultimately receives marketing approval for
an indication broader than what was designated in its orphan drug 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 for the same
indication is shown to be clinically superior to the approved product on the basis of greater efficacy or safety or provides a major contribution to patient
care, or if the company with orphan drug exclusivity is not able to meet market demand. In September 2021, the Court of Appeals for the 11th Circuit held
that, for the purpose of determining the scope of market exclusivity, the term “same disease or condition” in the statute means the designated “rare disease
or condition” and could not be interpreted by the FDA to mean the “indication or use.” Thus, the court concluded, orphan drug exclusivity applies to the
entire designated disease or condition rather than the “indication or use.” It is unclear how this court decision will be implemented by the FDA.
Pediatric Exclusivity
Pediatric exclusivity is another type of non-patent exclusivity in the United States and, if granted, provides for an additional six months of
regulatory exclusivity. For drug products, the six month exclusivity may be attached to the term of any existing patent or regulatory exclusivity, including
orphan drug exclusivity and regulatory exclusivities available under the Hatch-Waxman provisions of the FDCA. For biologic products, the six month
period may be attached to any existing regulatory exclusivities but not to any patent terms. This six-month exclusivity may be granted if an application
sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show that the product is
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 covering the product are extended by six months. This is not a patent term extension, but it effectively extends the
regulatory period during which the
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FDA cannot approve an ANDA or 505(b)(2) NDA that references the product. With regard to patents, the six-month pediatric exclusivity period will not
attach to any patents for which an ANDA or 505(b)(2) sponsor submitted a paragraph IV certification, unless the NDA sponsor or patent owner first
obtains a court determination that the patent is valid and infringed by the proposed ANDA or 505(b)(2) product.
Review and Approval of Products in Europe and other Foreign Jurisdictions
In addition to regulations in the United States, a manufacturer is subject to a variety of regulations in foreign jurisdictions to the extent it chooses
to conduct clinical trials or sell any products in those foreign countries. Even if a manufacturer obtains FDA approval of a product, it must still obtain the
requisite approvals from regulatory authorities in foreign countries before beginning clinical trials or marketing the product in those countries. To obtain
regulatory approval of an investigational product in the European Union, a manufacturer must submit a marketing authorization application, or MAA, to
the EMA. For other countries outside of the European Union, such as the United Kingdom or countries in Latin America or Asia, the requirements
governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, clinical trials are to be
conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of
Helsinki.
Clinical Trial Approval in the European Union
On January 31, 2022, the new Clinical Trials Regulation (EU) No 536/2014 became effective in the European Union and replaced the prior
Clinical Trials Directive 2001/20/EC. The new regulation aims at simplifying and streamlining the authorization, conduct and transparency of clinical trials
in the European Union. Under the new coordinated procedure for the approval of clinical trials, the sponsor of a clinical trial to be conducted in more than
one Member State of the European Union, or EU Member State, will only be required to submit a single application for approval. The submission will be
made through the Clinical Trials Information System, a new clinical trials portal overseen by the EMA and available to clinical trial sponsors, competent
authorities of the EU Member States and the public.
The new regulation did not change the preexisting requirement that a sponsor must obtain prior approval from the competent national authority of
the EU Member State in which the clinical trial is to be conducted. If the clinical trial is conducted in different EU Member States, the competent
authorities in each of these EU Member States must provide their approval for the conduct of the clinical trial. Furthermore, the sponsor may only start a
clinical trial at a specific study site after the applicable ethics committee has issued a favorable opinion.
Parties conducting certain clinical trials must, as in the United States, post clinical trial information in the EU at the EudraCT website.
Marketing Authorization
In the European Union, marketing authorizations for medicinal products may be obtained through different procedures founded on the same basic
regulatory process. A marketing authorization may be granted only to a sponsor established in the European Union. As in the United States, marketing
authorization holders and manufacturers of approved medicinal products are subject to comprehensive regulatory oversight by the EMA and the competent
authorities of the individual EU Member States both before and after grant of marketing authorizations.
Centralized Procedure. The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is
valid across the European Economic Area, i.e. the European Union as well as Iceland, Liechtenstein and Norway. The centralized procedure is compulsory
for medicinal products produced by certain biotechnological processes, products designated as orphan medicinal products, and products with a new active
substance indicated for the treatment of certain diseases. It is optional for those products that are highly innovative or for which a centralized process is not
in the interest of patients. Manufacturers must demonstrate the quality, safety, and efficacy of their products to the EMA, which provides an opinion
regarding the MAA. The European Commission grants or refuses marketing authorization in light of the opinion delivered by the EMA.
Specialized Procedures for Gene Therapies. The grant of marketing authorization in the European Union for gene therapy products is governed by
Regulation 1394/2007/EC on advanced therapy medicinal products, read in combination with Directive 2001/83/EC of the European Parliament and of the
Council, commonly known as the Community code on medicinal products for human use. Regulation 1394/2007/EC includes specific rules concerning the
authorization, supervision, and pharmacovigilance of gene therapy medicinal products. All advanced therapy medicinal products are approved centrally
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through the EMA. The EMA's Committee for Advanced Therapies reviews and provides an opinion regarding each advanced therapy MAA for potential
final approval by the European Commission.
Decentralized Procedure. The decentralized procedure provides for approval by one or more other concerned EU Member States of an assessment
of an MAA conducted by one EU Member State, known as the reference EU Member State. In accordance with this procedure, a sponsor submits an MAA
to the reference EU Member State and the concerned EU Member States. This application is identical to the application that would be submitted to the
EMA for authorization through the centralized procedure. Following receipt of a valid application, the reference EU Member State prepares a draft
assessment and drafts of the related materials. The resulting assessment report is submitted to the concerned EU Member States which must decide whether
to approve the assessment report and related materials.
If a concerned EU Member State cannot approve the assessment report and related materials due to concerns relating to a potential serious risk to public
health, disputed elements may be referred to the European Commission, whose decision is binding on all EU Member States. Authorization in accordance
with the decentralized procedure will result in authorization of the medicinal product only in the reference EU Member State and in the other concerned EU
Member States.
Mutual Recognition Procedure. In accordance with the mutual recognition procedure, the sponsor applies for national marketing authorization in one EU
Member State. Upon receipt of this authorization the sponsor can then seek the recognition of this authorization by other EU Member States.
PRIME Designation
In March 2016, the EMA launched an initiative to facilitate development of product candidates in indications, often rare, for which few or no
therapies currently exist. The PRIority MEdicines, or PRIME, scheme is intended to encourage drug development in areas of unmet medical need and
provides accelerated assessment of products representing substantial innovation. Products from small- and medium-sized enterprises, or SMEs, may qualify
for earlier entry into the PRIME scheme than larger companies. Many benefits accrue to sponsors of product candidates with PRIME designation, including
but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program
elements, and accelerated marketing authorization application assessment once a dossier has been submitted. Importantly, a dedicated agency contact and
rapporteur from the CHMP or Committee for Advanced Therapies are appointed early in the PRIME scheme, facilitating increased understanding of the
product at EMA’s Committee level.
Periods of Authorization and Renewals in the European Union
A marketing authorization is valid for five years, in principle, and it may be renewed after five years on the basis of a reevaluation of the risk-
benefit balance by the EMA or by the relevant EU Member State. To seek renewal, at least six months prior to expiration of the marketing authorization,
the holder must provide the EMA or the EU Member State with a consolidated version of the file detailing the continued quality, safety and efficacy of the
product, including all variations introduced since the marketing authorization was granted. Once renewed, the marketing authorization is valid for an
unlimited period, unless the European Commission or the relevant competent authority of the EU Member State decides, on justified grounds relating to
pharmacovigilance, to proceed with one additional five-year renewal period. Any marketing authorization that is not followed by the marketing of the
medicinal product on the European Union market, in the case of the centralized procedure, or in the market of the EU Member State which delivered the
marketing authorization, in the case of the decentralized procedure, within three years after authorization ceases to be valid.
Patent Term Extensions in the European Union and Other Jurisdictions
The European Union also provides for patent term extension through Supplementary Protection Certificates, or SPCs. The rules and requirements for
obtaining a SPC are similar to those in the United States. An SPC may extend the term of a patent for up to five years after its originally scheduled
expiration date and can provide up to a maximum of fifteen years of marketing exclusivity for a drug. These periods can be extended for six additional
months if pediatric exclusivity is obtained, which is described in detail below. Although SPCs are available throughout the European Union, sponsors must
apply on a country-by-country basis. Similar patent term extension rights exist in certain other foreign jurisdictions outside the European Union.
Regulatory Data Exclusivity in the European Union
In the European Union, innovative medicinal products approved on the basis of a complete independent data package qualify for eight years of
data exclusivity upon marketing authorization and an additional two years of market exclusivity. Data exclusivity prevents sponsors for authorization of
generics of these innovative products from referencing the innovator’s data in a generic (abridged) application for a period of eight years. During an
additional two-year period of market exclusivity, a generic MAA can be submitted and authorized, and the innovator’s data may be referenced, but no
generic medicinal product
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can be placed on the European Union market until the expiration of the market exclusivity. The overall ten-year period will be extended to a maximum of
11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic
indications that are shown, during the scientific evaluation prior to authorization, to bring a significant clinical benefit in comparison with existing
therapies. Even if a compound is considered to be an innovative medicinal product so that the innovator gains the additional prescribed period of marketing
exclusivity, another company nevertheless could also market another version of the product if such company obtained marketing authorization based on an
MAA with a complete independent data package of pharmaceutical tests, preclinical tests and clinical trials.
Orphan Drug Designation and Exclusivity in the European Union
Regulation (EC) No 141/2000 and Regulation (EC) No. 847/2000 provide that a product can be designated as an orphan medicinal product by the
European Commission if its sponsor can establish that the product is intended for the diagnosis, prevention or treatment of: (1) a life-threatening or
chronically debilitating condition affecting not more than five in ten thousand persons in the European Union when the application is made, or (2) a life-
threatening, seriously debilitating or serious and chronic condition in the European Union and that without incentives the medicinal product is unlikely to
be developed. For either of these conditions, the sponsor must demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of
the condition in question that has been authorized in the European Union or, if such method exists, the medicinal product will be of significant benefit to
those affected by that condition.
Once authorized, orphan medicinal products are entitled to ten years of market exclusivity in all EU Member States and, in addition, a range of
other benefits during the development and regulatory review process, including scientific assistance for study protocols, authorization through the
centralized marketing authorization procedure and a reduction or elimination of registration and marketing authorization fees. The market exclusivity
period can be extended by two years following completion of an agreed upon pediatric investigation plan. However, marketing authorization may be
granted to a similar medicinal product with the same orphan indication during the ten year period with the consent of the marketing authorization holder for
the original orphan medicinal product or if the manufacturer of the original orphan medicinal product is unable to supply sufficient quantities. Marketing
authorization may also be granted to a similar medicinal product with the same orphan indication if the new product is safer, more effective or otherwise
clinically superior to the original orphan medicinal product. The period of market exclusivity may, in addition, be reduced to six years if it can be
demonstrated on the basis of available evidence that the original orphan medicinal product is sufficiently profitable to not justify maintenance of market
exclusivity.
Pediatric Studies and Exclusivity
Before obtaining a marketing authorization in the European Union, sponsors must demonstrate compliance with all measures included in an EMA-
approved Pediatric Investigation Plan, or PIP, approved by the Pediatric Committee of the EMA, or PDCO, covering all subsets of the pediatric population,
unless the EMA has granted a product-specific waiver, a class waiver, or a deferral for one or more of the measures included in the PIP. This requirement
also applies when a company wants to add a new indication, pharmaceutical form or route of administration for a medicine that is already authorized. The
PDCO may grant deferrals for some medicines, allowing a company to delay development of the medicine for children until there is enough information to
demonstrate its effectiveness and safety in adults. The PDCO may also grant waivers when development of a medicine for children is not needed or is not
appropriate, such as for diseases that only affect the elderly population. Before an MAA can be filed, or an existing marketing authorization can be
amended, the EMA must determine that the sponsor actually complied with the agreed studies and measures listed in each relevant PIP. If a sponsor obtains
a marketing authorization in all EU Member States, or a marketing authorization granted via the centralized procedure by the European Commission, and
the study results for the pediatric population are included in the product information, even when negative, the medicine is then eligible for an additional six-
month period of qualifying patent protection through extension of the term of the SPC or alternatively a one year extension of the regulatory market
exclusivity from ten to eleven years, as selected by the marketing authorization holder.
Brexit and the Regulatory Framework in the United Kingdom
The United Kingdom’s withdrawal from the EU took place on January 31, 2020. The EU and the U.K. reached an agreement on their new
partnership in the Trade and Cooperation Agreement, or the Trade Agreement, which was applied provisionally beginning on January 1, 2021 and which
entered into force on May 1, 2021. The Trade Agreement focuses primarily on free trade by ensuring no tariffs or quotas on trade in goods, including
healthcare products such as medicinal products. Thereafter, the EU and the U.K. will form two separate markets governed by two distinct regulatory and
legal regimes. As such, the Trade Agreement seeks to minimize barriers to trade in goods while accepting that border checks will become inevitable as a
consequence that the U.K. is no longer part of the single market. As of January 1, 2021, the Medicines
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and Healthcare products Regulatory Agency, or the MHRA, became responsible for supervising medicines and medical devices in Great Britain,
comprising England, Scotland and Wales under domestic law whereas Northern Ireland continues to be subject to EU rules under the Northern Ireland
Protocol. The MHRA will rely on the Human Medicines Regulations 2012 (SI 2012/1916) (as amended), or the HMR, as the basis for regulating
medicines. The HMR has incorporated into the domestic law of the U.K. the body of EU law governing medicinal products that pre-existed prior to the
U.K.’s withdrawal from the EU.
Pharmaceutical Insurance Coverage, Pricing and Reimbursement
In the United States and markets in many other countries, patients who are prescribed treatments for their conditions and providers performing the
prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Significant uncertainty exists as to the
coverage and reimbursement status of products approved by the FDA and other government authorities. Thus, even if a product candidate is approved,
sales of the product will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as
Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage, and establish adequate reimbursement levels, for
the product. 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. Third-party payors may limit coverage for a particular indication to specific products
on an approved list, also known as a formulary, which might not include all of the approved products for such indication.
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 studies required to obtain
FDA or other comparable marketing approvals. Nonetheless, product candidates may not be considered medically necessary or cost effective by the payors.
A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s
determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product, and the
level of coverage and reimbursement can differ significantly from payor to payor. Moreover, coverage policies and third-party reimbursement rates may
change at any time.
The containment of healthcare costs also has become a priority of federal, state and foreign governments and the prices of pharmaceutical products have
been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs, including rebate programs, price
controls, restrictions on reimbursement and requirements for substitution of generic products. Efforts to control drug pricing have garnered bipartisan
support in the U.S. Congress. Under both the previous Trump Administration and the current Biden Administration, various U.S. government agencies,
including the FDA and the Center for Medicare & Medicaid Services, or CMS, proposed a number of rules intended to curb drug prices. For example, in
October 2020, the Department of Health and Human Services, or HHS, and the FDA published a final rule allowing states and other entities to develop a
Section 804 Importation Program, or SIP, to import certain prescription drugs from Canada into the United States. The final rule is currently the subject of
ongoing litigation, but at least six states (Vermont, Colorado, Florida, Maine, New Mexico, and New Hampshire) have passed laws allowing for the
importation of drugs from Canada with the intent of developing SIPs for review and approval by the FDA.
Further, on July 9, 2021, President Biden signed Executive Order 14063, which focuses on, among other things, the price of pharmaceuticals. The
executive order directs HHS to create a plan within 45 days to combat “excessive pricing of prescription pharmaceuticals and enhance domestic
pharmaceutical supply chains, to reduce the prices paid by the federal government for such pharmaceuticals, and to address the recurrent problem of price
gouging.” On September 9, 2021, HHS released its plan to reduce pharmaceutical prices. The key features of that plan are to: (a) make pharmaceutical
prices more affordable and equitable for all consumers and throughout the health care system by supporting pharmaceutical price negotiations with
manufacturers; (b) improve and promote competition throughout the prescription pharmaceutical industry by supporting market changes that strengthen
supply chains, promote biosimilars and generic drugs, and increase transparency; and (c) foster scientific innovation to promote better healthcare and
improve health by supporting public and private research and making sure that market incentives promote discovery of valuable and accessible new
treatments.
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 access to certain products, and marketing
cost disclosure and transparency measures, and, in some cases, measures designed to encourage importation from other countries and bulk purchasing. A
number of states, for example, require drug manufacturers and other entities in the drug supply chain, including health carriers, pharmacy benefit managers,
and wholesale distributors, to disclose information about pricing of pharmaceuticals. In addition, regional healthcare organizations and individual hospitals
are increasingly using bidding procedures to determine which pharmaceutical products and which suppliers will be included in their prescription drug and
other healthcare programs. These measures could reduce the
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ultimate demand for our products, if and once approved, or put pressure on our product pricing. We expect that additional state and federal healthcare
reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and
services, which could result in reduced demand for our product candidates or additional pricing pressures.
Outside the United States, ensuring adequate coverage and payment for a product also involves challenges. Pricing of prescription pharmaceuticals is
subject to governmental control in many countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory
marketing approval for a product and may require a clinical trial that compares the cost effectiveness of a product to other available therapies. The conduct
of such a clinical trial could be expensive and result in delays in commercialization.
In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be
marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional cost effectiveness clinical studies. EU
Member States may approve a specific price for a product or any of them may instead adopt a system of direct or indirect controls on the profitability of the
company placing the product on the market. Other member states allow companies to fix their own prices for products, but monitor and control prescription
volumes and issue guidance to physicians to limit prescriptions. Over the past decade, many EU Member States have increased the amount of discounts
required on pharmaceuticals and these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal
and debt crises experienced by many countries in the European Union over the past decade. Reference pricing used by various EU Member States, and
parallel trade, i.e., arbitrage between low-priced and high-priced member states, can further reduce prices.
In addition to initiatives specifically directed at lowering or containing prescription drug prices, legislative action in the United States at the national
level has resulted in reduced funding levels for Medicare. For example, the Budget Control Act of 2011, or BCA, led to aggregate reductions in Medicare
payments to providers of up to 2% per fiscal year from 2013 through 2031, and the American Taxpayer Relief Act of 2012 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.
We expect that Zimura, if approved for GA, would be reimbursed by the Medicare Part B "buy and bill" reimbursement model, under which physicians
purchase Zimura from us or a wholesaler/distributor, and then bill Medicare for their costs following administration. Medicare Part B currently provides for
reimbursement to the physicians at a rate equal to the average sales price for the product plus a six percent markup. The BCA has reduced the effective rate
of that markup to 4.3%. Any further reduction in healthcare, including Medicare, funding may 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.
Moreover, the number of individuals covered by health insurance has a direct impact on the potential market for our product candidates, if approved. The
ACA, passed in 2010, included the "individual mandate," which required most Americans to carry a minimal level of health insurance. Individuals who did
not obtain required coverage were subject to a penalty. The individual mandate was repealed as part of the Tax Cuts and Jobs Act of 2017, or TCJA, with
the repeal becoming effective on January 1, 2019. According to the Congressional Budget Office, the repeal of the individual mandate will cause 13 million
fewer Americans to be insured in 2027 and premiums in insurance markets may rise. In addition, since passage of the ACA, there have been several
lawsuits challenging the ACA, and we expect additional lawsuits may be filed.
Despite those developments, we expect the 117th Congress and the Biden Administration to support and expand on the ACA. For example, on
January 28, 2021, President Biden issued an executive order directing federal agencies to review all existing regulations, policies and a variety of other
guidance that limit Americans’ access to high-quality healthcare and to
consider actions that will protect and strengthen Medicaid, the ACA and, more generally, access to affordable healthcare for Americans. Under this order,
federal agencies are to advance President Biden’s overall access policy and make determinations as to whether additional actions are necessary.
Specifically, the agencies must examine, among other things, policies that undermine protections for people with pre-existing conditions, including
complications related to COVID-19, and policies that undermine the health insurance marketplace or other markets for health insurance.
Healthcare Law and Regulation
Healthcare providers and third-party payors play a primary role in the recommendation and prescription of products that are granted marketing
approval. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse, anti-kickback,
false claims, reporting of payments to physicians and patient privacy laws and regulations and other healthcare laws and regulations that may constrain
business and/or financial arrangements. Restrictions under applicable federal and state healthcare laws and regulations include the following:
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•
•
•
the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering,
paying, 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;
federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit individuals
or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are
false, fictitious or fraudulent or knowingly making, using or causing to made or used a false record or statement to avoid, decrease or conceal
an obligation to pay money to the federal government;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which, among other things, prohibits knowingly and
willfully executing, or attempting to execute, 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, which impose obligations, including mandatory contractual terms, relating to safeguarding the privacy, security and transmission
of individually identifiable health information by certain covered entities and their business associates;
•
•
•
•
the federal false statements statute, which 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 Foreign Corrupt Practices Act, which, among other things, prohibits providing or offering to provide money or anything of value
to a foreign government body, government official, or political candidate for the improper purpose of obtaining or keeping business;
federal transparency requirements such as the federal Physician Payments Sunshine Act, created under the ACA, which requires certain
manufacturers of drugs, devices, biologics and medical supplies to report annually to CMS information related to payments and other
transfers of value made by that entity to physicians, other healthcare providers and teaching hospitals, as well as ownership and investment
interests held by physicians, other healthcare providers and their immediate family members; and
analogous state and foreign laws and regulations, such as state anti–kickback and false claims laws, state pharmaceutical sales representative
listing requirements and other consumer protection laws, which may apply to healthcare items or services that are reimbursed by 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 manufacturers to report information related to payments to physicians
and other health care providers or marketing expenditures. State and foreign laws, such as the European Union's General Data Protection Regulation, also
govern the privacy and security of, and require the notification of any breaches 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.
Our Corporate Information
Our principal executive offices are located at 8 Sylvan Way, Parsippany, New Jersey, 07054, and our telephone number is (609) 474-6755. Our
Internet website is http://www.ivericbio.com.
Available Information
We make available free of charge through our website our Annual Report on Form 10–K, Quarterly Reports on Form 10–Q, Current Reports on Form 8–
K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. We make these reports available through our website as soon as reasonably practicable after we electronically file such reports with, or
furnish such reports to, the SEC. You can find, copy and inspect information we file at the SEC’s public reference room. You can review our electronically
filed reports and other information that we file with the SEC on the SEC’s web site at http://www.sec.gov. We also make available,
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free of charge on our website, the reports filed with the SEC by our executive officers, directors and 10% stockholders pursuant to Section 16 under the
Exchange Act as soon as reasonably practicable after copies of those filings are provided to us by those persons. The information contained on, or that can
be accessed through, our website is not a part of or incorporated by reference in this Annual Report on Form 10–K.
Item 1A. Risk Factors.
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and
uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we
presently deem less significant may also impair our business operations. Please see page 1 of this Annual Report on Form 10-K for a discussion of some of
the forward-looking statements that are qualified by these risk factors. If any of the following risks occur, our business, financial condition, results of
operations and future growth prospects could be materially and adversely affected.
Risks Related to Our Business Plan, Financial Position and Need for Additional Capital
We are a development-stage company without any commercial products. The value of our company, therefore, is highly dependent on the success of
Zimura and our other research and development efforts and the amount of our available cash. Our research and development programs, which are
focused on novel therapies and technologies, carry significant scientific and other risks. If any of these programs are not successful, the value of your
investment may decline.
We are a development-stage company without any approved products. Our growth prospects and the future value of our company are highly
dependent on the progress of our research and development programs, including our ongoing and any future clinical trials for Zimura, our preclinical
development program for IC-500, and our gene therapy research programs. In particular, we are highly dependent on the success of Zimura, and any delays
or issues with its further development, its potential marketing approval, or its potential commercialization will likely cause the value of your investment to
decline significantly. Drug development is a highly uncertain undertaking and carries significant scientific and other risks.
We may encounter unforeseen difficulties, complications, delays, expenses and other known and unknown factors. We may never be successful in
developing or commercializing any of our product candidates or other programs. There is a high rate of failure in pharmaceutical research and
development. Even if we have promising preclinical or clinical candidates, their development could fail at any time. Our failure could be due to unexpected
scientific, safety or efficacy issues with our product candidates and other programs, invalid hypotheses regarding the molecular targets and mechanisms of
action we choose to pursue or unexpected delays in our research and development programs resulting from applying the wrong criteria or experimental
systems and procedures to our programs or lack of experience or other factors, including disruptions resulting from the COVID-19 pandemic, with the
possible result that none of our product candidates or other programs result in the development of marketable products. We have not yet demonstrated our
ability to successfully complete the development of a pharmaceutical product, including completion of large-scale, pivotal clinical trials with safety and
efficacy data sufficient to obtain marketing approval or activities necessary to apply for and obtain marketing approval, including the qualification of a
commercial manufacturer through a pre-approval inspection with regulatory authorities. If successful in developing and obtaining marketing approval of
one of our product candidates, we would need to transition from a company having a product development focus to a company capable of commercializing
pharmaceutical products. At this time, we are beginning to hire commercialization personnel and build a commercial infrastructure for the potential
commercialization of Zimura, if approved. We may not be successful in such a transition, as our company has never conducted the sales, marketing,
manufacturing and distribution activities necessary for successful product commercialization.
Because the value of our company is largely based on the prospects for our research and development programs and their potential to result in
therapies capable of achieving marketing approval and generating future revenues, any failure, delay or setback for these programs will likely have a
negative impact on the value of your investment. In addition, even if we are successful in advancing the development of IC-500, which is currently in
preclinical development, the value of our common stock may not rise in a meaningful way. As we continue to invest in our research and development
programs to generate data to support further development or applications to obtain marketing approval for commercialization, the amount of our available
cash will continue to decline until we raise additional finances.
We have a history of significant operating losses. We expect to continue to incur losses until such time, if ever, that we successfully commercialize our
product candidates and may never achieve or maintain profitability.
Since inception, we have experienced significant cash outflows in funding our operations. To date, we have not generated any revenues from
commercial product sales and have financed our operations primarily through private placements of our common stock and preferred stock, venture debt
borrowings, funds received under our prior Fovista royalty purchase and sale agreement with Novo Holdings A/S, our initial public offering, which we
closed in September 2013, funds we received under
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our prior Fovista licensing and commercialization agreement with Novartis Pharma AG, funds we received in connection with our acquisition of Inception
4 in October 2018, and our follow-on public offerings, which we closed in February 2014, December 2019, June 2020, July 2021 and October 2021. As of
December 31, 2021, we had an accumulated deficit of $679.6 million. Our net loss was $114.5 million for the year ended December 31, 2021 and we
expect to continue to incur significant operating losses for the foreseeable future.
Zimura is in clinical development, IC-500 is in preclinical development, and we are advancing multiple gene therapy research programs. We expect
our research and development expenses to increase as we pursue these programs as currently planned. We could incur additional research and development
expenses if we modify or further expand the scope of our clinical trials, our preclinical development programs or our gene therapy research programs, or if
we in-license or acquire, and undertake development of, additional product candidates and technologies, including sustained release delivery technologies
for Zimura and any promising product candidates that emerge from our gene therapy research programs. We could also incur additional research and
development expenses if, for example, we are required by the FDA, the EMA or regulatory authorities in other jurisdictions, or if we otherwise decide, to
perform clinical trials and/or nonclinical or other studies in addition to those we currently expect to conduct. If we experience delays or disruptions to our
research and development programs, including delays in patient enrollment or issues with patient retention or patients missing scheduled visits and
treatments, if we experience issues with our preclinical development programs, such as unfavorable toxicology or other preclinical data, if we experience
issues with the manufacture and supply of product candidates for our development programs, including issues with process development or manufacturing
scale-up activities, whether such delays or disruptions are due to the COVID-19 pandemic or other reasons, we could incur additional and unexpected
expenses as a result of such delays or disruptions and our business and financial results may be materially impacted. Furthermore, if we successfully
develop and expect to obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to
product sales, marketing, distribution and manufacturing. We expect to start incurring these expenses as we prepare for the potential commercialization of
Zimura. We are party to agreements with Archemix with respect to Zimura, the former equityholders of Inception 4 with respect to IC-500, the University
of Florida Research Foundation, Incorporated, or UFRF, and Penn, with respect to IC-100 and IC-200, and UMass with respect to any potential product
candidates from our miniCEP290 program, in each case, that impose significant milestone payment obligations on us if we or a potential collaborator
achieves specified clinical, regulatory and commercial milestones with respect to these product candidates, as well as certain royalties on net sales with
respect to IC-100, IC-200 and any product candidates we choose to develop from our miniCEP290 program. It is likely that any future in-licensing or
acquisition agreements that we enter into with respect to additional product candidates or technologies would include similar obligations.
We expect that we will continue to incur significant expenses as we:
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continue the development of Zimura in GA and STGD1 and initiate development of Zimura in intermediate AMD and potentially other
indications;
expand our outsourced manufacturing capabilities for Zimura and IC-500 and begin to establish commercial operations and sales, marketing
and distribution capabilities for Zimura;
prepare an NDA and an MAA for Zimura and seek marketing approval for any product candidates that successfully complete clinical trials;
in-license or acquire the rights to, and pursue the development of, other product candidates or technologies for retinal diseases, such as
sustained release delivery technologies for Zimura;
continue the development of IC-500 and pursue our gene therapy research programs;
• maintain, expand and protect our intellectual property portfolio;
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hire additional clinical, commercial, medical affairs, regulatory, pharmacovigilance, manufacturing, quality control, quality assurance and
scientific personnel; and
expand our general and administrative functions to support our future growth.
Our ability to become and remain profitable depends on our ability to generate revenues in excess of our expenses. Our ability to generate revenues
from product sales is dependent on our obtaining marketing approval for and commercializing our product candidates or any product candidates we may in-
license or acquire. We may be unsuccessful in our efforts to develop and commercialize product candidates or in our efforts to in-license or acquire
additional product candidates. Even if we succeed in developing and commercializing one or more of our product candidates, we may never achieve
sufficient sales revenue to achieve or maintain profitability. See “—Risks Related to Product Development and Commercialization” for a further discussion
of the risks we face in successfully developing and commercializing our product candidates and achieving profitability.
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We expect we will require substantial, additional funding in order to complete the activities necessary to develop and commercialize Zimura or any of
our other product candidates. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate one or more of our
product development programs or commercialization efforts. We may require additional funding beyond what we currently expect or sooner than we
currently expect.
As of December 31, 2021, we had cash, cash equivalents and available-for-sale securities of $381.7 million. We estimate that our year-end 2022 cash,
cash equivalents and available-for-sale securities will range between $215 million and $225 million. We also estimate that our cash, cash equivalents and
available-for-sale securities will be sufficient to fund our planned capital expenditure requirements and operating expenses through at least mid-2024.
These estimates are based on our current business plan, which includes the continuation of our ongoing clinical development programs for Zimura in GA
and STGD1 and the initiation of an intermediate AMD clinical trial, preparation and potential filing of an NDA and a MAA for Zimura in GA, continuing
preparations for a potential commercial launch of Zimura in GA, investing in sustained release delivery technologies for Zimura, and the advancement of
our IC-500 development program. Excluded from these estimates are any potential approval or sales milestones payable to Archemix or any potential
expenses for actual commercial launch of Zimura, such as sales force expenses, any additional expenditures related to potentially studying Zimura in
indications outside of GA, STGD1 and intermediate AMD, or resulting from the potential in-licensing or acquisition of additional product candidates or
technologies, or any associated development we may pursue. We have based these estimates on assumptions that may prove to be wrong, and we could use
our available capital resources sooner than we currently expect.
We expect the development of our product candidates will continue for at least the next several years. Although we believe we have sufficient
financial resources for the activities necessary to complete development of, including manufacturing scale-up and validation activities, and potentially seek
marketing approval of Zimura in GA, we expect we will require additional funding in order to launch and commercialize Zimura in GA, if approved. We
also expect we will require substantial, additional funding in order to complete the activities necessary to develop and commercialize Zimura for other
indications or any of our other product candidates. At this time, we cannot reasonably estimate the total remaining costs necessary to complete
development, to complete process development and manufacturing scale-up and validation activities and to potentially seek marketing approval for Zimura
for any other indication or for any of our other product candidates.
Our future capital requirements will depend on many factors, including:
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the scope, progress, costs and results of our current and future Zimura clinical programs and any further development we may undertake to
enable us to file an NDA and an MAA for Zimura in one or more indications;
the scope, progress, costs and results of process development, manufacturing scale-up and validation activities, analytical method
development and qualification, and stability studies associated with Zimura and our other product candidates;
the timing, scope and costs of establishing a commercial infrastructure for potential commercialization of Zimura and for any other product
candidates for which we receive, or expect to receive, marketing approval;
the costs, timing and outcome of regulatory filings and reviews of our product candidates, including the potential submission and regulatory
review of an NDA and an MAA for Zimura in GA;
our ability to establish collaborations on favorable terms, if at all, if we choose to do so, including a potential collaboration for the further
development and potential commercialization of Zimura in one or more territories outside the United States and a collaboration or out-license
for the further development and potential commercialization of IC-100 and IC-200;
the extent to which we in-license or acquire rights to, and undertake research or development of, additional product candidates or
technologies, including sustained release delivery technologies for Zimura;
the scope, progress, costs and results of our efforts to develop IC-500, including activities to establish manufacturing capabilities and other
preclinical development activities to enable us to file an IND for this product candidate;
the scope, progress, costs and results from our gene therapy research programs, including costs related to the in-license and future
development of any promising product candidates and technologies that emerge from these programs;
the timing and extent of delays or disruptions to our research and development programs as a result of the COVID-19 pandemic;
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the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending
intellectual property-related claims; and
subject to receipt of marketing approval, net revenue received from commercial sales of any of our product candidates, after milestone
payments and royalty payments that we would be obligated to make.
We do not have any committed external source of funds. Our ability to raise adequate additional financing when needed, and on terms acceptable to
us, will depend on many factors. These factors include investors' perceptions of the potential success of our ongoing business, including the development of
our product candidates and other programs, and the potential future growth of our business. Additionally, these factors include general market conditions
that also affect other companies. For example, the COVID-19 pandemic and governmental responses to the pandemic have caused volatility and
uncertainty in the financial markets as well as additional volatility in the price of our stock, which may result in prospective investors being less likely to
invest new capital. These factors may make raising capital difficult, and may result in us accepting terms that are unfavorable to us, especially if we are in
need of financing at the particular time. Although we were successful in raising approximately $162.6 million in net proceeds in an underwritten public
offering of our common stock in October 2021, we may not be able to successfully raise additional capital in the future. The size of our company and our
status as a company listed on The Nasdaq Global Select Market, or Nasdaq, may also limit our ability to raise financing. For example, our ability to raise
adequate financing through a public offering may be limited by market conditions and SEC rules based on our current market capitalization. Nasdaq listing
rules also generally limit the number of shares we may issue in a private placement to a number less than 20% of the number of shares of our common
stock outstanding immediately prior to the transaction, unless we issue such shares at a premium, which investors may be unwilling to accept, or unless we
obtain shareholder approval, which can be expensive and time-consuming and can add risk to our ability to complete the financing transaction. If we are
unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate the development of one or more of our product
candidates, our gene therapy research programs, or our future commercialization efforts.
We may require additional funding beyond what we currently expect due to unforeseen or other reasons. Our costs may exceed our expectations if we
experience an issue in our clinical trials, such as issues with patient enrollment, the retention of enrolled patients, enrolled patients maintaining scheduled
visits and receiving scheduled treatments, or the availability of drug supply, if we experience an issue with manufacturing, such as issues with process
development, scale-up and validation, or establishing and qualifying second source suppliers and ensuring adequate inventory for our expected needs, if we
experience an issue in our preclinical development programs, such as unfavorable toxicology or other preclinical data, or if we modify or further expand
the scope of our clinical trials, preclinical development programs or gene therapy research programs. Our costs may also exceed our expectations for other
reasons, for example, if we are required by the FDA, the EMA, or regulatory authorities in other jurisdictions to perform clinical trials or nonclinical or
other studies in addition to those we currently expect to conduct. For example, we are conducting the GATHER2 trial with the expectation that data
collected from such trial, if it is positive, together with other available data, will be sufficient to support an application for marketing approval in the United
States and the European Union and we may subsequently decide to, or be required by regulatory authorities to, enroll additional patients in the GATHER2
trial, or conduct additional clinical trials or nonclinical studies of Zimura in order to seek or maintain marketing approval or qualify for reimbursement
approval. In addition, the COVID-19 pandemic may result in disruptions to the progress of the GATHER2 or STAR trials, including slowing patient
enrollment in STAR or causing enrolled patients in either trial to miss their scheduled visits or drop out in greater numbers than we expect, or disruptions to
our other research and development programs, which could cause us to continue to expend our cash resources while not progressing our research and
development programs as expeditiously as we would have had the pandemic not occurred or persisted. As a result of any of the above, we may need or may
seek to obtain additional funding for our continuing operations sooner or in greater amounts than expected.
Our need for additional financing may continue even if we are able to successfully develop one or more of our product candidates. Our future
commercial revenues, if any, will be derived from sales of such product candidates, which may not be available for at least several years following
completion of successful product development, if at all. In addition, if approved, our product candidates may not achieve commercial success. Even if those
products are successful and we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Under most, if
not all, of the foregoing circumstances, we may need to obtain substantial additional financing to achieve our business objectives.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or
product candidates.
Until such time, if ever, when we can generate substantial product revenues, we may need or may seek to finance our operations through a
combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. In addition, we
may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current
or future operating plans. To the extent
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that we raise additional capital through the sale of equity or convertible debt securities, our existing stockholders' ownership interests would be diluted, and
the terms of these new securities may include liquidation or other preferences that adversely affect our existing stockholders' rights as common
stockholders. The dilutive effect of future equity issuances may be substantial, depending on the price of our common stock at the time of such capital
raise, with a lower stock price translating to greater dilution for existing stockholders. Debt financing and preferred equity 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, declaring dividends or entering into certain investments or transactions.
In addition, we have issued, and may in the future issue additional, equity securities as consideration for business development transactions, which
may also dilute our existing stockholders' ownership interests. For example, under the agreement and plan of merger pursuant to which we acquired
Inception 4, or the Inception 4 Merger Agreement, we issued an aggregate of 5,174,727 shares of our common stock as up-front consideration to the former
equityholders of Inception 4. The Inception 4 Merger Agreement also requires us to make payments to the former equityholders of Inception 4 upon the
achievement of certain clinical and regulatory milestones, subject to the terms and conditions set forth in the Inception 4 Merger Agreement. Those
milestone payments will be in the form of shares of our common stock, calculated based on the price of our common stock over a five-trading day period
preceding the achievement of the relevant milestone, unless and until the issuance of such shares would, together with all other shares issued under the
Inception 4 Merger Agreement, exceed an overall maximum limit of approximately 7.2 million shares, which is equal to 19.9% of the number of issued and
outstanding shares of our common stock as of the close of business on the business day prior to the closing date of our acquisition of Inception 4, and will
be payable in cash thereafter. In July 2019, we also issued 75,000 shares of our common stock to UMass as partial upfront consideration for the in-license
of our miniCEP290 program, and are obligated to issue up to 75,000 additional shares to UMass upon the achievement of a development milestone.
In March 2021, we filed a shelf registration statement on Form S-3, or the March 2021 Shelf Registration, pursuant to which we may offer and sell
shares of common stock, debt securities and other securities for aggregate gross sale proceeds of up to $300.0 million, of which we may offer and sell up to
$100.0 million from time to time pursuant to an “at-the-market” sales agreement, or the ATM Agreement, we entered into in March 2021 with Cowen and
Company, LLC, or Cowen, as agent, subject to the terms and conditions described in the ATM Agreement and SEC rules and regulations. In July 2021, we
issued and sold 13,397,500 shares of our common stock in an underwritten public offering under the March 2021 Shelf Registration. We have not yet
issued and sold any shares of common stock under our “at-the-market” offering program. In addition, in October 2021, we filed an automatically effective
shelf registration statement, or the October 2021 Shelf Registration, under which we may issue an indeterminate amount of shares of common stock, debt
securities and other securities. In October 2021, we issued and sold 10,350,000 shares of our common stock in an underwritten public offering under the
October 2021 Shelf Registration. If we make further sales under the March 2021 Shelf Registration or the October 2021 Shelf Registration or if we make
sales under our “at-the-market” offering program, the sales could dilute our stockholders, reduce the trading price of our common stock or impede our
ability to raise future capital.
If we raise additional funds through collaborations, royalty transactions, strategic alliances or marketing, distribution or licensing arrangements with
third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, products or product candidates or grant licenses on
terms that may not be favorable to us. If we choose to pursue a collaboration for any of our product candidates, we may be required to relinquish certain
valuable rights depending on the terms of such a transaction. If we are unable to raise additional funds through equity or debt financings when needed, we
may be required to grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
The COVID-19 pandemic, which is a fluid and evolving situation, has adversely affected and may continue to negatively affect our business and
operations in a number of ways, and its long-term effects are uncertain. In addition, the pandemic has caused substantial disruptions in the financial
markets and economies, which could adversely affect our business and operations.
The COVID-19 pandemic, which began in December 2019, has spread worldwide. A majority of the world's population has been affected by
government efforts to slow the spread of the outbreak through stay-at-home and social distancing orders, shutdowns of businesses and public places,
heightened border security, travel restrictions, quarantines and other measures. The COVID-19 pandemic and government measures taken in response have
had a significant impact, both direct and indirect, on businesses and commerce, as a substantial number of people have been required to stay and work from
home; worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods
and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel and conferences, has fallen.
Beginning in March 2020, the COVID-19 pandemic and measures taken to contain it have affected our business and operations in a number of ways.
These include, but are not limited to, the following:
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Clinical Trial Operations. In March 2020, we decided to delay the initiation of patient enrollment in our GATHER2 trial. As we initiated patient
enrollment in June 2020, we and our clinical trial sites implemented new health and safety practices to mitigate the effects of the COVID-19
pandemic and to support patients and site staff. In addition, we added more than 30 new sites to the GATHER2 trial to help with patient
recruitment. Although we have since completed patient enrollment in GATHER2, we may face difficulties in retaining patients or maintaining
scheduled visits to the extent patients are affected by the virus or lockdown measures or are fearful of visiting or traveling to our clinical trial sites
because of the pandemic. We are aware that a number of patients initially enrolled in the STAR trial missed consecutive visits during the early
months of the pandemic, and that a number of patients in our Latin America sites for GATHER2 missed visits because of the COVID-19
pandemic. We do not yet know whether the number of missed visits will increase or decrease in the GATHER2 or STAR trials, or what the impact
of missed visits may be on patient retention in those trials or the trial results, especially because we are masked to the treatment of patients during
the conduct of the trials. We have been and continue to monitor the situation closely. For a more detailed discussion of the impact of the COVID-
19 pandemic on our clinical trial operations, please see the Risk Factor titled, “The COVID-19 pandemic has affected and may continue to affect
the initiation and conduct of our clinical trials, including the retention of patients for our GATHER2 clinical trial and patient recruitment and
retention for our STAR clinical trial. It may have long-lasting effects on the conduct of clinical trials, which can make our ongoing and any future
trials more difficult, costly or time consuming”.
Third-Party Collaborators and Vendors. Many of our third-party contract manufacturers, academic research collaborators and contract research
organizations limited their operations and staff during the COVID-19 pandemic, which resulted in delays to some of our manufacturing and
research and development activities and limited our ability to be on site to oversee these activities. For example, the closure of animal research
laboratories at UMMS for several months during 2020 caused delays to the progress of, and to our timelines for receipt of data from, our minigene
research programs. Over the past year, several of our vendors have been facing backlogs due to work and demands from other clients, including
those who are developing vaccines or medicines for the COVID-19 pandemic, which has limited their availability to perform work for us. For
example, we anticipate that the start of the IND-enabling toxicology studies for IC-500 will be later than what we originally planned, primarily
due to the limited availability of study slots at CROs attributable to rising demand for their services as well as increased absenteeism of staff at
those CROs in wake of the COVID-19 pandemic and the recent Omicron variant. We are also aware that some of our third-party contract
manufacturers and storage vendors have experienced high levels of absenteeism due to the Omicron variant and as a result started to limit their
operations and on-site activities. These operational and staffing limitations may cause further delays for our development and manufacturing
activities. At this time, we do not know whether there will be further impact on the work of our third-party vendors and collaborators due to the
COVID-19 pandemic.
Supply Chain and Materials. Shortages, delays and governmental restrictions arising from the COVID-19 pandemic have disrupted and may
continue to disrupt the ability of our contract manufacturers to procure items, such as raw materials, that are essential for the manufacture of our
product candidates. For example, during 2020, our contract manufacturer for IC-500 drug substance experienced a shortage in obtaining one of the
raw materials that was sourced from China, which was caused by the shutdown of local suppliers and the slowdown in trade due to the COVID-19
pandemic. This shortage delayed our process development activities for the drug substance for IC-500 by a number of months. In addition, since
2020, there have been shortages of various animals used in research studies, such as several types of non-human primates, which are typically
sourced from China, due to the COVID-19 pandemic and disruptions to the global supply chain. Although our development programs have not yet
been affected by these shortages, we are continuing to monitor the situation. Furthermore, in October 2021 we learned that the new manufacturer
we are working with for second source supply of Zimura drug substance was experiencing issues with procuring an important raw material
common to many manufacturing processes, which occurred due to recent supply chain interruptions and caused a slight delay to our
manufacturing timelines with this contract manufacturer.
Remote Working. We instituted company-wide remote working starting in March 2020. In 2021, we began permitting employees to return to our
offices on a voluntary basis in compliance with new health and safety policies we implemented, including a vaccination policy for employees
working in our offices. We expect to operate under a hybrid (partially remote and partially in office) working model for the foreseeable near
future. We are continuing to monitor and support the health and well-being of our employees and their productivity as remote working continues.
The progression of the COVID-19 pandemic remains fluid and its impact on our business and operations remains uncertain. Throughout the course of
the pandemic thus far, many countries and regions, including many states in the United States, have experienced surges in the number of new cases,
including as a result of new variants to the SARS-COV-2 virus, such as the recently emerged Omicron variant, which have caused public health authorities
to reimpose restrictive measures. In addition, although the FDA has fully approved three vaccines as well as vaccine booster shots for certain individuals,
there continue to be challenges with increasing the percentage of vaccinated individuals among the general population, and the long-
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term safety and efficacy and ability of these vaccines to slow transmission, including against new variants of the virus, are largely unknown. In the United
States and some other countries, vaccine mandates remain controversial and the reluctance of many individuals to get COVID-19 vaccines may affect the
work of our vendors and other third parties providing services for us. As a result, governments may continue to deploy measures to contain the pandemic
for a prolonged period of time. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and
financial condition will depend on developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge
concerning COVID-19 and new variants of the virus, the actions taken to contain it or lessen its impact, including the availability, effectiveness and
administration of vaccines, and the economic impact on local, regional, national and international markets. If the delays and other disruptions due to the
pandemic become prolonged or more extensive, then we may experience further delays or disruptions to our research and development programs and our
financial position, results of operations or cash flows for future periods may be materially affected.
In addition, many companies have been using force majeure clauses in their contracts to excuse or delay performing under their contracts. Our
contract manufacturers, academic research collaborators, contract research organizations and other third parties on whom we rely for goods or services may
make similar claims. If any such force majeure claims were successful, then not only would our timelines be delayed but also our right to recover for any
economic damages due to the delay would be limited. Because we rely on many single-source suppliers, any such claims from them are likely to result in a
delay to our timelines or otherwise adversely affect our operations or financial position.
We cannot foresee if and when the COVID-19 pandemic will be effectively contained, nor can we predict the severity and duration of the impact of
the pandemic on our financial condition or operations. We may experience additional disruptions to our clinical trials or supply chains, and closures of
facilities, such as clinical trial sites, academic research centers and suppliers, including single source suppliers, and delays in interactions with regulatory
agencies or obtaining approvals for our product candidates. In addition, the effects of COVID-19 on the financial markets could hamper our ability to raise
additional finances. Additional public health crises and natural disasters, such as future epidemics or pandemics or those resulting from the effects of
climate change, may arise in the future. Any of these events may materially and adversely affect our business operations and financial condition.
Our strategy of obtaining additional rights to products, product candidates or technologies for the treatment of retinal diseases may not be successful.
We may not be successful in obtaining rights to and developing a sustained release delivery technology for Zimura. We may not be successful in finding
a collaborator for IC-100 and/or IC-200.
An element of our strategy over the past few years has been to expand our pipeline through in-licensing or acquiring the rights to products, product
candidates or technologies that would complement our strategic goals as well as other compelling retina opportunities. Since early 2018, we have
completed multiple acquisition, in-license, exclusive option and sponsored research arrangements for product candidates and other technologies intended to
treat retinal diseases. We plan to continue to evaluate additional opportunities to in-license or acquire products, product candidates and technologies on a
selective and targeted basis, with a focus on sustained release delivery technologies for Zimura. We may also continue to consider other alternatives,
including mergers, acquisitions, asset purchases or sales and/or other transactions involving our company as a whole or other collaboration transactions,
including potential collaboration or out-license opportunities for further development and potential commercialization of Zimura in one or more territories
outside the United States and collaboration opportunities for further development and potential commercialization of IC-100 and/or IC-200. Our business
development efforts may fail to result in our acquiring rights to additional products, product candidates or technologies, or may result in our consummating
transactions with which you do not agree.
We may be unable to in-license or acquire the rights to any such products, product candidates or technologies from third parties for several reasons.
The success of this strategy depends partly upon our ability to identify, select and acquire or in-license promising product candidates and technologies. For
potential sustained release delivery technologies, that process typically involves conducting a feasibility study of Zimura formulated with the sustained
release delivery technology and analyzing the resulting formulation, which can be time-consuming, costly and uncertain in outcome. If a formulation is
promising based on the analytical results, we could then proceed to negotiate a longer term collaboration. The process of proposing, negotiating and
implementing a license or acquisition of a product candidate or technology is lengthy and complex. With respect to potential product candidates or
technologies for which we have entered into option agreements or sponsored research agreements for which we have option rights, our agreements
generally do not have fixed economic or other key terms for definitive agreements, and we may not obtain favorable terms if and when we choose to
exercise our option to acquire or in-license any product candidates or technologies.
The in-licensing and acquisition of pharmaceutical products is an area characterized by intense competition, and a number of companies (both more
established and early stage biotechnology companies) are also pursuing strategies to in-license or acquire product candidates or technologies that we may
consider attractive. More established companies may have a competitive advantage over us due to their size, cash resources and greater research, preclinical
or clinical development,
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manufacturing or commercialization capabilities, while earlier stage companies may be more aggressive or have a higher risk tolerance. In addition,
companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to in-license or acquire the rights to
the relevant product candidate or technology on terms that would allow us to make an appropriate return on our investment. Moreover, we may devote
resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts or
we may incorrectly judge the value of an acquired or in-licensed product candidate or technology.
Further, any product candidate that we acquire or in-license would most likely require additional development efforts prior to commercial sale,
including extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. For potential sustained release delivery
technologies with Zimura, we expect any promising technologies would require extensive preclinical and clinical testing and investment in manufacturing
before any potential approval by the FDA or other regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical
product development, including the possibility that a product candidate would not be shown to be sufficiently safe and effective for approval by regulatory
authorities.
If we are unable to successfully obtain rights to suitable product candidates or technologies, our business, financial condition and prospects for
growth could suffer. In addition, acquisitions and in-licensing arrangements for product candidates and technologies are inherently risky, and ultimately, if
we do not complete an announced acquisition or license transaction or integrate an acquired or licensed product candidate or technology successfully and in
a timely manner, we may not realize the benefits of the acquisition or license to the extent anticipated and the perception of the effectiveness of our
management team and our company may suffer in the marketplace. In addition, even if we are able to successfully identify, negotiate and execute one or
more transactions to acquire or in-license new product candidates or technologies, our expenses and short-term costs may increase materially and adversely
affect our liquidity.
In addition, acquisitions and in-licenses may entail numerous operational, financial, regulatory and legal risks, including:
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exposure to known and unknown liabilities, including possible intellectual property infringement claims, violations of laws, tax liabilities and
commercial disputes;
incurrence of substantial debt, dilutive issuances of securities or depletion of cash to pay for acquisitions or in-licensing transactions;
inability to receive regulatory clearance from government agencies, such as the Federal Trade Commission, to close transactions after
announcement;
higher than expected acquisition and integration costs;
difficulty in combining the operations and personnel of any acquired businesses with our operations and personnel;
inability to maintain uniform standards, controls, procedures and policies;
restructuring charges related to eliminating redundancies or disposing of assets as part of any such combination;
large write-offs and difficulties in assessing the relative percentages of in-process research and development expense that can be immediately
written off as compared to the amount that must be amortized over the appropriate life of the asset;
increased amortization expenses or, in the event that we write-down the value of acquired assets, impairment losses;
impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership;
inability to retain personnel, key customers, distributors, vendors and other business collaborators integral to an in-licensed or acquired
product candidate or technology;
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potential failure of the due diligence process to identify significant problems, liabilities or other shortcomings or challenges of an acquired or
licensed product candidate or technology, including problems, liabilities or other shortcomings or challenges with respect to intellectual
property, data or product quality, revenue recognition or other accounting practices, partner disputes or issues and other legal and financial
contingencies and known and unknown liabilities; and
entry into therapeutic approaches, indications or markets in which we have no or limited direct prior development or commercial experience
and where competitors in such markets have stronger market positions.
We and certain of our current and former board members and executive officers were named as defendants in lawsuits that could result in substantial
costs and divert management’s attention. We are in the process of settling those lawsuits, but the settlements are not yet final.
We and certain of our current and former executive officers were named as defendants in a purported consolidated putative class action lawsuit
initiated in 2017 that generally alleges that we and certain of our officers violated Sections 10(b) and/or 20(a) of the Exchange Act and Rule 10b-5
promulgated thereunder by making allegedly false and/or misleading statements concerning the results of our Phase 2b trial and the prospects of our Phase
3 trials for our prior product candidate Fovista in combination with anti-VEGF agents for the treatment of wet AMD. Certain current and former members
of our board of directors and current and former officers were also named as defendants in two shareholder derivative actions initiated in August 2018 and
May 2021 respectively, which generally allege that the defendants breached their fiduciary duties to our company by failing to oversee our business during
the period of the Phase 2b and Phase 3 clinical trials of Fovista. These complaints seek equitable and/or injunctive relief, unspecified damages, attorneys’
fees, and other costs. On September 8, 2021, the parties in the class action executed a settlement agreement, which has been submitted to the court for
approval. We expect our directors’ and officers’ liability insurance to cover the costs of the settlement, including plaintiff counsel’s fees. The shareholder
derivative actions were stayed while a special litigation committee of our board of directors, or the SLC, investigated the allegations contained in the
complaints. On October 18, 2021, the parties notified the court overseeing the Pacheco matter that they had reached an agreement in principle to settle the
action. On January 27, 2022, the parties executed a settlement agreement, which has been submitted to the court for approval. We are unable, however, to
predict the outcome of these matters at this time. Moreover, any conclusion of these matters in a manner adverse to us and for which we incur substantial
costs or damages not covered by our directors’ and officers’ liability insurance could have a material adverse effect on our financial condition and business.
In addition, the litigation, including in responding to discovery requests, caused our management and board of directors to divert time and attention to the
litigation and could adversely impact our reputation, and if the litigation remains protracted, could further divert management and our board of directors’
attention and resources from other priorities, including the execution of our business plan and strategies that are important to our ability to grow our
business, any of which could have a material adverse effect on our business. Regardless of whether these lawsuits are finally settled, additional lawsuits
may be filed against us.
Risks Related to Product Development and Commercialization
Companies in our industry face a wide range of challenging activities, each of which entails separate, and in many cases substantial, risk.
The long-term success of our company, and our ability to become profitable as a biopharmaceutical company, will require us to be successful in a
range of challenging activities, including:
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designing, conducting and successfully completing preclinical research and development activities, including preclinical efficacy and IND-
enabling studies, for our product candidates;
• making arrangements with third-party manufacturers and providers of starting materials for our product candidates, and having those
manufacturers successfully develop manufacturing processes for drug substance and drug product and provide adequate amounts of drug
product for preclinical and clinical activities in accordance with our expectations and regulatory requirements;
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designing, conducting and completing clinical trials for our product candidates;
obtaining favorable results from required clinical trials, including for each ophthalmic product candidate, favorable results from two adequate
and well-controlled pivotal clinical trials in the relevant indication;
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applying for and receiving marketing approvals from applicable regulatory authorities for the marketing and sale of our product candidates;
• making arrangements with third-party manufacturers for scale-up and commercial manufacturing, validating and receiving regulatory
approval of our manufacturing processes and our third-party manufacturers’ facilities and ensuring adequate supply of drug substance and
drug product and starting materials used for the manufacture of drug substance and drug product;
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establishing sales, marketing and distribution capabilities, either internally or through collaborations or other arrangements, to effectively
market and sell our product candidates, if and when approved;
achieving acceptance of the product candidate, if and when approved, by patients, the medical community and third-party payors;
if our product candidates are approved, obtaining from governmental and third-party payors adequate coverage and reimbursement for our
product candidates and, to the extent applicable, associated injection procedures conducted by treating physicians;
effectively competing with other therapies, including the existing standard of care, and other forms of drug delivery;
• maintaining a continued acceptable safety profile of the product candidate during development and following approval;
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obtaining and maintaining patent and trade secret protection and regulatory exclusivity, including under the Orphan Drug Act and the Hatch-
Waxman Amendments to the Federal Food, Drug and Cosmetic Act, or FDCA, if we choose to seek such protections for any of our product
candidates;
protecting and enforcing our rights in our intellectual property portfolio; and
complying with all applicable regulatory requirements, including Good Laboratory Practices, or GLP, Good Clinical Practices, or GCP,
current Good Manufacturing Practices, or cGMP, and standards, rules and regulations governing promotional and other marketing activities.
Each of these activities has associated risks, many of which are detailed below and throughout this “Risk Factors” section. We may never succeed in
these activities and, even if we do, may never generate revenues from product sales that are significant enough to achieve commercial success and
profitability. Our failure to be commercially successful and profitable would decrease the value of our company and could impair our ability to raise
capital, expand our business, maintain our research and development efforts, diversify our product offerings or continue our operations. A decrease in the
value of our company would also cause our stockholders to lose all or part of their investment.
Drug development is a highly uncertain undertaking. Our research and development efforts may not be successful or may be delayed for any number of
reasons, in which case potential clinical development, marketing approval or commercialization of our product candidates could be prevented or
delayed.
Before obtaining approval from regulatory authorities for the sale of any product candidate, we must conduct extensive clinical trials to demonstrate
the safety and efficacy of our product candidate in humans. Prior to initiating clinical trials, we must complete extensive preclinical testing of a product
candidate, including, in most cases, preclinical efficacy experiments as well as IND-enabling toxicology studies. Drug research, including the gene therapy
research we are pursuing, may never yield a product candidate for preclinical or clinical development. Early stage and later stage research experiments and
preclinical studies, including the preclinical studies we are conducting and planning to conduct for IC-500, may fail at any point or produce unacceptable or
inconclusive results for any number of reasons, and even if completed, may be time-consuming and expensive. As a result of these risks, a potentially
promising product candidate may never be tested in humans. For example, we observed different findings across the two different species in which we
tested IC-100 in preclinical toxicology studies, which caused us to evaluate our development options for this product candidate. At this time, we are
planning to seek a collaborator for the further development of this product candidate.
Once it commences, clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome.
A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of
the success of later clinical trials, and interim results of a clinical trial
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do not necessarily predict final results. For example, our pivotal Phase 3 Fovista program for the treatment of wet AMD failed to produce positive safety
and efficacy data that support the use of Fovista in wet AMD, despite the results from preclinical testing and earlier clinical trials of Fovista, including a
large Phase 2b trial with a statistically significant efficacy signal. Additionally, although the 18-month results from our GATHER1 trial supported the 12-
month results in this trial, at which time Zimura met the prespecified primary endpoint in reducing the mean rate of GA growth in patients with GA with
statistical significance across both the Zimura 2 mg and Zimura 4 mg treatment groups when compared to the corresponding sham control groups while
maintaining a favorable safety profile, these results may not be replicated in the GATHER2 trial or any future trials we may conduct for Zimura in GA or
other indications. The results of our planned Phase 3 clinical trial studying Zimura in intermediate AMD may not replicate the results we observed after
conducting post-hoc analyses of the GATHER1 data and the Phase 3 clinical trial may not be adequately powered to detect a difference in the primary
endpoint with statistical significance. Preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that
have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval
of their products.
We may experience numerous unforeseen events during drug development that could delay or prevent our ability to receive marketing approval or
commercialize our product candidates. These risks include, but are not limited to, the following:
• we may not be able to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation of clinical trials for
any preclinical product candidates that we are developing;
• we or our contract manufacturers may be unable to develop a viable manufacturing process for any product candidates that we are developing;
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the supply or quality of our product candidates or other materials necessary to conduct preclinical development and clinical trials of our
product candidates may be insufficient or we may face delays in the manufacture and supply of our product candidates for any number of
reasons, including as a result of interruptions in our supply chain, including in relation to the procurement or quality of starting materials, such
as the polyethylene glycol, or PEG, and dichloroacetic acid, or DCA, used for the manufacture of Zimura, and issues with the packaging,
distribution, storage and import/export of materials and products;
• we or our contract research organizations may be unable to complete necessary analytical method development for testing our product
candidates;
• we may not be able to successfully scale up or validate a manufacturing process for one or more of our product candidates, including the
manufacturing process for Zimura, and may need to rely on second source suppliers for adequate supply of drug substance and/or drug
product in line with our needs and expectations;
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regulators or institutional review boards may not agree with our clinical trial designs, including our selection of endpoints, or may not
authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
• we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with
prospective contract research organizations or clinical trial sites, especially in cases where we are working with contract research
organizations or clinical trial sites we have not worked with previously;
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our contract research organizations, clinical trial sites, contract manufacturers, providers of starting materials and packagers and analytical
testing service providers may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at
all;
• we, through our clinical trial sites, may not be able to locate and enroll a sufficient number of eligible patients to participate in our clinical
trials as required by the FDA or similar regulatory authorities outside the United States, especially in our clinical trials for orphan or other rare
diseases;
• we, through our clinical trial sites, may not be able to maintain enrolled patients for scheduled visits and treatments, or to retain patients
altogether, especially in light of the COVID-19 pandemic, which could result in missing data from our clinical trials, potentially leading to
uninterpretable results or a clinical trial not being sufficiently powered to demonstrate an efficacy benefit;
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• we may decide, or regulators or institutional review boards may require us, to suspend or terminate clinical trials for various reasons,
including noncompliance with regulatory requirements, including GCPs, or a finding that the participants are being exposed to unacceptable
health risks;
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as there are no therapies approved for GA, intermediate AMD, or Stargardt disease, in either the United States or the European Union, the
regulatory pathway for product candidates in those indications, including the selection of efficacy endpoints and their clinical meaningfulness,
is highly uncertain;
there may be changes in regulatory requirements and guidance or we may have changes in trial design that require amending or submitting
new clinical trial protocols;
there may be changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;
• we may decide, or regulators may require us, to conduct additional clinical trials or nonclinical studies beyond those we currently contemplate
or to abandon product development programs;
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the number of patients required for clinical trials of our product candidates to demonstrate statistically significant results may be larger than
we anticipate. This risk may be heightened for clinical trials in orphan diseases, for which the natural history of the disease is less understood,
making it more difficult to predict the drug effect required to adequately demonstrate efficacy, and because there are fewer affected
individuals available to participate in clinical trials; and
the cost of clinical trials of our product candidates, including the costs of manufacturing activities to support those clinical trials, may be
greater than we anticipate.
If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we contemplate, if we otherwise
change our clinical development plans, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of
these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:
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be delayed in obtaining marketing approval for our product candidates;
not obtain marketing approval at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use limitations, distribution restrictions or safety warnings, including boxed warnings;
be subject to additional post-marketing testing requirements; or
have the product removed from the market after obtaining marketing approval.
Despite our ongoing efforts, we may not complete any of our ongoing or planned development activities for our product candidates. The timing of the
completion of, and the availability of results from, development activities is difficult to predict. For clinical trials in particular, we do not know whether
they will begin as planned, will need to be restructured or will be completed on schedule, or at all. The progress of our clinical trials may be dependent on
macro-economic events beyond our control, such as the COVID-19 pandemic. For example, the pandemic and governmental measures instituted in
response to the pandemic have caused a number of missed visits in the GATHER2 trial and may cause additional patients to miss visits or drop out of the
trial, which could result in missing data from this trial. Furthermore, our development plans may change based on feedback we may receive from regulatory
authorities throughout the development process or for other reasons. For example, our expectations regarding the remaining clinical requirements to
demonstrate the safety and efficacy of Zimura for the treatment of GA in a manner sufficient to support an application for marketing approval to the FDA
are based on the Special Protocol Assessment, or SPA, we received from the FDA for the GATHER2 trial and our review of the 12-month and 18-month
data from the GATHER1 trial. Our expectations regarding the minimum clinical requirements to demonstrate the safety and efficacy of Zimura for GA may
change as we continue to have interactions with the FDA and potentially with the EMA and other regulatory authorities, as we conduct our GATHER2
trial, and as new regulatory or third party information, including that of our competitors, third-party clinical data or information from prospective
collaborators or licensees, becomes available. If we
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experience delays in manufacturing, testing or marketing approvals, our product development costs would increase. Significant product development delays
also could allow our competitors to bring products to market before we do, could impair our ability to successfully commercialize our product candidates,
including by shortening any periods during which we may have the exclusive right to commercialize our product candidates, and may otherwise harm our
business and results of operations.
Our development of Zimura is based on a novel mechanism of action that is unproven in GA, intermediate AMD and STGD1 and poses a number of
scientific and other risks, and we may not be successful in developing Zimura in the indications we are pursuing or in any other indication we may
choose to pursue.
We are currently targeting GA and intermediate AMD, which are an advanced form and an earlier form of AMD, respectively, and STGD1 with
Zimura. The causes of AMD are not completely understood. In addition to advanced age, there are environmental and genetic risk factors that contribute to
the development of AMD including ocular pigmentation, dietary factors, a positive family history for AMD, high blood pressure and smoking. Although
we believe there is a scientific rationale for pursuing the development of inhibitors of the complement system as potential pharmaceutical treatments for
GA, and that the results from our GATHER1 trial of Zimura in GA and from a competitor’s trials of its complement inhibitor in GA support our view, this
approach may not prove successful for treating GA in a clinically meaningful way. Similarly, although there is nonclinical scientific literature supporting
the potential use of complement system inhibitors for the treatment of STGD1, we have not yet completed a clinical trial assessing Zimura for the treatment
of STGD1 and do not have any unmasked data regarding the efficacy of Zimura in this indication. As a result, this approach may not prove clinically
successful.
Zimura is designed to inhibit complement protein C5. There are no FDA or EMA approved products that utilize C5 inhibition as a mechanism of
action to treat GA, intermediate AMD or STGD1. There have been other investigational products using complement inhibition as a mechanism of action
for the treatment of GA, including inhibition of C5, that ultimately proved to be unsuccessful. Even though our GATHER1 trial of Zimura in GA met its
prespecified primary endpoint at month 12 and continued to show positive treatment effect at month 18, this mechanism of action may not prove safe and
effective for the treatment of GA, intermediate AMD, STGD1 or any other indication for which we may develop Zimura.
We are planning to initiate clinical development of Zimura in intermediate AMD based on results from a post-hoc analysis of data from our
GATHER1 trial. Although there is nonclinical scientific literature supporting the potential use of complement system inhibitors for the treatment of
intermediate AMD, we have not yet conducted a clinical trial assessing Zimura for the treatment of intermediate AMD. Intermediate AMD is a developing
field of study whose patient population continues to be defined by, and any primary endpoints used to assess any treatments are new for, the medical
community, and as such, the patient population and primary endpoint we choose for our planned Phase 3 clinical trial may not be accepted by regulators.
We intend to seek regulatory feedback before initiating this trial, and regulatory authorities may disagree with our development and regulatory plans and
strategy. We may also decide to pursue clinical development of Zimura for other indications, including those we previously studied such as wet AMD and
IPCV. Similar to GA and STGD1, Zimura, and the use of C5 inhibition, are unproven in those indications and we may not be successful in our efforts to
develop Zimura for those indications.
The GATHER2 trial may yield results that are different from the results observed in the GATHER1 trial. An unfavorable result from the GATHER2
trial likely would materially and adversely affect our ability to obtain approval for Zimura in GA.
Unlike the GATHER1 trial, the GATHER2 trial includes only one treatment arm, Zimura 2 mg, in addition to a control arm. Several Phase 3 clinical
trials for ophthalmic product candidates that have been, or are currently being, conducted by other sponsors include multiple treatment arms, either
different doses or treatment regimens, in addition to a control arm. The FDA has expressed that including multiple study doses or treatment regimens
within a single trial helps mitigate the risk of bias in the trial and is therefore recommended, although not required. We believe that the anatomical measure
used as the primary efficacy endpoint in our GATHER2 trial, the mean rate of growth (slope) estimated based on GA area, as evaluated by an independent,
masked reading center, is not subject to bias. We have decided to proceed with only one treatment arm in the GATHER2 trial consisting of a single monthly
administration of Zimura 2 mg, because the 12-month data from the GATHER1 trial suggested that monthly administration of Zimura 2 mg provides a
similar benefit (approximately 27%) in reducing the mean rate of GA growth over 12 months as compared to the corresponding sham control group, as
measured by our primary endpoint, as Zimura 4 mg, and these results are supported by the results of the 18-month data, and because we want to avoid the
treatment burden associated with the Zimura 4 mg dose evaluated in our GATHER1 trial. If the results from GATHER2 are positive, we plan to seek
approval for the 2 mg dose of Zimura in GA. Additionally, for our GATHER2 trial, because we want to begin to evaluate the efficacy of a less frequent
dosing regimen, we are re-randomizing the patients in the monthly Zimura 2 mg treatment arm at 12 months and evaluating dosing Zimura 2 mg every
other month, a dosing regimen which we have not previously studied, in half of those patients during the second 12 months of the trial. The GATHER2
trial, however, is not designed to reliably assess any differences we observe between these treatment groups at 24 months with statistical significance
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and the label we would seek for Zimura in GA, if the results from the GATHER2 trial are positive, would in all likelihood provide for monthly
administration of Zimura.
We are conducting the GATHER2 trial at many clinical trial sites and in many countries that were not included in the GATHER1 trial. The
introduction of new sites, and the resulting involvement of new treating physicians, as well as potentially different patient demographics, can introduce
additional variability into the conduct of the trial and may result in greater variability of patient outcomes, which could adversely affect our ability to detect
statistically significant differences between patients treated with Zimura 2 mg and patients receiving sham control.
In addition, the 12-month and 18-month data from the GATHER1 trial suggested there is an overall dose response relationship in which higher doses
of Zimura (for example, the 4 mg and the 2 mg doses) corresponded to a greater reduction in the mean rate of GA growth as compared to the corresponding
sham group as compared to lower doses of Zimura (for example, the 1 mg dose). For our GATHER2 trial, for the reasons stated above, we have decided to
proceed with only a 2 mg dose treatment arm and not include a 4 mg dose treatment arm. The 2 mg dose may prove not to be efficacious in treating GA.
Additionally, unlike the protocol for the GATHER1 trial, the protocol of the GATHER2 trial provides that patients who develop CNV in the study eye in
the trial may remain in the trial and receive either Lucentis® or Eylea® in accordance with the label for that anti-VEGF agent, and that measurements of
these patients' GA will be included in the primary efficacy analysis if their fundus autofluorescence, or FAF, images can be assessed by the masked reading
center. The retention of these patients in the GATHER2 trial may introduce additional variability not present in the GATHER1 trial, as we do not have any
data regarding the progression of GA in patients with CNV who receive treatment with an anti-VEGF agent. Moreover, if a significant number of patients
develop CNV in the study eye and these patients' FAF images are not reliably assessable, or if more patients than we anticipate drop out or their data is
otherwise missing, any such occurrence would reduce the number of patients from whom data is available for analyzing the primary endpoint for this trial
and the GATHER2 trial could be underpowered to demonstrate a potential clinical benefit for Zimura in GA with statistical significance.
Our intended regulatory pathway for generating sufficient safety and efficacy data to apply for and potentially obtain marketing approval for Zimura
for GA is subject to several assumptions, including that we may be able to rely on the results from our GATHER1 and GATHER2 trials. Although we
received a written agreement from the FDA under a SPA for the overall design of GATHER2 and the FDA indicated that as part of a future NDA
submission, it will consider the GATHER1 data using the original prespecified primary efficacy endpoint analysis, together with the new FDA
preferred method that we are using for GATHER2, the FDA, the EMA or other regulatory authorities may not accept the design or results of the
GATHER1 or GATHER2 trials. We may decide to or may be required to enroll additional patients, collect additional safety data or conduct additional
clinical trials or nonclinical studies to seek or obtain approval for Zimura in GA.
Based on the results of our GATHER1 trial, additional statistical analysis we have performed and discussions we have had with the FDA, we believe
that the efficacy results from this trial would satisfy the FDA’s requirements as one of the two pivotal clinical trials typically required for marketing
approval. This belief is based on many assumptions, including that a reduction in mean rate of GA growth over 12 months, measured by FAF based on
readings at three time points: baseline, month 6 and month 12, calculated using the square root transformation of the GA area, is a primary endpoint of
clinical relevance, in the absence of a demonstrated reduction in the loss of vision. The FDA, the EMA or other regulatory authorities may not agree with
our view that the observed reduction in the rate of GA growth, calculated using the square root transformation, is clinically relevant or meaningful, or may
require us to correlate this reduction in rate of GA growth with another outcome more directly associated with visual function. We understand that many
regulatory authorities outside the United States, including those in Europe, may require a sponsor to show a functional benefit to vision for marketing
approval in GA. If we are required to show a functional benefit to vision to obtain marketing approval, we may need to conduct additional clinical trials or
sub-studies, which may not ultimately demonstrate a functional benefit to vision to the satisfaction of these regulatory authorities. Since receiving the 12-
month results from the GATHER1 trial, we have not had any interactions with the EMA regarding the GATHER1 data or the design of GATHER2. The
FDA, the EMA or other regulatory authorities may also disagree with our conclusion regarding the robustness of the data from the GATHER1 trial based
on our sensitivity analyses or may conduct their own sensitivity analyses yielding different results. Even if we meet with the FDA, EMA or other regulatory
authorities, we likely will not have an opportunity to obtain definitive confirmation from the FDA, EMA or other regulatory authorities regarding the
sufficiency or robustness of the data from our clinical trials, including the GATHER1 trial, until such time as we submit an application for marketing
approval and receive a response from the applicable authority. If the GATHER1 trial results are not considered robust, or if regulatory authorities do not
accept the study designs of GATHER1 or GATHER2, then in order to seek marketing approval we may need to conduct, in addition to the GATHER2 trial,
one or more additional, adequate and well-controlled clinical trials that meet the applicable regulatory requirements in order to obtain marketing approval.
In parallel discussions with those for the GATHER2 SPA, the FDA indicated that, as part of a future NDA for Zimura, it would consider the results
from GATHER1 using the original prespecified primary efficacy endpoint analysis, together with a post-hoc analysis we performed using the FDA-
preferred method that will be used for the GATHER2 trial (mean rate of growth
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(slope) estimated based on GA area measured by FAF in the relevant timepoints). Although we believe that the post-hoc analyses from the GATHER1 trial
are consistent with the positive results from the original prespecified analysis from the trial, any analyses, whether prespecified or post-hoc, that are
intended to support an application for marketing approval are a matter of review for the FDA and other regulatory authorities, who may disagree with our
methodologies and analyses for any number of reasons. The FDA, EMA or other regulatory authorities may take issue with the number of modifications we
introduced to the GATHER1 trial following its commencement, which they may view as introducing additional uncontrolled variables. The FDA, EMA or
other regulatory authorities may also take issue with the degree of data that are missing from the clinical data set from our GATHER1 trial, or with the rate
at which patients withdrew from the trial. To the extent patients miss critical visits or drop out of the GATHER2 trial, we face a similar risk with
GATHER2.
Based on discussions with the FDA, following the GATHER1 trial, we believe we need to conduct one additional clinical trial with enough patients
such that we will have safety data for a minimum of 300 patients having received the dose of Zimura for which we are seeking approval, or a higher
Zimura dose, independent of indication, for a minimum of 12 months, with 24-month safety data available for some portion, but not all, of these 300
patients. We believe that if we were to file an application for marketing approval for Zimura for GA, we would be able to rely on safety data from our
GATHER1 and GATHER2 trials in GA secondary to AMD, as well as our STAR trial evaluating Zimura for STGD1. We also believe that, if the data from
the GATHER2 trial are positive, we would be able to submit our application following the primary efficacy and safety analysis for the GATHER2 trial at
the 12-month time point, without waiting for the full 24-month data package. We have designed our GATHER2 trial to meet these requirements, which, as
we understand them, and if data from the GATHER2 trial are positive, will permit us to seek marketing approval for Zimura for GA in the United States
and potentially the European Union. Since receiving the 12-month results from the GATHER1 trial, we have not had any scientific advice or other formal
interactions with the EMA or competent national authorities in the European Union or United Kingdom regarding the sufficiency of the GATHER1 and
GATHER2 trials, including our primary efficacy endpoint analyses, to support an application for marketing approval. As we continue to engage with
regulatory authorities, including in Europe, we may receive feedback that is not consistent with our expectations, including potential disagreements by the
EMA and other regulatory authorities with what we understand are the requirements of the FDA. Regulatory authorities may require us to enroll additional
patients, collect additional safety data, conduct additional trials or take other actions, which would require us to revise our development plans for Zimura,
including potentially changing the design of the GATHER2 trial, increase the costs of our Zimura clinical programs and delay our expected timelines. For
example, based on our assessment of the data we have collected for Zimura to date and the requirements of regulatory authorities, we are conducting a
pharmacokinetic substudy involving a portion of the patients enrolled in the GATHER2 trial and an additional nonclinical study of Zimura. Any delays or
unfavorable results from those studies may impact our timelines for seeking and potentially obtaining approval for Zimura in GA. In addition, because of
the COVID-19 pandemic or other reasons, we may experience a higher than anticipated rate of dropouts and missed visits and treatments in our GATHER2
and STAR trials, which could result in our not having adequate safety data for a sufficient number of patients to obtain marketing approval in GA, even if
the primary efficacy endpoint is met and the results from the GATHER2 trial are otherwise positive.
Furthermore, our previous and ongoing Zimura clinical trials have evaluated Zimura dosing levels and regimens that we have studied only in cohorts
consisting of a small number of patients. This approach may increase the risk that patients in our ongoing trials experience adverse events and/or serious
adverse events (either ocular, systemic or both) that we have not observed or at rates that we have not observed in prior trials. Although we have not
observed any adverse events or serious adverse events attributable by the investigators to the drug product in our GATHER1 trial, they may manifest in our
GATHER2 trial, in our STAR trial or in any other subsequent clinical trials we or a potential collaborator may undertake for Zimura. When we follow
patients for a longer period of time or collect safety data from a greater number of patients, we may observe safety events that we have not previously
observed. For a further discussion of the safety risks in our trials, see the risk factor herein entitled “If serious adverse or unacceptable side effects are
identified during the development of our product candidates, we may need to abandon or limit our development of such product candidates. There are a
number of known safety risks associated with our product candidates and currently unknown safety issues may arise during development."
Our ongoing clinical trials and any future clinical trials or other studies for Zimura that we or a potential collaborator may undertake may yield
inconsistent safety or efficacy results with those we have observed to date or otherwise fail to demonstrate sufficient safety or efficacy to justify further
development or to ultimately seek or obtain marketing approval. Any negative results from our ongoing or any future clinical trials or other studies for
Zimura will likely adversely affect our business and the value of your investment in our company.
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We have no unmasked clinical data regarding the safety and efficacy of Zimura as a treatment of STGD1. The dropout rate or patients with missing
visits may reduce the number of patients from whom we can collect and analyze data from STAR. We may not be able to recruit additional patients for
this trial in line with our expectations.
We have no unmasked clinical data regarding the safety and efficacy of Zimura as a treatment for STGD1. As STGD1 is an orphan indication, to our
knowledge there is only very limited natural history data currently available regarding the variability of our planned primary efficacy endpoint in the
STGD1 patient population we enrolled in this trial. Moreover, because Stargardt disease, like GA, is a degenerative disease, and in many cases, the rate of
degeneration is slow, and because we are seeking to slow the progression of degeneration with Zimura, and not necessarily to reverse prior degeneration or
restore visual function, patients participating in our STAR trial, who are generally younger and may experience vision loss that is more subtle than patients
with GA or other forms of AMD, may not perceive a benefit from continuing to participate and therefore may drop out of this trial or miss scheduled visits
and treatments. This risk is particularly magnified during the COVID-19 pandemic, which may cause our patients to voluntarily or involuntarily drop out of
the trial or miss scheduled visits and treatments in greater numbers than before. Although we and the investigators and their staffs take efforts to encourage
continued patient participation, the dropout rate may exceed our expectations. A higher than expected dropout rate would reduce the number of patients
from whom data is available for analyzing the primary endpoint for this trial. Given the information above, our STAR trial could be underpowered to
demonstrate a potential clinical benefit for Zimura in STGD1 with statistical significance.
We have decided to enroll approximately 25 additional patients in this trial, with the goal of enrolling a total of approximately 120 patients. This
change to the trial has increased the costs associated with this trial and has delayed the timelines for receipt of data from this trial. We believe an expanded
trial could allow us to collect additional data regarding the effect of Zimura on STGD1 patients and help us mitigate the risks from additional patient
dropouts and missed visits; however, these expectations may prove to be incorrect. We are continuing to recruit and enroll patients in this trial. Patient
recruitment may take longer or cost more than we would expect.
The COVID-19 pandemic has affected and may continue to affect the initiation and conduct of our clinical trials, including the retention of patients for
our GATHER2 clinical trial and patient recruitment and retention for our STAR clinical trial. It may have long-lasting effects on the conduct of
clinical trials, which can make our ongoing and any future trials more difficult, costly or time consuming.
Our GATHER1, GATHER2 and STAR trials involve sites located across the United States and in many countries outside the United States. At the
start of the COVID-19 pandemic in early 2020, we were conducting startup activities for the GATHER2 trial, and we were in the process of completing
patient visits for our GATHER1 trial and those of the initially enrolled patients in the STAR trial. We have made a number of operational changes to our
clinical trials as a result of the COVID-19 pandemic, its effects on current and prospective participating patients, and various governmental and other
measures in response to the pandemic. As the COVID-19 pandemic evolves, we may make further changes to how we conduct our ongoing and any future
clinical trials.
Patient enrollment, missed patient visits and patient retention remain key risks for our clinical trials. Due to the COVID-19 pandemic, we delayed the
initiation of patient enrollment for the GATHER2 trial from March 2020 to June 2020. Even though we have completed patient enrollment for GATHER2,
we are continuing to enroll patients in the STAR trial, where we may choose to or be required to slow down or stop patient enrollment in certain
geographies due to the COVID-19 pandemic and any governmental measures taken in response. Patients, in turn, may be reluctant to enroll in clinical trials
or to maintain their scheduled visits and treatments once enrolled due to their reluctance to visit clinical trial sites for fear of potential exposure to COVID-
19 or ongoing restrictive measures requiring social distancing or limiting travel. These concerns may particularly apply to GA patients, many of whom are
elderly and therefore at a higher risk for COVID-19 and other diseases than the general population.
For patients who are enrolled in our trials, the COVID-19 pandemic may cause them to miss study visits or drop out in greater numbers than
expected, which could affect our ability to complete our trials and obtain data in accordance with our expectations. Compared to the generally elderly
patients in our GATHER2 trial, the patients in the STAR trial are generally younger and have work and family commitments, which may cause them to
miss more visits or drop out in greater numbers. In addition to the risks posed by increased patient dropouts, if patients miss scheduled visits in greater
numbers as a result of the pandemic, especially if a patient misses consecutive visits, it may affect our ability to draw meaningful conclusions from the
clinical data. We are aware that a number of patients initially enrolled in the STAR trial missed consecutive visits during the early months of the COVID-19
pandemic and that a number of patients in our Latin America sites for GATHER2 missed visits because of the COVID-19 pandemic. We do not know yet
whether the number of missed visits will increase or decrease in any of these trials, and whether and to what extent missed visits may impact patient
retention in these trials or the results of the
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trials, especially since we are masked to the data until the conclusion of the trials. The duration of the GATHER2 and STAR trials, at 24 months and 18
months, respectively, plus time for recruiting patients, makes them more likely to be affected by any subsequent waves of the COVID-19 pandemic.
The COVID-19 pandemic has caused many of our clinical trial sites and competent health authorities and ethics committees in certain countries to
reduce their staff and operations. In 2020, this reduction in operations resulted in delays to the approval of and the site activation process for the GATHER2
trial in certain geographies. During late 2020 to early 2021, a number of our clinical trial sites scaled back their operations because of surges in COVID-19
cases or new lockdown measures being imposed. We expect to initiate our planned clinical trial studying Zimura in intermediate AMD during the second
half of 2022 and we plan to use many of the same sites that are in the GATHER2 trial. The sites may be assisting with database lock and related activities
for GATHER2 around the same time that they may be preparing for and starting up the intermediate AMD trial. If any reductions in staff and operations
continue to persist at the sites at that time, it may affect our conduct of the ongoing GATHER2 and planned intermediate AMD trials. Shortages of
vaccines, personal protective equipment and other supplies for the prevention of COVID-19 and the proliferation of new variants of COVID-19 may cause
our clinical trial sites to further scale back the number of staff on site and other operations, and may also cause prospective or enrolled patients to avoid
clinical trial visits.
In addition to the disruptions to the operations of many clinical trial sites, the COVID-19 pandemic affected our monitoring and audit operations, for
example, by requiring remote monitoring, remote source document verification and remote auditing in many instances. Some countries prohibit or limit
remote source document verification due to privacy and other concerns. During 2020 and early 2021, we experienced difficulties and delays in performing
audits on most of our clinical trial sites because of privacy and other concerns with remote auditing. Although we do not believe the COVID-19 pandemic
has materially affected the robustness of our data verification process for the GATHER1 trial, we or regulatory authorities may find data verification
discrepancies upon reviewing the data from the trial. This risk may also affect our data verification processes for the GATHER2 and STAR trials.
Our development of IC-500 is also based on a novel mechanism of action that is unproven and poses a number of scientific and other risks.
IC-500, our selected product candidate from our HtrA1 inhibitor program, is in preclinical development. There are no FDA or EMA approved
products that utilize HtrA1 inhibition as a mechanism of action for treating ophthalmic diseases, including GA and other age-related retinal diseases for
which we may develop IC-500, and this mechanism of action may not prove safe and effective for these diseases. Although other companies are pursuing
HtrA1 inhibition as a strategy for treating retinal diseases, including Genentech in an ongoing Phase 2 clinical trial in GA, to date, there is limited
published clinical data regarding the safety and efficacy of HtrA1 inhibition in the target patient population. We are also aware that Genentech is
conducting a clinical trial to assess the long-term safety and tolerability of its monoclonal antibody HtrA1 inhibitor. We made the decision to acquire our
HtrA1 inhibitors program in 2018 based on our interpretation of the scientific literature and rationale for this potential target that suggest an association
between HtrA1 and the risk for AMD, as well as a limited set of preclinical data generated by Inception 4 prior to the acquisition. Even though genetic and
histologic findings correlate HtrA1 with AMD, the development and progression of AMD may not be affected by HtrA1 or may be more strongly affected
by other genes. Our hypothesis that targeting inhibition of HtrA1 may be a safe and effective method of treating AMD may ultimately be incorrect, which
would likely adversely affect the value of IC-500 and its continued development.
To our knowledge, there are no suitable animal models for GA or dry AMD. This absence of a suitable animal model makes designing a proof of
concept study to assess the preclinical efficacy of IC-500 difficult. To date, we have only generated limited preclinical data of IC-500 in animal studies and
we are conducting and planning additional studies to assess the pharmacokinetics and toxicology of IC-500 in animals, which ultimately may fail to
produce favorable results. In addition, we have not had any formal or informal interactions with the FDA or other regulatory authorities regarding our
development plans for IC-500. We do not know whether the FDA or other regulatory authorities will accept any preclinical proof of concept study we may
propose, or other aspects of our development plans for IC-500. The FDA may require us to change our plans or conduct additional studies, which would
increase our costs and delay our timelines.
Gene therapy is an emerging field of drug development that poses many scientific and other risks. We are refocusing our gene therapy development
efforts from IC-100 and IC-200 to earlier stage research programs, and need to continue building our gene therapy capabilities. Our limited experience
with gene therapy and the limited patient populations for our gene therapy programs may limit our ability to be successful or may delay our
development efforts.
Gene therapy is an emerging field of drug development with only a small number of gene replacement therapies having received FDA approval to
date. Our gene therapy research and development programs, which we decided to undertake based on
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a review of a limited set of preclinical data, are still at an early stage. Even with promising preclinical data, there remains several areas of drug
development risk, including translational science, manufacturing processes and materials, safety concerns, regulatory pathway and clinical trial design and
execution, which pose particular uncertainty for our programs given the relatively limited development history of, and our limited prior experience with,
gene therapies. For example, we observed inconclusive data across the two preclinical toxicology studies we conducted for IC-100, which caused us to
evaluate our development options for this product candidate. Furthermore, the medical community's understanding of the genetic causes of many diseases
continues to evolve and further research may change the medical community's views on what therapies and approaches are most effective for addressing
certain diseases.
For our miniCEP290 program and other minigene programs, we are pursuing research using a novel approach that is largely untested and presents
various scientific and regulatory risks. To date, all the data generated for our miniCEP290 program are in a newborn mouse model for LCA10, and we do
not know whether the effect we observed with these minigenes in mice will be replicated in other animals or humans. Furthermore, minigenes result in the
expression of a protein that differs from the naturally occurring protein. The protein expressed by the minigene may have physiological effects, including
toxic effects, that are not yet known. Because of the novelty of minigenes, the medical community's and regulators' receptiveness to this approach remains
unknown. Our research efforts may not fully elucidate all of the physiological risks associated with a particular minigene and the associated expressed
protein. For these and other reasons, promising minigene candidates that emerge from our gene therapy research programs may not succeed in later stage
preclinical and clinical development.
We have particularly focused on AAV gene therapy, as AAV vectors are relatively specific to retinal cells and their safety profile in humans is
relatively well-documented as compared to other delivery vehicles and gene therapy technologies currently in development. However, AAV has a number
of drawbacks, including its small packaging capacity: an AAV vector can hold only up to approximately 4,700 base pairs of DNA, whereas the genes that
are associated with a number of diseases, such as LCA10, Stargardt disease and Usher 2A, exceed that size. Although AAV is the most commonly used
vector in ocular gene therapy today, it may prove to pose safety risks that we are not aware of and other vector forms, such as retroviral or lentiviral and
non-viral based vectors, or gene editing approaches, may prove to be safer and more effective.
As we pursue our gene therapy research programs, we expect we will need to continue to grow our own gene therapy scientific and technical
capabilities through hiring internally and seeking assistance from outside service providers. We believe that gene therapy is an area of significant
investment by biotechnology and pharmaceutical companies and that there may be a scarcity of talent available to us in these areas. If we are not able to
expand our gene therapy capabilities, we may not be able to develop in the way we intend or desire any promising product candidates that emerge from our
gene therapy research programs.
We have not previously conducted any clinical development involving gene therapies and, if and when we are ready to conduct our first gene therapy
clinical trial, we will need to build our internal and external capabilities in designing and executing a gene therapy clinical trial. There are many known and
unknown risks involved in translating preclinical development of gene therapies to clinical development, including selecting appropriate endpoints and
dosage levels for dosing humans based on preclinical data. Many of the indications for which we are pursuing our gene therapy programs have limited
natural history data and limited number of therapies in clinical development, which may make selecting an appropriate endpoint difficult. Furthermore, our
gene therapy programs are targeting orphan diseases with relatively small populations, which limits the pool of potential patients for our gene therapy
clinical trials. Because gene therapy trials generally require patients who have not previously received any other therapy for the same indication, we will
also need to compete for the same group of potential clinical trial patients with our competitors who are also developing therapies for these same
indications. If we are unable to initiate and conduct our gene therapy clinical trials in a manner that satisfies our expectations or regulatory requirements,
the value of our gene therapy programs may be diminished.
For a further discussion of the risks associated with the manufacturing of gene therapy products, see the risk factor herein entitled “The manufacture
of gene therapy products is complex with a number of scientific and technical risks, some of which are common to the manufacture of drugs and biologics
and others are unique to the manufacture of gene therapies.”
If serious adverse or unacceptable side effects are identified during the development of our product candidates, we may need to abandon or limit our
development of such product candidates. There are a number of known safety risks associated with our product candidates and currently unknown
safety issues may arise during development.
If any of our product candidates are associated with serious adverse events or undesirable side effects in preclinical studies or clinical trials or have
characteristics that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the
undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many drugs that initially
showed promise in clinical or earlier stage testing
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have later been found to cause side effects that prevented further development. Safety issues may arise due to reasons unrelated to the study drug, such as
issues with the injection procedure or the syringes or needles being used.
In our completed clinical trials for Zimura, we have observed only a single adverse event, mild subcapsular cataract, from our OPH2000 trial,
assessed to be drug-related by participating investigators. Although not reported as related to Zimura by investigators, we observed an increase in the
number of investigator-reported cases of choroidal neovascularization, or CNV, in the Zimura treatment groups in the GATHER1 trial as compared to the
sham control groups. Additionally, we learned from our independent masked reading center that the retinal images of one of the patients in the Zimura 4
mg group showed evidence of CNV in the study eye that was not reported by the investigator. For the GATHER2 trial, because we are asking investigators
to perform monthly OCT imaging and to submit cases where patients experience a decrease in visual acuity of five or more ETDRS letters between
successive visits to the independent reading center for confirmation by multi-modal imaging, in addition to the cases the investigator suspects to be CNV,
we may observe a higher rate of CNV cases in the GATHER2 trial, including, potentially in the Zimura 2 mg treatment group as compared to the sham
group. We have no unmasked data regarding the safety, tolerability or efficacy of Zimura administered for the treatment of STGD1 or intermediate AMD.
We have no human data regarding IC-500.
Our clinical trials for Zimura involve dosing regimens that we have not studied extensively, which may increase the risk that patients in these trials
experience adverse events and/or serious adverse events (either ocular, systemic or both) that we have not observed or at rates that we have not observed in
prior trials. For example, although we view the rate of CNV incidence in the Zimura treatment groups, as compared to the corresponding sham control
groups, as acceptable and within the range observed in other clinical trials of complement inhibitors in development for GA, the FDA, EMA, other
regulatory authorities, treating physicians or patients may not agree, concluding that Zimura may increase the risk of patients developing CNV to an
unacceptable degree. Moreover, our clinical trials for Zimura involve multiple intravitreal injections over an extended period of time and, as such, may
involve risks involved with multiple and chronic intravitreal injections. For these reasons, there may be, among others, an increase in the rates of
intraocular infections, or endophthalmitis, intraocular pressure, glaucoma, retinal tears, cataracts, retinal detachment, intraocular inflammation, retinal
and/or choroidal circulation compromise, or hospitalizations in patients who receive Zimura. An unforeseen or unexpected safety event, or any safety
finding that is inconsistent with our prior experience with Zimura, from any of our clinical trials for Zimura, including from the GATHER2 trial during
which we will follow patients and collect safety data over 24 months, may impact our ability to continue to develop Zimura or the long-term viability of
Zimura as a potential treatment for GA, intermediate AMD, STGD1 or any other indication for which we may seek to develop Zimura.
As HtrA1 inhibition is a novel treatment approach for treating ocular disease, this treatment approach may present potentially unknown safety risks
when tested in clinical trials that could not have been anticipated based on preclinical studies, including the tolerability studies we are conducting. In
addition, we intend to administer IC-500 by intravitreal injection, which poses the same safety risks outlined above with respect to intravitreal injections of
Zimura.
In addition, there are several known safety risks specific to gene therapy, including inflammation resulting from a patient's immune response to the
administration of viral vectors and the potential for toxicity as a result of chronic exposure to the expressed protein. Managing a host body's immune
response to introduced viral vectors has been and remains a challenge for gene therapies. For AAV gene therapy, “vector shedding,” or the dispersal of
AAV vectors away from the target tissue to other parts of the body, which can trigger a more serious and extensive immune response, is a known safety
issue. Although subretinal injection, which is the method often used to administer retinal gene therapies, helps to control vector shedding beyond the eye,
subretinal injection is a surgical procedure that requires significant skill and training for the administering surgeon and involves its own risks separate from
the gene therapy vectors, including the risk of retinal detachment. The margin for error with subretinal injections is extremely low and there are a limited
number of retinal surgeons with experience in performing subretinal injections in the eye. In order to generate useful clinical data for gene therapy clinical
trials, one or more retinal surgeons must repeat the same subretinal injection procedure in multiple patients with consistency across patients and surgeons.
In the event that we progress into clinical development with a gene therapy product candidate, we may experience delays or other challenges for our gene
therapy development programs as a result of safety issues.
In addition to the currently known safety risks, there may be unknown risks to human health from gene therapies. Because gene therapy involves the
introduction of concentrated quantities of AAV, as well as the introduction of persistent foreign genetic material into the human body, any safety risks may
not manifest until much later, if at all. Gene therapies have only recently been used in the treatment of human diseases and the scientific and medical
understandings of safety or other risks to humans continue to evolve. The safety profile of minigenes and their associated proteins in humans remains
largely unknown. If gene therapies prove to be unsafe for humans, we likely will need to curtail or eliminate our gene therapy development programs.
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We do not have any internal manufacturing capabilities and use third parties to manufacture our product candidates on a contract or purchase order
basis. We may encounter manufacturing issues that could cause delays in our development programs or increase costs. We may experience delays in
regulatory approval of our product candidates if we or our contract manufacturers do not satisfy applicable regulatory requirements. If any of our
product candidates is approved, a manufacturing issue could result in product shortages, which could impair our ability to commercialize our products
and generate revenue.
We do not have internal manufacturing facilities and use or plan to use outside contract manufacturers to manufacture Zimura, IC-500 and any other
product candidates that we may acquire or in-license. The manufacturing processes for our product candidates are technically complex. Problems with
developing, executing or scaling up the manufacturing process, even minor deviations from the established process, could result in product defects or
manufacturing failures that result in lot failures, product recalls, product liability claims, insufficient inventory or delays to our programs. We may
encounter problems achieving adequate quantities and quality of clinical-grade or commercial-grade materials that meet FDA, EMA or other applicable
standards or specifications with consistent and acceptable production yields and costs.
In addition, we have a limited number of personnel hired to supervise our outside contract manufacturers and, as we prepare for potential
commercialization of Zimura, we expect we will need to increase our manufacturing personnel and bolster our quality control and quality assurance
capabilities. We may encounter problems hiring and retaining scientific, manufacturing and quality assurance and control personnel needed to oversee our
contract manufacturers, which could result in delays in our production or difficulties in maintaining compliance with applicable regulatory
requirements. As our contract manufacturer scales up manufacturing of any product candidate, we may encounter unexpected issues relating to the
manufacturing processes or the quality, purity or stability of the product, and we may be required to refine or alter our manufacturing processes to address
these issues, or may need to use an alternative manufacturer. Resolving these issues could result in significant delays and may result in significantly
increased costs. If we underestimate the demand for an approved product or the timing for the need for that product, given the long lead times required to
manufacture or obtain regulatory approvals for our products and/or manufacturing facilities, we could potentially face commercial drug product supply
shortages. If we experience significant delays or other obstacles in producing any approved product at commercial scale, our ability to market and sell any
approved products may be adversely affected and our business could suffer.
The manufacturing processes and the facilities of our third-party manufacturers are subject to inspection and approval by the FDA, referred to as a
pre-approval inspection, before we can commence the commercial sale of any approved product candidate, and thereafter on an ongoing basis. None of our
third-party manufacturers have undergone a pre-approval inspection by the FDA for Zimura or any of our other product candidates. Failure by us or our
third-party manufacturers to pass such inspections and otherwise satisfactorily complete the FDA approval regimen with respect to our product candidates
may result in delays in the approval of our applications for marketing approval, as well as regulatory actions such as the issuance of FDA Form 483 notices
of observations, warning letters or injunctions or the loss of operating licenses. If any of our third-party manufacturers are found to have delayed, denied,
limited or refused a drug inspection, our drug substance or drug product could be deemed adulterated. Based on the severity of the regulatory action, our
clinical or commercial supply of drug substance or drug product could be interrupted or limited, which could have a material adverse effect on our
business.
Any problems in our manufacturing process or our third-party contract manufacturers’ facilities could make us a less attractive collaborator for
potential collaborations, including with larger pharmaceutical companies. Problems in our manufacturing process or facilities also could restrict our ability
to meet market demand for our products.
For a further discussion of the risks associated with our reliance on third-party manufacturers, including the effects of the COVID-19 pandemic on
our third-party manufacturers, see the risk factor herein entitled, “We contract with third parties for the manufacture of and for providing starting materials
for our product candidates for preclinical development activities and clinical trials and expect to continue to do so in the future, including to support
potential commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or product
candidates of sufficient quality, which could delay, prevent or impair our development or commercialization efforts. The COVID-19 pandemic has affected
our contract manufacturers' operations and the manufacture of our product candidates.”
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Our experience manufacturing Zimura is limited. As we plan for the potential commercialization of Zimura, we and our third-party manufacturers will
need to complete several activities to ensure the continued supply of drug product for ongoing and future clinical trials we conduct for Zimura and to
support potential future commercial supply of Zimura. Any delay or failure in completing these activities could cause delays in the development of
Zimura or its potential approval or could result in inadequate clinical or commercial product supply.
In order to obtain and maintain regulatory approval for Zimura, our third-party manufacturers will be required to produce Zimura drug substance with
consistent quality and to execute fill/finish services on a repeated basis and document their ability to do so. In order for us to successfully commercialize
Zimura, if approved, our manufacturers also need to be able to produce quantities at a commercial scale. If our third-party manufacturers are unable to
satisfy these requirements, our business would be materially and adversely affected. To date, we have not yet scaled up the manufacturing process for
Zimura beyond the scale used for developmental clinical batches, nor have we validated the manufacturing process.
In early 2017, we completed the small scale manufacture of multiple batches of Zimura drug substance that we are using to support clinical drug
supply for the GATHER2 trial and the expanded STAR trial. Although we believe we have adequate Zimura drug substance for the GATHER2 trial and the
expanded STAR trial, this supply may not be sufficient for our needs over the duration of the trials or for any additional trials we may conduct, including
our planned clinical trial for Zimura in intermediate AMD. We are working with our historical contract manufacturer for Zimura drug substance, Agilent
Technologies, Inc., or Agilent, to scale up and potentially validate the manufacturing process for Zimura drug substance. Agilent may not be successful in
producing Zimura drug substance at a larger scale. In parallel, we are working with a new contract manufacturer with the goal of assessing whether this
manufacturer can produce Zimura drug substance at an adequate scale for potential commercial use. We have experienced issues during technology transfer
of the existing manufacturing process to this manufacturer, which has resulted in delays to our timelines with this manufacturer. Subject to successful
completion of scale up and validation activities, we currently plan to use Agilent as the primary source of supply of Zimura drug substance upon launch, if
approved, and the new manufacturer as a second source of supply of Zimura drug substance. Validation requires that we demonstrate that the drug
substance produced through the scaled up process can be produced consistently, delivering quality product within a range of acceptable specifications.
Starting in 2020, we have worked with a contract manufacturer to provide us with additional supply of finished Zimura drug product to support our
needs for the GATHER2 trial and the expanded STAR trial. We believe we have sufficient finished Zimura drug product for these two clinical trials. In
addition, we are working with our historical fill/finish manufacturer, Ajinomoto Bio-Pharma Services, or Ajinomoto, on fill/finish of Zimura drug product
with a new vial, which we believe will allow us to support a more efficient and robust fill/finish operation at a commercial scale. Ajinomoto has produced
finished Zimura drug product using the new vial, which we plan to use for a portion of the second-year study visits for patients in the GATHER2 trial. We
believe Ajinomoto has the capacity to supply us with finished Zimura drug product with the new vial for our expected commercial supply needs upon
launch, if approved. If Ajinomoto is unable to provide us and/or a potential collaborator with Zimura drug product for potential commercial use, we will
need to use alternative suppliers, which may increase our costs and delay our timelines.
In order to obtain regulatory approval for Zimura, we expect we will need to demonstrate that the drug substance produced through the scaled up
process, together with the finished drug product in the container closure system to be used commercially, are comparable to the drug substance and drug
product we are currently using in our clinical trials. Under applicable regulatory guidance, comparability can be established through a combination of
analytical, nonclinical or clinical data. Our plan to demonstrate comparability is subject to review by the FDA and other health authorities. Based on
feedback from the FDA, we are planning to use finished Zimura drug product in the new vial for a portion of the second-year study visits for patients in the
GATHER2 trial, which adds potential variability to the trial. If we are unable to sufficiently demonstrate comparability to the FDA or other health
authorities, or if the FDA or other health authorities require analytical, nonclinical or clinical comparability data beyond what our plans currently provide
for, our timelines to complete the development of and seek regulatory approval for Zimura could be impacted.
We order the PEG starting material used to make Zimura drug substance from a sole source third-party manufacturer outside the United States. We
currently procure the supply on a purchase order basis and are continuing discussions regarding a long-term supply agreement with this manufacturer for
the PEG starting material. However, we may not be able to agree to terms or may need to agree to unfavorable terms in order to secure adequate supply. We
believe this supplier will have the capacity to supply the PEG that we will need for commercial manufacturing. If this supplier is unable to supply us the
PEG in line with our expectations, we believe there are a limited number of alternative suppliers for this important starting material, and if we need to use
those suppliers, it could increase our costs and delay our manufacturing plans for Zimura.
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Each of these activities is costly, time-consuming and uncertain in outcome. We may not be able to successfully scale up our manufacturing process
for Zimura, validate the scaled up process, demonstrate comparability of Zimura drug substance manufactured through the scaled up process or of the
finished drug product in the container closure system to be used commercially, in each case, with the Zimura previously used in our clinical trials, or
establish the long-term stability of the Zimura drug product stored in the new vial container. The new manufacturers we have engaged or may engage in the
future have not had previous experience with Zimura and there may be additional issues with technology transfer. We may need to perform additional work
beyond what we currently plan to establish manufacturing and analytical capabilities sufficient to obtain regulatory approval of our manufacturing process
for Zimura and to support potential commercial operations. In addition, we may not be able to secure adequate supply of Zimura drug substance, including
the PEG starting material used to make Zimura drug substance, and Zimura drug product for our future needs, including to support potential commercial
launch, and we may need to secure alternative contract manufacturers or suppliers sooner than we currently expect. If any of the foregoing events occur, it
could result in delays or increased costs to support our future development and commercialization of Zimura, even if we successfully complete any
required clinical trials for Zimura and obtain sufficient and favorable safety and efficacy data.
Some of the standards of the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human
Use, which establishes basic guidelines and standards for drug development in the United States, the European Union, Japan and certain other countries, do
not apply to oligonucleotides, including aptamers. As a result, there are limited established generally accepted manufacturing or quality standards for the
production of oligonucleotides such as Zimura. The lack of uniform manufacturing and quality standards among regulatory agencies may delay regulatory
approval of Zimura. Furthermore, there are a limited number of contract manufacturers with experience manufacturing oligonucleotides, which may limit
our ability to find and use alternative manufacturers.
We are continuing to establish manufacturing capabilities for IC-500. We may need to conduct additional process development and formulation
development activities.
Before we can commence IND-enabling studies for IC-500, we need to conduct process development and formulation development to determine
whether we can formulate IC-500 for intravitreal administration that is safe to advance into preclinical studies and, depending on the outcome of such
studies, into clinical trials. For example, as part of formulation development, we need to determine which inactive formulation components should be used
in the preparation of IC-500, and derive a preparation that includes an adequate amount of drug substance with the necessary inactive ingredients to achieve
the desired safety and efficacy profile for intravitreal injection.
We are working with a CDMO to conduct scale up and cGMP manufacturing of the drug substance for IC-500 for early-stage clinical trials. We are
working with a number of other CDMOs to conduct scale-up, cGMP manufacturing and fill/finish of the drug product for IC-500. Our contract
manufacturers have developed a manufacturing process for IC-500 drug substance and a formulation of this produced drug substance. However, we have
only limited data showing the effect of this formulation in animals; the results of additional preclinical studies for IC-500, including the GLP toxicology
studies we are planning, may require us to refine or change our manufacturing process or conduct additional formulation development activities.
Manufacturing, including process development, formulation development and drug product manufacturing, can be costly and time-consuming and our
anticipated timelines for the development of IC-500 may be delayed. If we are unable to successfully manufacture and formulate IC-500 in line with our
expectations, we may switch to a backup HtrA1 inhibitor or cease developing our HtrA1 inhibitor program altogether.
The manufacture of gene therapy products is complex with a number of scientific and technical risks, some of which are common to the manufacture
of drugs and biologics and others of which are unique to the manufacture of gene therapies.
Gene therapy drug products are complex and difficult to manufacture. We believe that the high demand for clinical gene therapy material and a
scarcity of potential contract manufacturers may cause long lead times for establishing manufacturing capabilities for gene therapy drug development
activities. Even after a manufacturer is engaged, any problems that arise during manufacturing, including during process development and cGMP
manufacturing, may result in unanticipated delays to our timelines, including delays attributable to securing additional manufacturing time slots. In 2020,
we experienced several delays to our cGMP manufacturing activities for IC-100 and IC-200 because of a number of manufacturing issues at our CDMO.
There may also be long lead times to manufacture or procure starting materials such as cell banks or plasmids. In particular, plasmids and other starting
materials for gene therapy manufacture are usually sole sourced, as there are a limited number of qualified suppliers. The progress of our gene therapy
programs is highly dependent on these suppliers providing us or our contract manufacturers with the necessary starting materials that meet our
requirements in a timely manner. As previously disclosed, due to an issue with one of the starting materials used for our manufacturing process for IC-100,
we had to delay our
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cGMP manufacturing run at our CDMO and reschedule the run for a later date based on the CDMO’s availability. A failure to procure or a shortage of
necessary starting materials likely would delay our manufacturing and development timelines.
A number of factors common to the manufacturing of biologics and drugs could also cause production or quality issues for gene therapies, including
raw material or starting material variability in terms of quality, consistency in cell growth, productivity or cell line stability issues, product and process
impurities, material shortages of any kind, shipping, distribution, storage and supply chain failures, cell culture contamination, equipment malfunctions,
operator errors, facility contamination, labor problems, natural disasters, disruption in utility services, terrorist activities, epidemics and pandemics, or acts
of god that are beyond our or our contract manufacturer's control. It is often the case that early stage process development is conducted with materials that
are not manufactured using cGMP starting materials, techniques or processes and which are not subject to the same level of analysis that would be required
for clinical grade material. We may encounter difficulties in translating the manufacturing processes used to produce research grade materials to cGMP
compliant processes, and any changes in the manufacturing process may affect the safety and efficacy profile of our product candidates. Although we were
successful in releasing cGMP batches of IC-100 and IC-200 produced by our CDMO, we have not yet conducted any manufacturing activities, including
process development, for any of our minigene research programs.
An important part of manufacturing drug products is performing analytical testing. Analytical testing of gene therapies involves tests that are more
complex in scope and take a longer time to develop and to conduct as compared to those used for traditional drugs. We, our contract manufacturers and our
contract research organizations need to spend considerable time and resources to develop assays and other analytical tests for our gene therapy product
candidates, including assays to assess the potency of our gene therapy product candidates. Some assays need to be outsourced to specialized testing
laboratories. Even when assays are developed, they need to be further tested, qualified and validated, which may take substantial time and resources.
Because of the lagging nature of analytical testing, we may proceed with additional manufacturing and other development activities without having first
fully characterized or released our manufactured materials. If the results of the testing fail to meet our expectations or applicable requirements, we may
need to delay or repeat certain manufacturing and development activities.
We face substantial competition, which may result in others developing or commercializing products before or more successfully than we do.
The development and commercialization of new drug products is highly competitive. We face competition with respect to our product candidates and
other programs from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies, as well as generic and
biosimilar companies, worldwide. Potential competitors also include academic institutions, government agencies and other public and private research
organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and
commercialization. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our approach, and
others are based on entirely different approaches. We also will face similar competition with respect to any product candidates that we may seek to develop
or commercialize in the future.
Our business strategy is focused on developing transformative therapies for retinal diseases, including GA, intermediate AMD and a number of
orphan inherited retinal diseases. There are multiple companies pursuing the development of therapeutics targeting the complement pathway for age-related
retinal diseases. Some of them have better name recognition, more resources and a longer history of developing therapies than we do. Competition in this
field is intense and especially for many inherited retinal diseases, there is a limited number of potential patients. If any of our competitors obtains FDA,
EMA or other regulatory approval for their products more rapidly than we may obtain approval for ours, our competitors could establish a strong market
position before we are able to enter the relevant market, which may significantly limit the commercial opportunity for our product candidates.
Our commercial opportunity could also be reduced or eliminated if one or more of our competitors develop and commercialize products that are more
effective, safer, have fewer or less severe side effects, are more convenient to use or are less expensive than our product candidates. For example, the
method of administration of Zimura, intravitreal injection, is commonly used to administer ophthalmic drugs for the treatment of severe diseases and is
generally accepted by patients facing the prospect of severe visual loss or blindness. A therapy that offers a less invasive or less frequent method of
administration, however, might have a competitive advantage over one administered by monthly intravitreal injections, depending on the relative safety of
the other method of administration. Furthermore, our ability to compete may be affected in many cases by insurers or other third-party payors, particularly
Medicare, seeking to encourage the use of less expensive or more convenient products.
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Many of our competitors have significantly greater financial and human resources and expertise in research and development, manufacturing,
preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Smaller and other early stage
companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third
parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and enrolling patients for
clinical trials, as well as in acquiring technologies complementary to, or necessary for, our development programs. Our timelines may be delayed to the
extent clinical trials conducted by our competitors are enrolling patients that would otherwise be eligible to participate in our trials at the same time we are
seeking to enroll these patients.
Based on publicly available information, we are aware of the following research and development programs that may be competitive with programs
we are pursuing. Other competitive programs may exist of which we are not aware.
Competitive considerations for GA or dry AMD:
• We are aware that LumiThera, Inc. has a medical device using its LT-300 light delivery system, which is approved in the European Union for the
treatment of dry AMD. In addition, there are a number of products in preclinical and clinical development by third parties to treat GA or dry
AMD. In general, these product candidates can be categorized based on their proposed mechanisms of action. The mechanisms of action for these
product candidates include complement system and inflammation suppression, visual cycle modulators, antioxidants and neuroprotectants, cell
and gene therapies and vascular perfusion enhancers. We are aware that AstraZeneca PLC (which acquired Alexion Pharmaceuticals, Inc. in
2021), Annexon Inc., Apellis Pharmaceuticals, Inc., or Apellis, Applied Genetic Technologies Corporation, or AGTC, Biogen Inc., Gemini
Therapeutics, Inc., Gyroscope Therapeutics (which was recently acquired by Novartis AG), IONIS Pharmaceuticals, Inc. (in collaboration with
Roche AG), Janssen Pharmaceuticals Inc. (which acquired its program through the acquisition of Hemera Biosciences, LLC), MorphoSys AG,
NGM Biopharmaceuticals Inc. and Novartis AG each have complement inhibitors in development for GA or dry AMD, including, in the cases of
Gemini Therapeutics, Gyroscope Therapeutics and Janssen Pharmaceuticals, complement inhibitor gene therapies and AGTC and Gemini
Therapeutics each has a research program on complement factor H gene therapy. We believe that the most advanced of these programs is Apellis's
pegylated, synthetic peptide targeting complement protein C3, for which Apellis announced top-line data from two Phase 3 clinical trials in
September 2021 and Apellis stated it would file an application for marketing approval with the FDA during the second quarter of 2022. Apellis
could obtain marketing approval for its product candidate in advance of when we might reasonably expect to obtain marketing approval for
Zimura in GA or IC-500 in GA, if at all. Moreover, we are aware that several other companies, including Abbvie Pharmaceuticals, Inc., Allegro
Ophthalmics, LLC, Alkeus Pharmaceuticals Inc., Astellas Pharma Inc., Boehringer Ingelheim, Lineage Cell Therapeutics, Inc., Ocugen, Inc., ONL
Therapeutics, Inc., Regenerative Patch Technologies, Roche AG and Stealth BioTherapeutics Corp., are pursuing development programs for the
treatment GA or dry AMD using different mechanisms of action outside of the complement system, including Genentech, Inc. (an affiliate of
Roche AG) and Gemini Therapeutics, which are pursuing HtrA1 inhibition as a mechanism of action. We believe that the most advanced HtrA1
inhibitor program in development is Genentech's monoclonal antibody HtrA1 inhibitor, which is currently being studied in a Phase 2 clinical trial
and whose results are expected to become available in 2022 or 2023.
Competitive considerations for Stargardt disease:
•
There are a number of products in preclinical research and clinical development by third parties to treat Stargardt disease. We are aware that
AGTC, Alkeus Pharmaceuticals, Inc., Beam Therapeutics Inc., Biogen, Generation Bio Co., Kubota Vision Inc. (formerly Acucela), Lin
BioScience, Inc., ProQR Therapeutics N.V., or ProQR, and Spark Therapeutics (a subsidiary of Roche AG) each have research or development
programs in Stargardt disease. Three of these programs, Alkeus, Kubota and Lin BioScience, are exploring the use of oral therapeutics, while
AGTC, Nightstar and Spark are each using a gene therapy approach, Beam is using a base editing approach, and ProQR is using an RNA-based
approach. Kubota’s product candidate, to which the FDA and the EMA granted orphan drug designation in August 2020, is in Phase 3
development while Alkeus’s product candidate is in Phase 2 development. In addition, several academic organizations have early stage programs
in Stargardt disease.
Competitive considerations for RHO-adRP:
• We are aware that ProQR is developing an RNA-based therapeutic for RHO-adRP, for which it is currently conducting a Phase 1/2 clinical trial.
Ocugen, Inc. is developing a preclinical gene therapy for RHO-adRP, for which the FDA granted orphan drug designation in July 2020. In
addition, Biogen has a preclinical AAV gene therapy program in RHO-adRP. Editas Medicine, Inc. is also developing a preclinical gene editing
product candidate for this disease. We are also aware that multiple academic institutions have early stage gene therapy development programs in
RHO-adRP.
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Competitive considerations for BEST1-related IRDs:
• We are aware that Biogen has a preclinical AAV gene therapy program for one or more BEST1-related IRDs.
Competitive considerations for LCA10:
• We are aware that Editas Medicine, Inc. has a gene editing program for LCA10, for which a Phase 1/2 clinical trial is ongoing, ProQR is
developing an RNA-based therapeutic for LCA10 that is currently in Phase 2/3 development, Generation Bio Co. has a preclinical program that
utilizes ceDNA technology to target LCA10 and Oxford Biomedica plc is developing a lentiviral gene therapy program for LCA10 that is in
preclinical development. In addition, several academic institutions have preclinical programs in LCA10.
Competitive considerations for USH2A-related IRDs:
•
There are a number of products in preclinical research and clinical development by third parties to treat USH2A-related IRDs. We are aware that
ProQR is pursuing two RNA based approaches for different mutations causing Usher 2A, one of which is currently in Phase 1/2 clinical
development and the other of which is in preclinical development. We are also aware that Editas Medicine, Inc., Odylia Therapeutics and Wave
Life Sciences, Inc. are exploring potential programs in USH2A-related IRDs.
If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution agreements with third parties,
we may not be successful in commercializing Zimura or any of our other product candidates, if and when any such product candidate is approved.
As a company, we have no experience in the sale, marketing or distribution of pharmaceutical products. In 2021, we hired a chief commercial officer
and are in the process of hiring additional commercialization personnel and planning our commercialization strategy for Zimura, including developing
market access and reimbursement strategies and potentially setting up a sales, marketing and distribution infrastructure. To achieve commercial success for
any approved product, we must either develop a sales, marketing and distribution organization or outsource those functions to third parties. We expect that
our commercial strategy for any of our product candidates, including whether to retain commercial rights and market and sell the product candidate
ourselves or to utilize collaboration, distribution or other marketing arrangements with third parties, would be determined based on a variety of factors,
including the size and nature of the patient population, the disease area, the particular indications for which the product is approved, the territories in which
the product may be marketed and the commercial potential for such product candidate. In addition, our commercial strategy would vary depending on
whether the disease is typically treated by general ophthalmology practitioners or specialists, such as retinal specialists, and the likely degree of acceptance
of our product candidate by the relevant physicians in various markets.
There are risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is
expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and
establish marketing and distribution capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these
commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our products on our own include:
•
•
•
our inability to recruit and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to adequate numbers of physicians who may prescribe our products; and
unforeseen costs and expenses associated with creating an independent sales and marketing organization.
There are also risks involved with having third parties perform sales, marketing and distribution services on our behalf. If we enter into arrangements
with third parties to perform sales, marketing and distribution services, our product revenues and our profitability, if any, are likely to be lower than if we
were to market, sell and distribute ourselves any products that we develop. In addition, we may not be successful in entering into arrangements with third
parties to sell, market and distribute our product candidates or may be unable to do so on terms that are favorable to us. We likely will have little control
over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If
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we do not or are unable to establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we
would not be successful in commercializing our product candidates, if approved.
Even if any of our product candidates receives marketing approval, such product candidate may fail to achieve the degree of market acceptance by
physicians, patients, third-party payors and others in the medical community necessary for commercial success and the market opportunity for any of
our product candidates may be smaller than we estimate.
The degree of market acceptance of any product candidate that we are developing or we may develop, if approved for commercial sale, will depend
on a number of factors, including:
•
•
•
•
•
•
•
efficacy and potential advantages compared to alternative treatments, including the existing standard of care;
any restrictions in the label on the use of our products in combination with other medications or with certain devices;
any restrictions in the label on the use of our products to or by a subgroup of patients, including, for example, for Zimura, if approved,
restrictions on use of our product to patients with GA secondary to dry or non-neovascular AMD (as opposed to all forms of GA) or to
patients with specific GA lesion characteristics, such as non-foveal GA. The inclusion criteria for our GATHER1 and GATHER2 trials require
patients to have non-foveal GA and as a result, our label for Zimura, if approved, may have a restriction limiting its use to those patients;
for treatment regimens calling for multiple intravitreal injections on the same day, restrictions in the label imposing a waiting period in
between intravitreal injections;
our and any commercialization partner’s ability to offer our products at competitive prices;
availability and timeliness of governmental and third-party payor coverage and adequate reimbursement;
increasing reimbursement pressures on treating physicians due to the formation of accountable care organizations and the shift away from
traditional fee-for-service reimbursement models to reimbursement based on quality of care and patient outcomes;
• willingness of the target patient population to try new therapies and of physicians to prescribe these therapies, particularly in light of the
existing available standard of care or to the extent our product candidates require invasive procedures for administration;
•
prevalence and severity of any side effects or perceived safety concerns, such as CNV; and
• whether competing products or other alternatives are more convenient or easier to administer, including alternatives that offer a less frequent
dosing regimen than monthly intravitreal injections, in the case of Zimura, come to market.
Our development program for Zimura in GA uses anatomical primary endpoints, the mean rate of change in GA growth over 12 months, in the case
of GATHER1, and the mean rate of growth (slope) estimated based on GA area over 12 months, in the case of GATHER2. We believe that this efficacy
assessment is most likely to demonstrate clinical relevance for an investigational product across a heterogeneous GA patient population and other potential
assessments, such as comparisons of visual acuity, are not as clinically meaningful for patients with GA. However, to date there is no direct functional
corollary to the anatomical measures that we are using as our primary endpoints for GATHER1 and GATHER2. Although we evaluated visual acuity as a
secondary endpoint in the GATHER1 trial, the trial was not designed to reliably assess differences in mean changes in visual acuity with statistical
significance. Patients, physicians and payors may not recognize the value of, and we may not be able to obtain marketing or reimbursement approval for,
Zimura without demonstrating a functional benefit to vision. To do so, we may need to conduct additional clinical trials or sub-studies, which may not
ultimately demonstrate a functional benefit to vision.
In addition, the potential market opportunity for any product candidate is difficult to estimate precisely. Our estimates of the potential market
opportunity for our product candidates include several key assumptions based on our expectations of the safety and effectiveness of the relevant product
candidate, the expected patient population for our product candidates, our industry knowledge, the competitive landscape for the indications for which we
are developing our product candidates, market response to anti-VEGF agents currently approved for treatment of wet AMD, third-party research reports
and other surveys.
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The potential market opportunity for our product candidates may also differ across geographies. While we believe that our internal assumptions are
reasonable, any of these assumptions could prove to be inaccurate, and the actual market for such product candidates could be smaller than our estimates of
our potential market opportunity.
There is a variety of factors that could contribute to the actual number of patients who receive an approved therapy being less than our estimates of
the potential addressable market. These estimates may prove to be incorrect and new studies may reduce the estimated incidence or prevalence of these
diseases. The number of patients in the United States, the European Union and elsewhere may turn out to be lower than expected, patients may not be
amenable to treatment with our products or patients may become increasingly difficult to identify and access, all of which would adversely affect our
business, financial condition, results of operations and prospects. Further, the severity of the progression of a disease up to the time of treatment, especially
in certain degenerative conditions such as GA, likely will diminish the therapeutic benefit conferred by a new drug product due to irreversible cell death.
For example, certain GA patients may have experienced the loss of certain portions of retinal tissue that disproportionately affected their functional vision,
and these patients may not value a treatment that can only slow the growth of additional GA lesions without providing a treatment to their loss of functional
vision. On the other hand, patients with intermediate AMD are often asymptomatic as to loss of vision; therefore they may not seek or value having a
treatment for their condition, especially a treatment involving monthly injections, which is the current dosing regimen for Zimura. In addition, physicians,
including retina specialists, GOs and ODs, and their patients may not be aware of the risks of disease progression or of the availability of treatments, once
approved. If the number of patients that may benefit from the treatments we are seeking to develop is lower than we expect, our business, financial
condition, results of operations and prospects may be adversely affected.
Even if we are able to commercialize any of the product candidates that we may develop, the product may become subject to unfavorable pricing
regulations, pricing dynamics, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.
The regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. Health care
reform, including increasing scrutiny of drug prices, is an issue of intense political focus, particularly in the United States. Current and future legislation
may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals or in ways that
could alter the mechanism by which pharmaceutical prices are negotiated or otherwise determined. Many countries outside the United States require
approval of the sale price of a drug before it can be marketed, and to apply for and obtain such an approval in certain countries, we or a commercialization
partner may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. In many
countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical
pricing remains subject to continuing governmental control or negotiation even after initial approval is granted. In particular for Zimura in GA and for
many countries in Europe, we may need to demonstrate a relative benefit in functional vision in order to obtain reimbursement approval, although our
clinical trials, which use an anatomic endpoint as the primary efficacy endpoint, are not designed to demonstrate a functional benefit with statistical
significance. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our or
any commercialization partner’s commercial launch of the product, possibly for lengthy time periods, which would negatively impact the revenues we are
able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more
product candidates, even if our product candidates obtain marketing approval and are widely accepted and prescribed or used by physicians.
In addition, even in countries where pharmaceuticals are not subject to strict pricing regulations through a governmental review and approval process,
we may nonetheless face an unfavorable pricing environment as a result of political pressure or market dynamics. The perceived high cost for
pharmaceutical products to treat orphan diseases, where manufacturers seek to recoup development costs and earn a profit for a therapy intended to treat a
relatively small patient population, may attract increased political and public scrutiny, as seen recently with a number of gene therapies that entered the
market. Moreover, if we obtain marketing approval for a product candidate, such as Zimura, in more than one indication, including, for example in an
orphan indication such as STGD1 and a non-orphan indication such as GA, such a product candidate likely would only be sold at one price in any given
country, regardless of the indications for which it is prescribed. This dynamic may result in our charging a price that does not generate profits in each
indication for which the product is approved.
Our ability and the ability of any commercialization partner to commercialize a product candidate successfully also will depend in part on the extent
to which reimbursement for these products and related treatments will be available from government health authorities, private health insurers and other
organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which
medications they will pay for and establish
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reimbursement levels. A major trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors,
particularly Medicare, have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications and encouraging
the substitution of lower cost or generic products. Pricing pressures experienced by the pharmaceutical industry may be further exacerbated by legislative
and policy changes under consideration by the Biden Administration, the U.S. Congress and many states. We expect that Zimura, if approved for GA,
would be reimbursed by Medicare Part B and therefore, these cost containment measures will likely affect our pricing and reimbursement strategies.
For example, the previous Trump Administration, through the Center for Medicare & Medicaid Service, or CMS, announced in late 2018 an advance
notice of proposed rulemaking describing a potential mandatory reference pricing model for Medicare Part B drugs under which the prices paid for these
drugs will be adjusted in relation to an international pricing index that includes prevailing prices from other countries with strict price controls. The
reference pricing model has found support from some members of the U.S. Congress. In 2020, President Trump issued several executive orders intended to
lower the
costs of prescription products and certain provisions in these orders have been incorporated into regulations. These
regulations included an interim final rule implementing a most favored nation model for prices that would tie Medicare Part
B payments for certain physician-administered pharmaceuticals to the lowest price paid in other economically advanced
countries, effective January 1, 2021. That rule, however, was subject to a nationwide preliminary injunction and, on
December 29, 2021, CMS issued a final rule to rescind it. With issuance of this rule, CMS stated that it will explore all
options to incorporate value into payments for Medicare Part B pharmaceuticals and improve beneficiaries' access to
evidence-based care.
On July 9, 2021, President Biden signed Executive Order 14063, which focuses on, among other things, the price of pharmaceuticals. The executive
order directs the Department of Health and Human Services, or HHS, to create a plan within 45 days to combat “excessive pricing of prescription
pharmaceuticals and enhance domestic pharmaceutical supply chains, to reduce the prices paid by the federal government for such pharmaceuticals, and to
address the recurrent problem of price gouging.” On September 9, 2021, HHS released its plan to reduce pharmaceutical prices. The key features of that
plan are to: (a) make pharmaceutical prices more affordable and equitable for all consumers and throughout the healthcare system by supporting
pharmaceutical price negotiations with manufacturers; (b) improve and promote competition throughout the prescription pharmaceutical industry by
supporting market changes that strengthen supply chains, promote biosimilars and generic drugs, and increase transparency; and (c) foster scientific
innovation to promote better healthcare and improve health by supporting public and private research and making sure that market incentives promote
discovery of valuable and accessible new treatments.
Reimbursement may affect the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining and maintaining
adequate reimbursement for our products may be particularly difficult because of the higher prices often associated with drugs administered under the
supervision of a physician, which are generally covered by the "buy and bill" reimbursement model under Medicare Part B. We may choose to, or be
required by market dynamics to, implement access and reimbursement policies that may not be successful in driving use of and reimbursement for our
products, if approved. We or any commercialization partner may also be required to conduct expensive pharmacoeconomic studies to justify coverage and
reimbursement or the level of reimbursement relative to other therapies that may be on the market. If coverage and adequate reimbursement are not
available or reimbursement is available only at limited levels, we may not be able to successfully commercialize any product candidate for which we obtain
marketing approval.
There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for
which the drug is approved by the FDA or similar regulatory authorities outside the United States. Eligibility for reimbursement does not imply that any
drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution costs. Interim
reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may
vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs, and
may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by
government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they
may be sold at lower prices than in the United States, which many members of the U.S. Congress expressed an interest in pursuing. In September 2020,
HHS issued a rule permitting limited importation of drugs from Canada. Third-party payors often rely upon Medicare coverage policy and payment
limitations in setting their own reimbursement policies. Our and any commercialization partner’s inability to promptly obtain coverage and profitable
payment rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our
operating results, our financial condition, or our ability to raise capital needed to commercialize products.
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Ethical, legal and social issues related to genetic testing may reduce demand for any gene therapy product candidates we develop and for which we seek
marketing approval.
We anticipate that prior to receiving certain gene therapies, including as part of a clinical trial, patients would be required to undergo genetic testing.
Genetic testing has raised concerns regarding the appropriate utilization and the confidentiality of information provided by genetic testing. The ownership
of and the lawfulness of using genetic data is an area of the law that is unclear and varies across jurisdictions. Genetic tests for assessing a person’s
likelihood of developing a chronic disease have focused public attention on the need to protect the privacy of genetic information. For example, concerns
have been raised that insurance carriers and employers may use these tests to discriminate on the basis of genetic information, resulting in barriers to the
acceptance of genetic tests by consumers. This dynamic could lead to governmental authorities restricting genetic testing or calling for limits on or
regulating the use of genetic testing, particularly for diseases for which there is no known cure, as well as the use of genetic data. Any of these scenarios
could decrease the pool of patients willing to participate in a clinical trial for a gene therapy and the demand for a gene therapy once it is approved.
Product liability lawsuits against us or any future commercialization partner could divert resources, cause us to incur substantial liabilities and limit
commercialization of any products that we may develop or in-license.
We face an inherent risk of product liability exposure related to the testing of any product candidate that we develop in human clinical trials, and we
and any future commercialization partner will face an even greater risk if we commercially sell any products that we develop or in-license. If we become
subject to or otherwise cannot successfully defend ourselves against claims that our product candidates or our products caused injuries, we will incur
substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
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decreased demand for any product candidates or products that we may develop or in-license;
• withdrawal of clinical trial participants;
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injury to our reputation and significant negative media attention;
significant costs to defend the related litigation;
substantial monetary awards to trial participants or patients;
loss of revenue;
reduced time and attention of our management to pursue our business strategy; and
the inability to commercialize any products that we may develop or in-license.
We currently hold $10.0 million in product liability insurance coverage in the aggregate, with a per incident limit of $10.0 million, which may not be
adequate to cover all liabilities that we may incur. We will need to increase our insurance coverage when and if we begin commercializing an approved
product. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to
satisfy any liability that may arise, including coverage for any local jurisdictions where we conduct clinical trials. In addition, if a commercialization or
collaboration partner were to become subject to product liability claims or were unable to successfully defend themselves against such claims, any such
commercialization or collaboration partners could be more likely to terminate such relationship with us and therefore substantially limit the commercial
potential of our products.
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Risks Related to Our Dependence on Third Parties
We contract with third parties for the manufacture of and for providing starting materials for our product candidates for preclinical development
activities and clinical trials and expect to continue to do so in the future, including to support potential commercialization of Zimura. This reliance on
third parties increases the risk that we will not have sufficient quantities of our product candidates or product candidates of sufficient quality, which
could delay, prevent or impair our development or commercialization efforts. The COVID-19 pandemic has affected our contract manufacturers'
operations and the manufacture of our product candidates.
We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of any of our product candidates
and have a limited number of personnel hired to supervise outside contract manufacturers. We currently rely upon and expect to continue to rely upon third-
party contract manufacturers to manufacture preclinical and clinical supplies of product candidates we are developing or may develop and commercial
supplies of products if and when approved for marketing by applicable regulatory authorities. Furthermore, we and our contract manufacturers currently
rely upon, and for the foreseeable future expect to continue to rely upon, sole-source suppliers of certain starting materials and other specialized
components of production used in the manufacture and fill/finish of our product candidates.
We have historically relied on, and purchased on a purchase order basis from, a single third-party manufacturer, Agilent, to provide Zimura drug
substance. We are working with Agilent and a new manufacturer to conduct scale up and validation activities for Zimura drug substance. However, we do
not currently have any contractual commitments with Agilent or the new manufacturer for the long-term clinical or commercial supply of Zimura drug
substance. We have also historically relied on a single third-party manufacturer, Ajinomoto, for Zimura drug product. We are working with a second
fill/finish manufacturer for additional supply of Zimura drug product for our expected needs for the GATHER2 and STAR trials. We plan to rely on
Ajinomoto for supply of Zimura drug product using the new vial for commercial supply upon launch, if approved. However, we may ultimately need to
rely on other manufacturers for long-term supply of Zimura drug product. We purchase the PEG starting material on a purchase order basis from a single
third-party supplier. We are continuing discussions with this supplier for a long-term supply agreement for the PEG starting material. For these and any
other manufacturers with which we do not have any contractual commitments for supply, the pricing and other terms for supply may vary, even
substantially, over time and could adversely affect our financial results and operations.
For IC-500, we work with a number of CDMOs to conduct process development, scale-up and cGMP manufacture of the drug substance and drug
product for preclinical toxicology studies and early-stage clinical trials.
Our current and anticipated future dependence upon others for the manufacture of the product candidates that we are developing or may develop may
adversely affect our business plan and future growth. For example, any production constraints, performance failure or differing priorities on the part of our
existing or future manufacturers could delay preclinical or clinical development or marketing approval of our product candidates. Our dependence on third
party manufacturers may limit our ability to commercialize on a timely and competitive basis any products that receive marketing approval. We may not
have adequate or timely visibility over issues at our third-party manufacturers, and may not become aware of any such issues until the effect on our
programs, if any, has already materialized.
Over the past few years, Agilent has been undergoing rapid expansion, including ramping up for production for existing clients, bringing on
additional clients, opening new facilities, installing and validating new equipment, and hiring and training new personnel. As a result, we engaged a new
contract manufacturer for supply of Zimura drug substance, which we had planned to be our primary manufacturer for Zimura drug substance. We
encountered issues during technology transfer of the Zimura manufacturing process to this new manufacturer, which delayed our timelines with this new
manufacturer. Subject to successful completion of scale up and validation activities, we currently plan to use Agilent as the primary source of supply of
Zimura drug substance upon launch, if approved, and the new manufacturer as a second source of supply of Zimura drug substance. We are continuing
discussions with Agilent for long-term commercial supply of Zimura drug substance. In addition, expansion experienced by other manufacturers and
suppliers that we use, including any issues that they may experience while expanding, could negatively impact the timing, costs, progress, quality and
outcome of our planned manufacturing activities with those manufacturers and delay or hinder our development plans.
If any of our third-party manufacturers, fill/finish providers or sole-source suppliers fail to fulfill our contracts or purchase orders, or if any of these
manufacturers or suppliers should become unavailable to us for any reason, including as a result of capacity constraints, differing priorities, regulatory
compliance issues, financial difficulties or insolvency, we believe that there are a limited number of potential replacement manufacturers or sole source
suppliers, and we likely would incur added costs and delays in identifying or qualifying such replacements. We may be unable to establish agreements with
such replacement manufacturers, fill/finish providers or sole-source suppliers or to do so on acceptable terms.
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As a result of the COVID-19 pandemic, our third-party contract manufacturers and many sole-source suppliers have limited their operations by
reducing the number of staff on site and instituting restrictions on visitors. These changes have affected how we work with our manufacturers and have
resulted in minor delays to the progress of our manufacturing activities. Additionally, shortages and governmental restrictions arising from the COVID-19
pandemic have disrupted and may continue to disrupt the ability of our contract manufacturers to procure items, such raw materials, that are essential for
the manufacture of our product candidates. For example, in 2020, the COVID-19 pandemic and governmental measures in response caused a delay to the
process development activities at our drug substance manufacturer for IC-500 as a result of difficulty in procuring one of the raw materials used in the
manufacture of IC-500 from China. Over the past year, there have been increasing disruptions in the global supply chain for various materials, due to the
effects of the COVID-19 pandemic and other reasons, and these disruptions may ultimately affect our operations. In October 2021, we learned that the new
manufacturer we are working with as a second source of Zimura drug substance was experiencing issues with procuring an important raw material common
to many manufacturing processes, which occurred due to recent supply chain interruptions and caused a slight delay to our manufacturing timelines with
this contract manufacturer.
In addition, we and our third party manufacturers source some of the raw and starting materials used in the manufacture of our product candidates
from outside the United States. We source the PEG starting material from a supplier outside the United States. Our supplier relationships could be
interrupted due to international supply disruptions, including those caused by geopolitical and other issues. For example, trade disputes, trade negotiations
or the imposition of tariffs between the United States and its trading partners could cause delays or disruptions in our supply of starting materials for our
product candidates.
Reliance on third-party manufacturers entails additional risks, including:
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our product candidates may compete with other product candidates and products for access to a limited number of suitable manufacturing
facilities that operate under cGMP conditions;
reliance on the third party for regulatory compliance, quality control and quality assurance;
the possible breach of the manufacturing agreement by the third party;
the possible misappropriation of our proprietary information, including our trade secrets and know-how, or the proprietary information of
third parties that we are responsible for protecting; and
the possible termination or non-renewal of the agreement by the third party at a time that is costly or inconvenient for us.
Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside the United States. Our
failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including
clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates
or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products and harm our
business and results of operations.
We rely upon third parties in conducting our preclinical development activities and clinical trials, and those third parties may not perform satisfactorily,
including failing to follow regulatory requirements or to meet deadlines for the completion of such activities. The COVID-19 pandemic has also
affected their operations.
We are relying upon and expect in the future to rely upon third parties, such as contract research organizations, or CROs, clinical data management
organizations, biostatisticians, medical institutions (including reading centers) and clinical investigators, in conducting our preclinical testing, analytical
testing and clinical trials for our product candidates. We also expect to rely upon certain facilities at UMMS for various services supporting our research
and development programs, including maintenance and care of research animals and production of viral vectors. These third parties may also have
relationships with other entities, some of which may be our competitors. We or these third parties may terminate their engagements with us at any time for
a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements, our product development activities
could potentially be delayed and could potentially be very costly.
The COVID-19 pandemic has caused our university collaborators to limit the number of staff on site and the types of activities that may be conducted
in their laboratories. During 2020, Penn restricted their researchers from being on site in their
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laboratories and closed a number of research centers that our researchers use for data analysis, which limited their ability to analyze some of the data
generated during our preclinical studies. As a result, our receipt of data and reports from some of those studies was delayed. The University of Florida, or
UF, also limited staff on site in their laboratories and vector production facilities, which delayed our obtaining certain reagents and other materials used for
our gene therapy programs. In addition, UMMS suspended researcher access to their laboratories and the conduct of certain animal studies and reduced the
number of staff in its animal medicine department, which delayed our timelines for our miniCEP290 and miniUSH2A sponsored research programs.
Shortages and governmental restrictions arising from the COVID-19 pandemic may also disrupt the ability of our academic collaborators, clinical trial sites
and other contract research organizations to procure items that are essential for our research and development activities, including, for example, medical
and laboratory supplies used in our clinical trials, including personal protective equipment for site staff, or animals that are used for preclinical studies. For
example, there have been shortages of various animals used in research studies, such as several types of monkeys, which are typically sourced from China,
due to the COVID-19 pandemic and disruptions to the global supply chain. Over the past year, several of our vendors have been facing backlogs due to
work and demands from other clients, including those who are developing vaccines or medicines for the COVID-19 pandemic, which has limited their
availability to perform work for us. For example, we anticipate that the start of the IND-enabling toxicology studies for IC-500 will be later than what we
originally planned, primarily due to the limited availability of study slots at CROs attributable to rising demand for their services as well as increased
absenteeism of staff at those CROs in wake of the COVID-19 pandemic and the recent Omicron variant. There is no guarantee that the COVID-19
pandemic will not further impact our third-party vendors, which could have a material impact on our research and development programs.
Our reliance on these third parties for preclinical testing, analytical testing and clinical development activities reduces our control over these activities
but does not relieve us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance
with the general investigational plan and protocols for the trial. Moreover, the FDA and other regulatory authorities require us to comply with GCPs for
conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity
and confidentiality of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials
on various government-sponsored databases within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal
sanctions.
Over the past few years, there has been increasing oversight by the FDA and other regulatory authorities on data integrity, especially in the research
and development of novel therapies such as gene therapies. We rely upon the practices of and systems in place at our third party collaborators in generating
data to support our preclinical and clinical development programs and for quality control over this data. Their practices and systems vary in scope and
effectiveness and we have a limited number of personnel to supervise, including to perform quality assurance of, those practices and systems. In 2020 and
early 2021, the COVID-19 pandemic prevented us from performing audits on our vendors and clinical trial sites that we otherwise would have performed,
which decreases the level of oversight we have over those vendors and clinical trial sites and increases the risk of non-compliance. Any failure of such
practices or systems to comply with our stated protocols or regulatory requirements could adversely affect the quality of the data generated by these studies.
For a number of our analytical development and testing providers, our CDMOs subcontract and manage that work on our behalf and we have less visibility
into or control over their activities. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our
preclinical studies, analytical testing or clinical trials in accordance with regulatory requirements or our stated protocols, we would not be able to obtain, or
may be delayed in obtaining, marketing approvals for our product candidates and would not be able to, or may be delayed in our efforts to, successfully
commercialize our product candidates.
We also rely upon other third parties to store, package, label and distribute drug supplies for our clinical trials and to store materials for our
development activities. In particular, we rely on a limited number of third parties to store starting materials, drug substance and drug product for our
product candidates and programs. Our product candidates are required to be stored and shipped at certain temperatures and a deviation from those
requirements may result in delays or additional costs. In addition, a number of these vendors are also servicing other clients who are developing vaccines or
medicines for the COVID-19 pandemic and those vendors may prioritize those other clients over us. Any performance failure on the part of these third
parties could delay preclinical development, clinical development or marketing approval of our product candidates or commercialization of our products
and adversely affect our results of operations.
We have historically relied upon third-party researchers to advance our sponsored research programs. We may not be able to fully realize the benefits
of any intellectual property generated by these arrangements.
Part of our strategy to date involves collaborative sponsored research performed by third-party research institutions. Although we have sought to
direct this research and advise on the design of these projects as well as critical development decisions, this research has been performed by individuals
who are not our employees and the timeline and quality of the
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research efforts are outside of our direct control. Academic investigators and other researchers may have different priorities than we do as a
biopharmaceutical drug development company. The sponsored research agreements we have entered into for these programs generally provide that any
inventions resulting from the research will be owned by the research institution performing the research, and that we have an option to negotiate for a
license to develop and exploit any such inventions. If we exercise our option rights for a program that is attractive to us, we may not be successful at in-
licensing rights to the inventions or may need to agree to unfavorable terms.
Confidential information and new inventions derived from these research efforts may be disclosed through publications or other means prior to us or
our third-party research collaborators being able to protect such intellectual property through the filing of patent applications. Our third-party research
collaborators may not be able to obtain or maintain full ownership of inventions that are derived from the research or associated rights, which may limit
their ability to provide us with a license to all relevant intellectual property on terms and conditions that are acceptable to us. Even if our collaborative
research efforts yield promising results or new technological advances, they may not ultimately result in our being able to protect, develop or exploit the
resulting intellectual property.
We have transitioned the miniCEP290, miniABCA4 and miniUSH2A research programs from UMMS to us. Those programs were previously
collaborative sponsored research programs overseen by researchers at UMMS, and we now plan to continue those research programs internally. As part of
this transition, we need to obtain or breed new animals for the miniABCA4 program and the miniUSH2A program, which has led to delays in our timelines
for receipt of data from both programs. We may not be successful in pursuing these research programs internally.
We may seek a collaborator for the further development and potential commercialization of Zimura in one or more territories outside the United States.
If any of the sustained release delivery technologies that we are evaluating for Zimura are promising, we expect we may pursue a collaboration with the
technology provider for further development. We also plan to seek a collaborator for the further development of IC-100 and/or IC-200. If we are not
able to establish collaborations to advance these or any of our other development programs, we may have to alter our development and
commercialization plans.
The development and potential commercialization of our product candidates is likely to require substantial additional cash to fund expenses and the
hiring of additional qualified personnel. In addition, the development or commercialization of a product candidate in markets outside of the United States
requires regulatory expertise and commercial capabilities that are specific to the local market. A number of countries require sponsors to perform a clinical
trial in the local jurisdiction or with patients similar to the demographics of the local population as a condition to approving the drug. For some of our
product candidates, we may seek to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of
those product candidates. In particular, we may seek a collaborator for the further development and potential commercialization of Zimura in one or more
territories outside the United States. We also plan to seek a collaborator for the further development and potential commercialization of IC-100 and IC-200.
We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among
other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed
collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials and other data we have generated for the
product candidate, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject
product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, any patent or other forms of exclusivity
for such product candidate and the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can
exist if there is a challenge to such ownership without regard to the merits of the challenge, the ability to obtain governmental approval for the
collaboration, if necessary, and industry and market conditions generally. For a potential collaborator for a sustained release delivery technology for
Zimura, those factors may include an assessment of the technical feasibility of the technology using the data we and the potential collaborator have
generated, which may be preliminary and limited. The collaborator may also consider alternative product candidates or technologies for similar indications
that may be available to collaborate on and whether such collaboration could be more attractive than the one with us for our product candidate. For our
gene therapy programs including IC-100 and IC-200, we are party to in-license agreements that limit who we can collaborate with or may require the
approval of our licensor for us to enter into a collaboration, and any future license agreements that we may enter into may have similar restrictions.
Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of business combinations
among pharmaceutical and biotechnology companies over the past decade that have resulted in a reduced number of potential future collaborators and this
trend is likely to continue.
If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the
development of a product candidate, reduce or delay its development program or one or more of our other
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development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and
undertake development or commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities
on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to
enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not
be able to further develop those product candidates or bring them to market and generate product revenue in line with our expectations. For Zimura, if we
choose to and are unable to find a collaborator for potential commercialization outside the United States, we likely will need to raise additional capital, hire
additional personnel and undertake the effort ourselves, any of which may be unsuccessful. In addition, although we currently intend to commercialize
Zimura in the United States ourselves, if approved, as part of the process for finding a collaborator for potential commercialization in one or more
territories outside the United States, we may choose to grant a potential collaborator co-commercialization rights in the United States.
If we enter into collaborations with third parties for the development or commercialization of our product candidates, any such collaborations will
carry numerous risks. If any of our collaborations are not successful, we may not be able to capitalize on the market potential of these product
candidates.
We may utilize a variety of types of collaboration, distribution and other marketing arrangements with third parties to develop or commercialize our
product candidates, either in the United States, or in markets outside the United States. We also may seek third-party collaborators for development and
commercialization of other product candidates we may develop. Our likely collaborators for any sales, marketing, distribution, development, licensing or
broader collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and
biotechnology companies. If we enter into any arrangements with third parties, we would likely have limited control over the amount and timing of
resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these
arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements.
Collaborations involving our product candidates could pose numerous risks to us, including the following:
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collaborators, including marketing and distribution collaborators, have significant discretion in determining the efforts and resources that they
will apply to these collaborations and may not perform their obligations as expected;
collaborators may de-emphasize or not pursue development and commercialization of our product candidates or may elect not to continue or
renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus, changes in
product candidate priorities or available funding or changes in priorities as a result of a merger, acquisition or other corporate restructuring or
transaction;
collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product
candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or
product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be
commercialized under terms that are more economically attractive than ours;
collaborators may make pricing, reimbursement and commercial decisions that adversely impact or reduce our flexibility to employ pricing,
reimbursement and commercial strategies in other geographies, including the United States;
• we could grant exclusive rights to our collaborators, which would prevent us from collaborating with others;
• we may be obligated to supply the collaborator with drug substance or drug product in an amount sufficient for its needs, or may be dependent
on the supply of certain materials or products by the collaborator;
•
disagreements or disputes with collaborators, including disagreements or disputes over proprietary rights, contract interpretation or the
preferred course of development or commercialization, might cause delays or termination of the research, development or commercialization
of products or product candidates, might lead to additional
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responsibilities for us with respect to product candidates or might result in litigation or arbitration, any of which would divert management
attention and resources, be time-consuming and expensive, and be uncertain in outcome;
collaborators may not properly maintain or defend our intellectual property rights, may infringe the intellectual property rights of third parties,
may misappropriate our trade secrets or may use our proprietary information in such a way as to invite litigation that could jeopardize or
invalidate our intellectual property or proprietary information or expose us to litigation and potential liability;
laws or practices in certain foreign jurisdictions may require that as a condition of working with a collaborator in such jurisdiction, we agree
to certain foreign ownership restrictions, use certain local services or providers, share or license certain of our proprietary information or
technology or agree to other conditions that are not attractive to us; and
collaborations may be terminated at the convenience of the collaborator, our breach of the terms of the collaboration or other reasons and, if
terminated, we may need to raise additional capital to pursue further development or commercialization of the applicable product candidates.
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If a collaborator of ours were to be involved in a business combination or other transaction, the foregoing risks would be heightened, and the business
combination or transaction may divert attention or resources or create competing priorities. The collaborator may delay or terminate our product
development or commercialization program. If one of our collaborators terminates its agreement with us, we could find it more difficult to attract new
collaborators and the perception of our company could be adversely affected.
Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all.
We depend on licenses and sublicenses for development and commercialization rights to Zimura, IC-100, IC-200 and our miniCEP290 program. These
license arrangements, as well as the Inception 4 Merger Agreement, impose diligence obligations on us. We depend on research licenses from UMMS
for our miniABCA4 and miniUSH2A programs. We may enter into similar arrangements for future product candidates or technologies. Termination of
licenses or the failure by us or our licensees, including our potential future commercialization or collaboration partners, to comply with obligations
under these or other agreements could materially harm our business and prevent us from developing or commercializing our products and product
candidates.
We are party to a license agreement with Archemix on which we depend for rights to Zimura. We are party to two different license agreements, each
with UFRF and Penn, on which we depend for rights to IC-100 and IC-200. We are also party to a license agreement with UMMS for our miniCEP290
program. These agreements generally impose diligence, development and commercialization timelines, milestone payment, royalty, insurance and other
obligations on us. Generally, the diligence obligations contained in these agreements require us to use commercially reasonable efforts to develop, seek
regulatory approval for and commercialize the applicable product candidate in the United States and certain territories outside of the United States,
including the European Union, Japan and such other markets where it would be commercially reasonable to do so. For IC-100, IC-200 and our
miniCEP290 program, we are party to agreements with academic institutions, and under those agreements, we must meet certain milestones by certain
timelines and if we fail to do so, we may need to expend significant amounts of money to extend those timelines or otherwise be in breach of those
agreements. For example, for IC-100, those milestones include a development milestone, which we did not meet at its original deadline. We were able to
successfully obtain an extension to that milestone and all subsequent milestones in the RHO-adRP License Agreement. If we are unable to meet the
extended deadline or any other diligence milestone timelines in our agreements with our academic licensors, or obtain extensions to those deadlines, the
applicable licensor would have the right to terminate the license agreement on which we depend for rights to IC-100, IC-200 or our miniCEP290 program
and we could lose our rights to develop and market IC-100, IC-200 or any product candidates from our miniCEP290 program, or to have a potential
collaborator or licensee do so.
Under the license agreements for our product candidates, we would not be able to avoid our payment obligations even if we believed a licensed patent
right was invalid or unenforceable because the license agreements provide that our licenses to all licensed patent rights would terminate if we challenge the
validity or enforceability of any licensed patent right. The Inception 4 Merger Agreement, pursuant to which we acquired IC-500, also imposes specified
diligence and milestone payment obligations on us. We may enter into acquisition or licensing agreements in the future that could impose similar
obligations on us.
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We are also party to research licenses with UMMS for rights to continue with the research and development of our miniABCA4 and miniUSH2A
programs. The term of these research licenses is the same as the term for us to exercise our rights under option agreements pursuant to which UMMS
granted us option rights to in-license certain patent applications covering these programs. If we fail to exercise our option rights or fail to agree to terms
with UMMS for a license for further development and commercialization of the applicable program, we may lose our rights to continue with conducting
research of that program.
If we fail to comply with our obligations under current or future acquisition and licensing agreements, or otherwise breach an acquisition or licensing
agreement as a result of our own actions or inaction or the actions or inactions of our commercialization or collaboration partners, our counterparties may
have the right to terminate these agreements, in which event we might not have the rights or the financial resources to develop, manufacture or market any
product that is covered by these agreements. Our counterparties also may have the right to convert an exclusive license to non-exclusive in the territory in
which we fail to satisfy our diligence obligations, which could materially adversely affect the value of the product candidate being developed under any
such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate
new or restated agreements with less favorable terms, seek alternative sources of financing or cause us to lose our rights under these agreements, including
our rights to Zimura, IC-100, IC-200, our miniCEP290 program, and other important intellectual property or technology. Any of the foregoing could
prevent us from commercializing our product candidates, which could have a material adverse effect on our operating results and overall financial
condition. In the case of our limited diligence obligation under the Inception 4 Merger Agreement, a potential breach of our obligation to use commercially
reasonable efforts to develop an HtrA1 inhibitor could lead to a lawsuit with the former equityholders of Inception 4 and result in potential liability to us of
up to $5.0 million.
In addition to the above risks, certain of our intellectual property rights are sublicenses under intellectual property owned by third parties, in some
cases through multiple tiers. The actions of our licensors may therefore affect our rights to use our sublicensed intellectual property, even if we are in
compliance with all of the obligations under our license agreements. Should our licensors or any of their upstream licensors fail to comply with their
obligations under the agreements pursuant to which they obtain the rights that are sublicensed to us, or should such agreements be terminated or amended,
our ability to develop and commercialize the relevant product candidates may be materially harmed. While the applicable agreements may contain
contractual provisions that would in many instances protect our rights as a sublicensee in these circumstances, these provisions may not be enforceable and
may not protect our rights in all instances. Further, we do not have the right to control the prosecution, maintenance and enforcement of all of our licensed
and sublicensed intellectual property, and even when we do have such rights, we may require the cooperation of our licensors and their upstream licensors,
which may not be forthcoming. Our business could be materially adversely affected if we are unable to prosecute, maintain and enforce our licensed and
sublicensed intellectual property effectively.
Moreover, the license agreements for IC-100, IC-200 and our miniCEP290 program and the research licenses for our miniABCA4 and miniUSH2A
programs reserve for the licensing academic institutions the right to continue to practice for research and educational purposes, the inventions covered by
the intellectual property rights that we have in-licensed. These licensing institutions or their collaborators may generate scientific, preclinical or clinical
data with respect to our product candidates, separate from our research and development efforts, that is inconsistent with other data for such product
candidates, including additional preclinical and clinical data that we develop. Investigators at these institutions may publish, present, or otherwise publicly
disclose this data, which may have an adverse impact on the prospects of the development of our product candidates and may harm our business. In
addition, these institutions may use these data to support new patent applications which could result in the issuance of patents that may limit our freedom to
operate without our obtaining additional licenses to these newly developed inventions.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain or do not maintain patent protection for our technology and products, or if the scope of the patent protection is
not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to
successfully commercialize our technology and products may be adversely affected.
We currently rely on and expect to continue to rely on patent rights to protect our competitive position. Once our patents expire, we may not be able
to exclude competitors from commercializing products similar or identical to ours. The U.S. patent rights covering Zimura as a composition of matter are
expected to expire in 2025. The U.S. patent rights covering methods of treating certain complement protein mediated disorders with Zimura are expected to
expire in 2026. The European patent rights covering the composition of matter of Zimura and methods of treating certain complement protein mediated
disorders with Zimura are expected to expire in 2025. We expect the clinical development of, and if clinical development is successful, the
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process for filing and obtaining marketing approval for, Zimura to continue for at least an additional year, if not more. The patents covering Zimura may
expire before the date by which we or a potential commercial partner would be able to commercialize Zimura in the United States or Europe if we seek and
obtain marketing approval. Even if we are able to obtain marketing approval for and commercially launch Zimura prior to the expiration of these patents,
the remaining term of those patents may be shorter than we anticipate. If we are successful in developing a sustained release delivery technology for
Zimura, we may be able to obtain patent protection for Zimura with the sustained release delivery technology beyond the current patent life for Zimura;
however, obtaining the additional patent protection from these efforts or other efforts to extend the patent life of Zimura is not guaranteed. Although the
patent rights under existing patent applications for IC-500, IC-100, IC-200 and our miniCEP290 program are not expected to expire until 2037 or after, we
face the same risk with those product candidates and programs and any future product candidates that we may develop.
The recently allowed claims from the USPTO relating to a method of using Zimura to treat GA will issue as a method-of-treatment patent. Certain of
our licensed patent rights for Zimura and IC-100 are method-of-treatment patents and patent applications. Our licensed patent rights for IC-200 are method-
of-treatment patent applications. Method-of-treatment patents are more difficult to enforce than composition-of-matter patents because of the risk of off-
label sale or use of a drug for the patented method. The FDA does not prohibit physicians from prescribing an approved product for uses that are not
described in the product’s labeling. Although off-label use of a product may infringe our method-of-treatment patents, the practice is common across
medical specialties, particularly in the United States, and such infringement is difficult to detect, prevent or prosecute. Off-label sales of other products
having the same drug substance as our product candidates would limit our ability to generate revenue from the sale of such product candidates, if approved
for commercial sale. In addition, patent laws in Europe and some other jurisdictions generally make the issuance and enforcement of patents that cover
methods of treatment of the human body difficult in those jurisdictions. Further, once the composition-of-matter patents relating to Zimura or IC-100 in a
particular jurisdiction, if any, expire, competitors will be able to make, offer and sell products containing the same drug substance as Zimura or IC-100 in
that jurisdiction so long as these competitors do not infringe any of our other patents covering Zimura’s or IC-100's composition of matter or method of use
or manufacture, do not violate the terms of any marketing exclusivity that may be granted to us by regulatory authorities and they obtain any necessary
marketing approvals from applicable regulatory authorities. In such circumstances, we also may not be able to detect, prevent or prosecute off-label use of
such competitors’ products containing the same drug substance as Zimura or IC-100, even if such use infringes any of our method-of-treatment patents.
Additionally, we do not currently have any composition-of-matter patent applications or patents covering IC-200. The method-of-treatment patent
applications that Penn filed and which we in-licensed may not issue as patents. Even if they are issued as patents, any of the claims covering IC-200 may be
declared unpatentable or invalid, or the patents may be declared unenforceable. An inability to secure patent coverage for IC-200 may diminish the value of
IC-200 and our competitive position.
Depending on potential delays in the regulatory review process for any of our product candidates, we may be able to obtain patent term extension for
one of our patents in the United States under the Hatch-Waxman Act, which permits a patent extension term of up to five years as partial compensation for
the portion of the patent term effectively lost during product development and the FDA regulatory review process occurring after the issuance of a patent,
but we can provide no assurances that such an extension term will be obtained. Similar to the patent term extension available in the United States, the
regulatory framework in the European Union and certain other foreign jurisdictions provides the opportunity to extend the term of a patent that covers an
approved drug in certain circumstances. Notwithstanding the availability of patent term extension provisions, we may not be granted patent term extensions
because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy
applicable requirements, such as using diligent efforts to develop a drug candidate. Moreover, the applicable time period or the scope of patent protection
afforded could be less than we request. If we are unable to obtain patent term extension or the term or scope of any such extension is less than we request,
any period during which we have the right to exclusively market our product would be shorter than we would otherwise expect, and our competitors may
commercialize competing products following our patent expiration, and our revenue could be reduced, possibly materially.
The Hatch-Waxman Act also permits the manufacture, use, offer for sale, sale or importation of a patented invention other than a new animal drug or
veterinary biological product, if the manufacture, use, offer for sale, sale or importation is solely for uses that are reasonably related to development of
information that could be submitted to the FDA. For this reason, our competitors might be able under certain circumstances to perform activities within the
scope of the U.S. patents that we own or in-licensed without infringing such patents. This might enable our competitors to develop during the lifetime of
these patents drugs that compete with our product candidates.
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Our issued patents may not be sufficient to provide us with a competitive advantage. For example, competitors may be able to circumvent our owned
or licensed patents by developing similar or alternative technologies or products in a non-infringing manner. Even if our owned or licensed patent
applications issue as patents, they may not issue with a scope broad enough to provide us with any meaningful protection, prevent competitors from
competing with us or otherwise provide us with any competitive advantage.
The issuance of a patent is not conclusive as to its inventorship, ownership, scope, term, validity or enforceability, and our owned and licensed patents
may be challenged in the courts or patent offices in the United States and abroad. For example, if we receive marketing approval for our product
candidates, other pharmaceutical companies may seek approval of generic or biosimilar versions of our products with the FDA or regulatory authorities in
other jurisdictions. We may then be required to initiate proceedings against such companies in order to enforce our intellectual property rights. The risk of
being involved in such proceedings is likely to increase if our products are commercially successful. In any such proceedings, the inventorship, ownership,
scope, term, validity and enforceability of our patents may be challenged. These and other challenges may result in loss of exclusivity or freedom to operate
or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to prevent others from using or
commercializing similar or identical technology and products or from launching generic or biosimilar versions of our products, or could limit the duration
of the patent protection of our technology and products. The launch of a generic version of one of our products in particular would be likely to result in an
immediate and substantial reduction in the demand for our product, which could have a material adverse effect on our business. Given the amount of time
required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly
after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing
products similar or identical to ours.
The patent prosecution process is expensive and time-consuming, is highly uncertain and involves complex legal and factual questions. Patent reform
legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our
issued patents.
Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our
proprietary technology and products. We seek to protect our proprietary position by filing in the United States and in certain foreign jurisdictions patent
applications related to our novel technologies and product candidates that are important to our business.
The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent
applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify or protect patentable aspects of our research and
development output before it is too late to obtain patent protection. In addition, we may not pursue or obtain patent protection in all major markets.
Moreover, in some circumstances, we do not have the right to control the preparation, filing or prosecution of patent applications, or to maintain the
patents, covering technology that we license from third parties or covering technology that a collaboration or commercialization partner may develop, the
eventual commercialization of which could potentially entitle us to royalty payments. In some circumstances, our licensors may have the right to enforce
the licensed patents without our involvement or consent, or to decide not to enforce or to allow us to enforce the licensed patents. Therefore, these patents
and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If any such licensors fail to maintain
such patents, or lose rights to those patents, the rights that we have licensed may be reduced or eliminated and our ability to develop and commercialize any
of our products that are the subject of such licensed rights could be adversely affected.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and
has in recent years been the subject of much litigation. In addition, the laws of foreign jurisdictions may not protect our rights to the same extent as the laws
of the United States. For example, patent laws in Europe and some other jurisdictions restrict the patentability of methods of treatment of the human body
more than United States law does. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in
the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain
that we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our
licensors were the first to file for patent protection of such inventions. Moreover, the U.S. Patent and Trademark Office, or USPTO, might require that the
term of a patent issuing from a pending patent application be disclaimed and limited to the term of another patent that is commonly owned or names a
common inventor. As a result, the issuance, scope, term, validity, enforceability and commercial value of our patent rights are highly uncertain.
Our pending and future patent applications, and any collaboration or commercialization partner’s pending and future patent applications, may not
result in patents being issued which protect our technology or products, in whole or in part, or
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which effectively prevent others from commercializing competitive technologies and products. In particular, during prosecution of any patent application,
the issuance of any patents based on the application may depend upon our or their ability to generate additional preclinical or clinical data that support the
patentability of our proposed claims. We or any collaboration or commercialization partner may not be able to generate sufficient additional data on a
timely basis, or at all. In addition, the issuance of any patents will depend on the existence of any prior art that comes to the patent examiner's attention
during prosecution, sometimes through the actions of third parties, and whether our claimed invention meets the statutory criteria for being granted a patent
in light of the prior art. Moreover, changes in either the patent laws or interpretation of the patent laws in the United States or other countries may diminish
the value of our or a collaboration or commercialization partner’s patents or narrow the scope of our or their patent protection.
Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or
defense of our issued patents. The Leahy-Smith America Invents Act, or the Leahy-Smith Act, revised United States patent law in part by changing the
standard for patent approval from a “first to invent” standard, which had existed before March 2013, to a “first to file” standard and developing a post-grant
review system. For example, if we are the first to invent a new product or its use, but another party is the first to file a patent application on this invention,
under the new law the other party may be entitled to the patent rights on the invention.
Moreover, we may be subject to a third-party preissuance submission of prior art to the USPTO, or become involved in opposition, derivation,
reexamination, inter partes review, post-grant review, interference proceedings or other patent office proceedings or litigation, in the United States or
elsewhere, challenging our patent rights or the patent rights of others. The Leahy-Smith Act expanded the ability of third parties to challenge the patents
held by patentees through administrative reviews at the USPTO, which may facilitate others to challenge our patents. Based on available information, we
believe that inter partes review proceedings, brought by financial investors who may be selling short the stock of the patent holder, are becoming more
prevalent. An adverse determination in any such submission, proceeding or 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 develop or commercialize current or future product candidates.
We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and
unsuccessful.
Competitors may infringe or otherwise violate our patents, trademarks, copyrights or other intellectual property. To counter infringement or other
violations, we may be required to file claims, which can be expensive and time consuming. For some of our licensed patent rights, we may need the
cooperation of our licensors to file such claims. Any such claims could provoke these parties to assert counterclaims against us, including claims alleging
that we infringe their patents or other intellectual property rights. In addition, in a patent infringement proceeding, a court may decide that one or more of
the patents we assert is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to prevent the other party from using
the technology at issue on the grounds that our patents do not cover the technology. Similarly, if we assert trademark infringement claims, a court may
determine that the marks we have asserted are invalid or unenforceable or that the party against whom we have asserted trademark infringement has
superior rights to the marks in question. In such a case, we could ultimately be forced to cease use of such marks. In any intellectual property litigation,
even if we are successful, any award of monetary damages or other remedy we receive may not be commercially valuable and we may not be able to obtain
injunctive relief. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that
some of our confidential information could be compromised by disclosure during this type of litigation.
Third parties may initiate legal proceedings or take other actions alleging that we are infringing or otherwise violating their intellectual property rights,
the outcome of which would be uncertain and could have a material adverse effect on the success of our business.
Our commercial success depends upon our ability and the ability of our collaborators, including our contract manufacturers and any commercial
partners, to develop, manufacture, market and sell our product candidates and products and use our proprietary technologies without infringing or otherwise
violating the intellectual property and other proprietary rights of third parties. New patent applications in the field of biotechnology and pharmaceuticals are
being filed at a rapid pace.
There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. We or any collaborators may become party
to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology,
including interference, derivation, re-examination, post-grant
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review, inter partes review, opposition, cancellation or similar proceedings before the USPTO or its foreign counterparts. The risks of being involved in
such litigation and proceedings may increase as our product candidates near commercialization.
Third parties may assert infringement or other claims against us or our collaborators based on existing or future intellectual property rights. We or
they may not be aware of all such intellectual property rights potentially relating to our product candidates and their manufacture, use or sale. In addition,
contract manufacturers may inadvertently incorporate intellectual property belonging to third parties into our products or the manufacturing processes for
these products without our knowledge. There is a lag between the filing of a patent application, which generally establishes the priority date of a patent
claim, and the publication of such patent application. During the period between filing of a patent application and publication of the application, we would
not otherwise have a means of discovering the existence or extent of the claimed inventions contained in a filed but unpublished patent application. Patent
applications are often drafted broadly, and the scope of patent claims that may ultimately issue may not be known until several years after a patent
application is filed and published. We may make development or pipeline decisions based on our belief that our product candidates can be distinguished
from patent claims contained in published patent applications or issued patents, that patent claims contained in published patent applications are unlikely to
issue as drafted, or that claims contained in issued patents are invalid. These positions regarding third-party intellectual property may not ultimately be
successful in litigation. Thus, we do not know with certainty that our product candidates, or our intended manufacture or commercialization thereof, does
not and will not infringe or otherwise violate any third party’s intellectual property.
If we are or any of our collaborators is found to infringe or otherwise violate a third party’s intellectual property rights, we or they could be required
to obtain a license from such third party to continue developing, manufacturing and marketing our product candidates or products or to continue using a
trademark. However, we or our collaborators may not be able to obtain any required license on commercially reasonable terms or at all. Even if we or they
were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us or our collaborators
and could require us or them to make substantial licensing and royalty payments. We or our collaborators could be forced, including by court order, to cease
using or commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and
attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. A finding of infringement could prevent us or our
collaborators from making or commercializing our product candidates or force us or them to cease some of our business operations, which could materially
harm our business. Claims that we or our collaborators have misappropriated the confidential information or trade secrets of third parties could expose us
or them to similar liabilities and have a similar negative impact on our business.
We may be subject to claims by third parties asserting that we or our employees or contractors have misappropriated their intellectual property, or
claiming ownership of what we regard as our own intellectual property.
Many of our employees and contractors were previously employed at universities or other biotechnology or pharmaceutical companies, including our
competitors or potential competitors. Although we try to ensure that our employees and contractors do not use the proprietary information or know-how of
others in their work for us, we may be subject to claims that we or these employees or contractors have used or disclosed intellectual property, including
trade secrets or other proprietary information, of such employee’s or contractor’s former employer. Litigation may be necessary to defend against these
claims.
In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual
property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in
fact conceives or develops intellectual property that we regard as our own. Moreover, because we acquired some of the rights to our product candidates
from third parties, we must rely upon these third parties' practices, and those of their predecessors, with regard to the assignment of intellectual property
therein, including the intellectual property rights protecting IC-500 and the other HtrA1 inhibitors we acquired in the Inception 4 acquisition transaction.
Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend
claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or
personnel.
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Intellectual property litigation could cause us to spend substantial resources and could distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses
and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the
results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it
could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses
and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial
or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or
proceedings more effectively than we can because of their greater financial resources. 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.
Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements
imposed by governmental patent offices, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and patent offices in foreign countries in several stages over the
lifetime of the patent. The USPTO and patent offices in foreign countries require compliance with a number of procedural, documentary, fee payment and
other requirements during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means
in accordance with the applicable rules, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application,
resulting in partial or complete loss of a patent or patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse
of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and
failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market sooner than we expect, which
would have a material adverse effect on our business.
In addition, we may decide not to pursue patent prosecution in certain markets or jurisdictions. For example, we may decide that the costs of
obtaining and maintaining patent protection in a certain jurisdiction may outweigh the commercial benefits of patent protection. If so, our competitors may
enter into and commercialize identical or similar products in that jurisdiction and if we choose to commercialize our products in that jurisdiction, we may
not be able to exclude our competitors in the same way as if we had chosen to pursue patent prosecution in that jurisdiction.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents for some of our technology and products, we also rely upon trade secrets, including unpatented know-how, technology
and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and
confidentiality agreements with parties who have access to them, such as our outside scientific collaborators, contract manufacturers, potential business
development counterparties, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our
employees and consultants. We cannot guarantee that we have executed such agreements with each party that may have or have had access to our trade
secrets. Moreover, because we acquired IC-500 and our other HtrA1 inhibitors through the acquisition of Inception 4, we are relying upon Inception 4's,
and its prior owner's, practices with regard to the protection of trade secrets and intellectual property rights for the period prior to our acquisition of
Inception 4. Any party with whom we or they have executed a non-disclosure and confidentiality agreement may breach that agreement and disclose our
proprietary information, including our trade secrets, and we may not become aware of such breach or may not be able to obtain adequate remedies. As we
work on transitioning from a development-stage company to a company capable of commercializing a pharmaceutical product, we are hiring many new
employees and engaging additional consultants and service providers, which increases the risk of disclosure or misuse of our proprietary information. Our
proprietary information may also be obtained by third parties by other means, such as breaches of our physical or computer security systems.
Detecting the disclosure or misappropriation of a trade secret and enforcing a claim that a party illegally disclosed or misappropriated a trade secret is
difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or
unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no
right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us and our competitive position
would be harmed.
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Risks Related to Information Technology and Data Protection
We rely significantly upon our information technology systems and any failure, inadequacy, interruption or security lapse of those systems could harm
our ability to operate our business effectively. Information technology risks have become more significant over time, including as a result of widespread
remote working during the COVID-19 pandemic.
In the ordinary course of business, we collect, process and maintain personal and other sensitive data on our information technology networks. These
data include our intellectual property and other proprietary or confidential information relating to our business as well as proprietary or confidential
information of third parties including business collaborators. These data also include personal information relating to our clinical trial participants,
employees and contractors, clinical investigators and other study staff and healthcare professionals. The secure maintenance of this sensitive information is
critical to our business and reputation.
We have implemented a number of measures to protect our information technology systems. These measures include, among others, creation of a
cyber-security governance team and an incident response plan and other standard operating procedures for responding to any cyber-security incidents,
mandatory routine cyber-security training, including social engineering training, for our employees and consultants with access to our information
technology systems, and engagement of a third-party vendor to regularly assess our informational technology systems and potential vulnerabilities.
Despite the implementation of security measures, our information technology systems are vulnerable to compromise, damage, loss or exfiltration
from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. In particular,
companies and other entities and individuals have been increasingly subject to a wide variety of cyber and ransomware attacks, phishing scams and other
attempts to gain unauthorized access to systems and information, including through social engineering. The number and complexity of these threats
continue to increase over time. These threats can come from a variety of sources, ranging in sophistication from individual hackers to state-sponsored
attacks. Cyber threats may be broadly targeted, or they may be custom-crafted against our information systems. In particular, there have been increasing
number of cyber threats and attempts by foreign hackers targeted towards U.S. pharmaceutical and biotechnology companies and vendors they work with.
As a result of the COVID-19 pandemic, we switched to remote working since March 2020 and as a result, have increasingly relied upon
teleconferencing and cloud-based means of communication and data storage. Many other companies have done the same. There have been numerous
publicized attempts of bad actors attempting to intercept proprietary communications. We may be similarly susceptible to those kinds of threats.
Cyber-attacks have become more prevalent and much harder to detect and defend against. Our networks and storage applications may be subject to
unauthorized access by hackers or breached due to human error, malfeasance or other system disruptions. We may not anticipate or immediately detect such
incidents and the damage caused by such incidents. System failures, data breaches and any unauthorized access, use or disclosure of our information or data
could compromise our intellectual property and expose sensitive business information; lead to unauthorized exposure of personal information of our
clinical trial participants, our employees or contractors, our clinical investigators or other study staff, healthcare professionals or others we work with;
and/or result in disruptions to our research and development activities and business operations, including potential product development, regulatory
approval and commercialization delays.
In addition, cyber-attacks and the measures we implement to prevent, detect, and respond to them could cause us to incur significant remediation
costs, including costs to recover or reproduce any compromised data, expose us to contractual damages and/or regulatory and other liability, require us to
make certain breach notifications, and divert the attention of our management and key information technology resources. Any loss of preclinical data or
clinical trial data could result in delays to our product development, marketing approval and commercialization efforts. We may not have adequate
insurance coverage to provide compensation for any losses associated with such events and cybersecurity insurance is becoming more expensive. Any
breach of security could harm our reputation and deter patients, clinical investigators, or other healthcare professionals and business collaborators from
participating in our clinical trials or otherwise working with us.
We also rely significantly upon the information technology systems of our third-party service providers and any failure, inadequacy, interruption or
security lapse of those systems could harm our ability to operate our business effectively. We have limited control and oversight over the information
security systems and practices of third parties.
In the ordinary course of business, we rely on third parties, including clinical trial sites, CROs, CDMOs and other service providers, to collect,
process and maintain personal and other sensitive data on their respective networks for our research and
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development activities and other business operations. These data include our intellectual property and other proprietary or confidential information relating
to our business, as well as personal information relating to our clinical trial participants, employees and contractors, and clinical investigators, study staff
and other healthcare professionals. The maintenance of our data by third parties does not absolve us of our responsibility for the security and integrity of
this data.
We have limited control and oversight over the information security systems and practices of third parties. Those systems and practices vary widely in
sophistication and robustness. We have limited personnel and resources to oversee the information security systems of third parties with whom we work.
Like our information security systems, those of our third-party service providers are vulnerable to compromise, damage, loss or exfiltration from
cyber-attacks, computer viruses, unauthorized access and other causes. Our third-party service providers may not anticipate or immediately detect such
incidents and the damage caused by such incidents or notify us in a timely or complete manner. System failures, data breaches and any unauthorized access,
use or disclosure of our information or data maintained by our third-party service providers could lead to similar consequences for us as similar events
involving our information technology systems, including compromise of our intellectual property or other sensitive personal or business information,
disruptions and delays to our research and development activities and other operations, contractual and regulatory liability, data breach notifications,
expenditure of significant costs and resources for remediation and harm to our reputation. Over the past few years, there has been an increasing number of
and severity of cyber-attacks, especially ransomware attacks, against the information security systems of companies across the supply chain and other
critical infrastructure service providers.
In September 2020, one of our vendors for the GATHER2 trial suffered a ransomware attack on several of its servers. While this vendor investigated
and worked to mitigate the effects of the incident, we deployed a backup process for the work this vendor was performing for us. Although we do not
believe this incident had a material impact on the GATHER2 trial or otherwise on our business or operations, similar kinds of incidents may occur in the
future with this or our other vendors.
Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and
process data in line with our expectations, and the failure to comply with such requirements could have a material adverse effect on our business,
financial condition or results of operations.
The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of personal information is rapidly evolving
worldwide and is likely to remain uncertain for the foreseeable future. Globally, virtually every jurisdiction in which we operate has established its own
data security and privacy frameworks with which we must comply, and those frameworks may not be consistent. For example, the collection, use,
disclosure, transfer, or other processing of personal data regarding individuals in the European Union, including personal health data, is subject to the
General Data Protection Regulation, or GDPR, which became effective on May 25, 2018. The GDPR is wide-ranging in scope and imposes numerous
requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of
the individuals to whom the personal data relates, providing information to individuals regarding data processing activities and their rights, conducting data
protection impact assessments before starting certain processing activities, implementing safeguards to protect the security and confidentiality of personal
data, providing notification of data breaches, and taking certain measures when engaging third-party data processors. The GDPR also imposes strict rules
on the transfer of personal data to countries outside the European Union, including the United States, some of which are currently in flux, and permits data
protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues,
whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory
authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. The GDPR also provides certain
discretion to individual European member states, and many of them have enacted local legislation implementing the GDPR that differ from one another.
The GDPR compliance framework is evolving as data protection authorities enforce applicable requirements and as European courts interpret the GDPR.
We are aware that many other countries have enacted or are considering legislation similar to the GDPR.
Similar actions are either in place or under way in the United States. There are a broad variety of data protection laws that are applicable to our
activities, and a wide range of enforcement agencies at both the state and federal levels with the authority to review our privacy and data security practices.
The Federal Trade Commission and state Attorneys General have been increasingly active in reviewing companies' privacy and data security practices in
relation to consumer information. New legislation and regulations are being considered, and in certain cases enacted, at both the state and federal levels.
For example, the California Consumer Privacy Act, which went into effect on January 1, 2020, and its replacement, the California Privacy Rights Act,
which will become effective on January 1, 2023, are creating similar risks and obligations as those created by the GDPR. The New York SHIELD Act,
which became fully effective in March 2020, imposes certain data security and data breach notification requirements on organizations that collect personal
information of New York residents. Many other states are considering similar legislation. A broad range of legislative measures are being introduced at the
federal level. Accordingly,
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failure to comply with federal and state laws (both those currently in effect and future legislation) regarding privacy and security of personal information
could expose us to fines and penalties under such laws. We also may be subject to consumer class action litigation related to alleged noncompliance with
these laws. Even if we are not determined to have violated these laws, responding to government investigations and/or consumer litigation in these areas
typically requires the expenditure of significant resources and has the potential to generate negative publicity, which could harm our reputation and our
business.
Given the breadth and depth of changes in data protection obligations, preparing for and complying with these requirements has required and will
continue to require significant time, resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators,
service providers, contractors or consultants that process or transfer personal data on our behalf. The GDPR and other changes in laws or regulations
associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information from our clinical trials, have
resulted in certain changes to our business practices, such as additional consideration given to the GDPR and other relevant data protection laws in setting
up clinical trial agreements and informed consent forms for our GATHER2 trial, and may require further changes to our business practices. Any non-
compliance by us or our employees, consultants or contractors with the GDPR or other applicable data protection laws could lead to setbacks in the
development or approval of our product candidates, government enforcement actions, private litigation, significant fines and penalties, or reputational harm
and could have a material adverse effect on our business, financial condition or results of operations.
Risks Related to Employee Matters and Managing Our Operations
We are a development-stage company with a limited number of employees to oversee our research and development programs and general and
administrative functions. We are in the process of recruiting new personnel to prepare for the potential commercialization of Zimura and to support
our growth. We may experience difficulties in recruiting necessary personnel and in retaining key employees and consultants.
We are a development-stage company with a total of 94 full-time employees as of January 31, 2022. These employees support key areas of our
business and operations, including commercial planning, clinical development and clinical operations, regulatory affairs, drug safety, data management,
medical affairs, scientific research, process and analytical development, drug substance and drug product manufacturing, quality control, materials and
supply chain management, and quality assurance, as well as all of our general and administrative functions and public company infrastructure.
We remain highly dependent on Glenn P. Sblendorio, our chief executive officer, and Dr. Pravin U. Dugel, our president, as well as the other principal
members of our management, scientific and clinical teams. We do not maintain “key person” insurance for any of our executives or other employees.
Although we have entered into letter agreements with our executive officers, each of them and our non-executive employees may terminate their
employment with us at any time. As a result, key employees whom we expect to retain to assist with the growth of our business may choose not to remain
employees. Additionally, we have only a small number of employees supporting some of the key areas of our business and operations. If any of those
employees were to leave our company or become unavailable due to the COVID-19 pandemic or other reasons, the loss of their services could seriously
disrupt our ability to carry on our operations as planned and seriously harm our ability to successfully implement our business plan.
Furthermore, replacing any of our executive officers and key employees may be difficult and may take an extended period of time because of the
limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain marketing approval of and
commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel
on acceptable terms, if at all, given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. As we conduct
our GATHER2 trial and prepare for the potential filing of an NDA and an MAA for and the potential commercialization of Zimura, and continue the
development of IC-500, we have been and expect we will need to continue hiring additional commercial operations, medical affairs, clinical operations,
quality assurance, manufacturing, analytical, regulatory, pharmacovigilance and other personnel from this limited pool. In 2021 we hired a chief
commercial officer and started hiring commercial and medical affairs personnel, and will need to continue to hire additional commercialization and medical
affairs personnel, including medical science liaisons, or MSLs. Hiring, training and effectively deploying MSLs can be time consuming and costly, and
many other companies are competing with us for the MSLs whom we are looking to hire. If we experience any challenges or delays in the hiring and
integration of necessary personnel due to the COVID-19 pandemic or other reasons, it could impede our ability to finish development of, file for marketing
approval for, and potentially commercialize Zimura in line with our expectations.
In addition to our employees, we rely on consultants and advisors, including scientific, technical and clinical advisors, to assist us in formulating our
research and development, manufacturing, commercialization and lifecycle management strategies. Our consultants and advisors may be employed by
employers other than us and may have commitments under consulting or
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advisory contracts with other entities that may limit their availability to us. Many consultants and advisors, especially those with specialized medical or
clinical knowledge, are high demand and we may not be able to obtain or retain their services for any number of reasons, which could limit our ability to
pursue our strategy.
As a result of the COVID-19 pandemic, our company has been working remotely since March 2020 and we expect to work in a hybrid (partially remote,
partially in office) working model for the foreseeable near future. Our ability to continue to work effectively in a hybrid working model may affect our
operations and the success of our company going forward.
In March 2020, we instituted a company-wide working from home policy, which has largely remained in effect. Other than for our laboratory-based
employees, we expect to work in a hybrid (partially remote, partially in office) working model for the foreseeable near future. We will closely follow the
guidance from federal and state authorities, including the Centers for Disease Control and Prevention, the New York State Department of Health, the New
Jersey Department of Health and the Massachusetts Department of Public Health, with regard to our policies relating to working in our offices. We expect
that changes to the way we work will depend on, among other factors, the local COVID-19 and public safety situation and the degree to which our
employees have received vaccines and if applicable, booster shots. If and when we transition back to working at company sites closer to a full-time basis,
there may be an increased risk to our employees and contractors, including as a result of a subsequent waves of the COVID-19 pandemic. If any of them
contracts COVID-19 as a result of or while conducting services for us, we may be subject to workers compensation or other claims. Because of the
importance of our employees and contractors to the success of our company, their exposure to the COVID-19 pandemic may adversely affect our ability to
carry on our operations.
If we fail to establish and maintain effective internal control over financial reporting, our ability to accurately report our financial results could be
adversely affected.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the company’s annual or interim financial statements would not be prevented or detected on a timely basis. If any
material weakness in our internal control over financial reporting is discovered or occurs in the future, our financial statements may contain material
misstatements and we could be required to restate our financial results. As previously disclosed, in 2015 our management concluded that we experienced a
material weakness in internal controls that required us to restate the relevant financial statements and we took steps that year to address the deficiency and
prevent similar deficiencies in the future. Although we have remediated this deficiency in internal control over financial reporting, we cannot be certain that
the remedial measures that we took in the past or other measures we take in the future will ensure that we maintain adequate controls over our financial
reporting going forward and, accordingly, additional material weaknesses could occur or be identified. The COVID-19 pandemic may also affect the
effectiveness of our internal controls. Any future material weaknesses or combination of deficiencies could materially and adversely affect our ability to
provide timely and accurate financial information and investors’ confidence in our internal controls and our company, which could cause our stock price to
decline.
Risks Related to Regulatory Approval and Marketing of our Product Candidates and Other Legal 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 product candidates. If we are not able to obtain, or if
there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our product candidates, and our ability to generate
revenue would be materially impaired.
Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture,
safety, recordkeeping, labeling, storage, advertising, promotion, sale and distribution and import and export, are subject to comprehensive regulation by the
FDA, the EMA and comparable regulatory agencies in other countries.
In general, the FDA and similar regulatory authorities outside the United States require two adequate and well-controlled clinical trials demonstrating
safety and effectiveness for marketing approval for an ophthalmic pharmaceutical product. Failure to obtain marketing approval for a product candidate
will prevent us from commercializing the product candidate. We have not received approval to market any of our product candidates from regulatory
authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect
to rely upon third-party CROs to assist us in this process. Securing marketing approval requires obtaining positive safety and efficacy data from required
clinical trials, as well as the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each indication to
establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product's
manufacturing processes to, and inspection of manufacturing facilities by, the relevant regulatory authorities. The FDA or other regulatory authorities may
determine that a product candidate
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that we may develop is not effective, is only moderately effective or has undesirable or unintended side effects, toxicities or other characteristics that
preclude our obtaining marketing approval or prevent or limit commercial use.
The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years, if approval is obtained at all,
and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved and information
concerning similar product candidates as our product candidates. Changes in marketing approval policies during the development period, changes in or the
enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or
rejection of an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may
decide that our data are insufficient for approval and require additional nonclinical, clinical or other studies. In addition, varying interpretations of the data
obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we
ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
Marketing approval of novel product candidates, for example aptamers such as Zimura, manufactured using specialized manufacturing processes, can
be more expensive and take longer than for other, more well-known or extensively studied pharmaceutical or biopharmaceutical products, due to regulatory
agencies’ lack of experience with them. We believe that the FDA has only granted marketing approval for one aptamer product to date. This lack of
experience may lengthen the regulatory review process, require us to conduct additional nonclinical studies or clinical trials, increase our development
costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these product candidates or lead to
significant post-approval limitations or restrictions.
Accordingly, if we or our collaborators experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the
commercial prospects for such product candidate may be harmed and our ability to generate revenues would be materially impaired.
Although we have obtained agreement with the FDA on a SPA for GATHER2, a SPA does not guarantee marketing approval of, or any other
particular outcome from, regulatory review.
In July 2021, the FDA agreed to a SPA for GATHER2. Under the SPA procedure, the FDA provides a clinical trial sponsor with an official evaluation
and written guidance on the design of a proposed protocol intended to form the basis for an NDA. A SPA agreement indicates concurrence by the FDA
with the adequacy and acceptability of specific critical elements of the overall protocol design for a clinical trial intended to support a future marketing
application, but it does not indicate FDA concurrence on every protocol detail. A SPA agreement also does not ensure the receipt of marketing approval or
that the approval process will be faster than conventional procedures. A determination regarding marketing approval is addressed during the review of a
submitted NDA and depends on efficacy and safety results and an evaluation of the overall benefits and risks of treatment after review of the data from the
development program in its totality.
Even after the FDA agrees to the design, execution, and analysis proposed in a protocol reviewed under the
SPA process, the FDA may revoke or alter its agreement if a substantial scientific issue essential to determining the safety or effectiveness of the drug has
been identified after the testing has begun. A SPA agreement may also be changed through written agreement between the sponsor and the FDA. A
revocation or alteration in our existing SPA could delay or prevent approval of our planned NDA for Zimura. In addition, any significant change to the
protocol for a clinical trial subject to a SPA would require prior FDA approval, which could delay implementation of such a change and the conduct of the
related clinical trial. The FDA retains significant discretion in interpreting the terms of the SPA agreement and the data and results from any study that is
the subject of the SPA agreement.
Failure to obtain marketing approval in foreign jurisdictions would prevent our product candidates from being marketed in such jurisdictions. The
approval requirements in foreign jurisdictions may differ significantly from those in the United States.
In order to market and sell our product candidates in the European Union and many other jurisdictions, we or our third-party commercialization
partners must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among
countries and can involve additional nonclinical or clinical testing. For example, although we have obtained a SPA from the FDA for the GATHER2 trial,
the EMA or other regulatory authorities may not agree with the overall protocol design for the GATHER2 trial. The time required to obtain approval may
differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks
associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for
reimbursement before the product can be sold in that country. We or our third-party commercialization
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partners may not obtain marketing and/or reimbursement approvals from regulatory authorities outside the United States on a timely basis, if at all.
Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority
outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We and our third-party
commercialization partners may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any
market. If our third-party commercial partners fail to obtain marketing approval in certain jurisdictions, it may diminish the value of our product candidate
to them and cause them to terminate their relationship with us.
In June 2016, the electorate in the United Kingdom, or UK, voted in favor of leaving the European Union, commonly referred to as “Brexit”.
Following protracted negotiations, the UK left the European Union on January 31, 2020 and European Union rules and regulations ceased to apply to the
UK starting on January 1, 2021. The Medicines and Healthcare products Regulatory Agency, or the MHRA, is now the sole decision maker for marketing
authorizations of pharmaceutical products in the UK, except for Northern Ireland. The MHRA will rely on the Human Medicines Regulations 2012 (SI
2012/1916) (as amended), or the HMR, as the basis for regulating medicines. The HMR has incorporated into the domestic law of the UK the body of
European Union law governing medicinal products that pre-existed before the UK’s withdrawal from the European Union. In December 2020, the UK
government and the European Union agreed on a long-term trade agreement to govern economic relations going forward. Since the existing regulatory
framework for pharmaceutical products in the UK is derived from European Union directives and regulations, Brexit could materially impact the future
regulatory regime for pharmaceutical products in the UK. As a result of Brexit, we expect we will need to submit a separate application to the MHRA for
marketing approval in the UK, in addition to the planned MAA for the EMA. We are continuing to analyze how Brexit and the trade agreement will affect
the future regulatory regime for pharmaceutical products in the United Kingdom. Any delay in obtaining, or an inability to obtain, any marketing
approvals, as a result of Brexit or otherwise, would prevent us from commercializing our product candidates in the United Kingdom and/or the European
Union and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, we may be forced to restrict or delay
efforts to seek regulatory approval in the United Kingdom and/or European Union for our product candidates, which could significantly and materially
harm our business.
A fast track designation or grant of priority review status by the FDA may not actually lead to a faster development or regulatory review or approval
process. The FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development
program or for other reasons.
The FDA may designate a product for fast track review if it is intended, whether alone or in combination with one or more other products, for the
treatment of a serious or life-threatening disease or condition, and if the product 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 application 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 fast track
application does not begin until the last section of the application 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 or for other reasons.
In April 2020, the FDA granted fast track designation to Zimura for the treatment of GA secondary to dry AMD. Even though Zimura has received
fast track designation, we must continue to follow the requirements of the program in order to maintain the fast track designation, and even if we maintain
the designation, we may not ultimately experience a faster development process, review or approval compared to conventional FDA procedures. The FDA's
grant of fast track designation to Zimura for the treatment of GA secondary to dry AMD does not imply that the FDA will grant fast track designation to
Zimura for another indication, such as intermediate AMD or STGD1, or that the FDA will grant fast track designation for any of our other product
candidates, if we choose to apply for fast track designation.
A breakthrough therapy designation by the FDA for our product candidates may not lead to a faster development or regulatory review or approval
process, and it does not increase the likelihood that our product candidates would receive marketing approval.
In 2012, Congress enacted the Food and Drug Administration Safety and Innovation Act, or 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 products, 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
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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 help
design the clinical trials in an efficient manner.
Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the
criteria for designation as a breakthrough therapy, the FDA may disagree and instead decide not to make such designation. In any event, the receipt of a
breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered
for approval under conventional FDA procedures and does not ensure ultimate approval by the FDA. In addition, even if one or more of our product
candidates qualify as breakthrough therapies, the FDA may later decide that the products no longer meet the conditions for qualification or that the time
period for FDA review or approval will not be shortened.
We currently do not have orphan drug designations or orphan drug exclusivity for any product candidate. If our competitors are able to obtain orphan
drug exclusivity for products that constitute the same or similar drug and treat the same indications as our product candidates, we may not be able to
have our product candidates approved by the applicable regulatory authority for a significant period of time.
Regulatory authorities in some jurisdictions, including the United States and the European Union, may designate drugs for relatively small patient
populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare
disease or condition, which is generally defined as having a patient population of fewer than 200,000 individuals in the United States, or a patient
population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from
sales in the United States. In the European Union, the EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the
development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not
more than 5 in 10,000 persons in the European Union and that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in
question that has been authorized in the European Community or, if such method exists, that the medicinal product will be of significant benefit to those
affected by that condition.
If we request orphan drug designation for any of our product candidates in one or more indications, there can be no assurances that the FDA or the
European Commission will grant any of our product candidates such designation. Additionally, the designation of any of our product candidates as an
orphan product does not guarantee that any regulatory agency will accelerate regulatory review of, or ultimately approve, that product candidate, nor does it
limit the ability of any regulatory agency to grant orphan drug designation to product candidates of other companies that treat the same indications as our
product candidates prior to our product candidates receiving exclusive marketing approval.
Generally, if a product candidate with an orphan drug designation receives the first marketing approval for the indication for which it has such
designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the European Commission, as the case may be, during
that marketing exclusivity period from approving another marketing application for a product that constitutes the same or similar drug treating the same
indication, except in limited circumstances. If another sponsor receives such approval before we do, regardless of our orphan drug designation, we may be
precluded from receiving marketing approval for our product candidate during the applicable exclusivity period. The applicable period is seven years in the
United States and 10 years in the European Union. The exclusivity period in the United States can be extended by six months if the sponsor submits
pediatric data that fairly respond to a written request from the FDA for such data. In the European Union, the exclusivity period can be extended by two
years following the completion of an agreed pediatric investigation plan. The exclusivity period in the European Union can be reduced to six years if a
product no longer meets the criteria for orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer justified.
Orphan drug exclusivity may be revoked, or a competing sponsor may be allowed on the market, if any regulatory agency determines that the request for
designation was materially defective or if the sponsor having orphan drug exclusivity is unable to assure sufficient quantity of the product to meet the needs
of patients with the rare disease or condition.
Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product candidate from competition
because a competing sponsor's drug could nevertheless be approved for the same condition if certain requirements are met. In the United States, even after
an orphan drug is approved, the FDA may subsequently approve another drug for the same condition if the FDA concludes that the later drug is not the
same drug or is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. In particular, the concept of
what constitutes the “same drug” for purposes of orphan drug exclusivity remains in flux in the context of gene therapies, and the FDA has recently issued
final guidance stating that it would consider two gene therapy products to be different products if they
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express different transgenes or use different vectors. In the European Union, marketing authorization may be granted to a similar medicinal product for the
same orphan indication if:
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the second applicant can establish in its application that its medicinal product, although similar to the orphan medicinal product already
authorized, is safer, more effective or otherwise clinically superior by making a major contribution to patient care;
the holder of the marketing authorization for the original orphan medicinal product consents to a second orphan medicinal product
application; or
the holder of the marketing authorization for the original orphan medicinal product cannot supply sufficient quantities of the orphan medicinal
product.
The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. This may be particularly true in light of a decision from the
Court of Appeals for the 11th Circuit in September 2021 finding that, for the purpose of determining the scope of exclusivity, the term “same disease or
condition” means the designated “rare disease or condition” and could not be interpreted by the FDA to mean the “indication or use.” Thus, the court
concluded, orphan drug exclusivity applies to the entire designated disease or condition rather than the “indication or use.” We do not know if, when, or
how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business.
If the FDA, EMA or other foreign regulatory authorities approve generic versions of any of our product candidates that receive marketing approval, or
such authorities do not grant our products appropriate periods of exclusivity before approving generic versions of those products, the sales of our
products, if approved, could be adversely affected.
Once an NDA is approved, the product covered thereby becomes a “reference listed drug” in the FDA’s Orange Book. Manufacturers may seek
approval of generic versions of reference listed drugs through submission of abbreviated new drug applications, or ANDAs, in the United States. In support
of an ANDA, a generic manufacturer need not conduct clinical trials to assess safety and efficacy. Rather, the applicant generally must show that its product
has the same active ingredient(s), dosage form, strength, route of administration and conditions of use or labelling as the reference listed drug and that the
generic version is bioequivalent to the reference listed drug, meaning it is absorbed in the body at the same rate and to the same extent. Generic products
may be significantly less costly to bring to market than the reference listed drug and companies that produce generic products are generally able to offer
them at lower prices. Thus, following the introduction of a generic drug, a significant percentage of the sales of any branded product or reference listed
drug is typically lost to the generic product.
Generic drug manufacturers may seek to launch generic products following the expiration of any applicable exclusivity period we obtain if our
products are approved, even if we still have patent protection for such products. Competition that our products could face from generic versions of our
products could materially and adversely affect our future revenue, profitability, and cash flows and substantially limit our ability to obtain a return on the
investments we have made in those products.
Any product candidate for which we obtain marketing approval could be subject to post-marketing restrictions or withdrawal from the market and we
or our third-party commercialization partners may be subject to penalties if we or our third-party commercialization partners or our or their
manufacturers fail to comply with regulatory requirements or if we or our third-party commercialization partners or our or their manufacturers
experience unanticipated problems with our products, when and if any of them are approved.
Any product candidate for which we or our commercialization partners obtain marketing approval, along with the manufacturing processes, post-
approval clinical data, labeling, advertising and promotional activities for such product, will be subject to the continued 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, cGMP requirements relating to manufacturing, quality control and quality assurance, tracking of complaints and corresponding
maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of
a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or may be subject to
significant conditions of approval or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the
medicine, including the possible requirement to implement a risk evaluation and mitigation strategy.
The FDA and other agencies, including the Department of Justice, or the DOJ, closely regulate and monitor the pre- and post-approval marketing and
promotion of products to ensure that they are marketed and distributed only for the approved
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indications and in accordance with the provisions of the approved labeling. The FDA and DOJ impose stringent restrictions on manufacturers'
communications regarding preapproval promotion and off-label use and if we engage in inappropriate pre-approval promotion or if we do not market our
products for their approved indications, we may be subject to enforcement action. Over the past few years, there has been increasing enforcement activity
from the FDA targeting preapproval promotion. Violations of the FDCA and other statutes, including the False Claims Act, relating to the promotion and
advertising of prescription drugs may lead to investigations and enforcement actions alleging violations of federal and state health care fraud and abuse
laws, as well as state consumer protection laws.
In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or
failure to comply with regulatory requirements, may yield various results, including:
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restrictions on such products, manufacturers or manufacturing processes;
restrictions on the labeling or marketing of a product;
restrictions on distribution or use of a product;
requirements to conduct post-marketing studies or clinical trials;
• warning letters or untitled letters;
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refusal to approve pending applications or supplements to approved applications that we submit;
recall of products;
damage to relationships with any potential collaborators;
unfavorable press coverage and damage to our reputation;
fines, restitution or disgorgement of profits or revenues;
suspension or withdrawal of marketing approvals;
refusal to permit the import or export of our products;
product seizure;
injunctions or the imposition of civil or criminal penalties; and
litigation.
Non-compliance with European Union requirements regarding safety monitoring or pharmacovigilance, and with any applicable requirements related
to the development of products for the pediatric population, can also result in significant penalties.
Our and our potential commercialization partners’ relationships with healthcare professionals, patients and third-party payors will be subject to
applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us and our commercialization partners to
criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers and third-party payors play a primary role in the recommendation and prescription of any product candidates for which we
obtain marketing approval. Our future arrangements with healthcare providers and third-party payors may expose us and our commercialization partners 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 and our commercialization partners market, sell and distribute any products for which we or they obtain marketing approval. Restrictions
under applicable federal and state healthcare laws and regulations include the following:
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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, or in
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return for, either the referral of an individual for, or the purchase, order or recommendation or arranging of, any good or service, for which
payment may be made under a federal healthcare program such as Medicare and Medicaid;
the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against
individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a
federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an
obligation to pay money to the federal government, with potential liability including mandatory treble damages and significant per-claim
penalties;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a
scheme to defraud any healthcare benefit program or making false statements in connection with the delivery of or payment for benefits,
items or services involving a healthcare benefit program;
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• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also
imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of
individually identifiable health information, and providing notifications of the breach of such information, by covered entities and certain
business partners;
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the federal Physician Payments Sunshine Act requires certain manufacturers of drugs, medical devices and biological products covered by
federal healthcare benefit programs to report payments and other transfers of value to physicians, other healthcare providers and teaching
hospitals; and
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency statutes, may apply to
sales or marketing arrangements and claims involving healthcare items or services reimbursed by governmental and 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 and may require drug manufacturers to report information related to payments and other
transfers of value to physicians and other healthcare providers or marketing expenditures and may require the licensing or listing of pharmaceutical sales
representatives. State and foreign laws, such as the GDPR, also govern the privacy and security of health information in some circumstances, many of
which differ from HIPAA and each other in significant ways, thus complicating compliance efforts.
If our operations are found to be in violation of any of the laws described above or any governmental regulations that apply to us, we may be subject
to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties, damages, fines,
curtailment or restructuring of our operations could adversely affect our financial results. These risks are becoming more important for our operations as
Zimura advances in clinical development and as we prepare for potential commercialization. We are working to develop and implement a corporate
compliance program to ensure that we will market and sell any future products that we successfully develop in compliance with all applicable laws and
regulations, but we cannot guarantee that any such program will protect us from governmental investigations or other actions or lawsuits stemming from a
failure to be in compliance with such laws and regulations. If any such actions are instituted against us and we are not successful in defending ourselves or
asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
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 or our commercialization partners’ operations
are found to be in violation of any of these laws or any other governmental regulations that may apply to us or them, we or they may be subject to
significant civil, criminal and administrative penalties, including damages, fines, imprisonment, exclusion of products from government funded healthcare
programs, such as Medicare and Medicaid, and the curtailment or restructuring of our or their operations. If any of the physicians or other healthcare
providers or entities with whom we are doing business or 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, and as a result, our relationships with
those healthcare providers or third parties may be adversely affected and our business and reputation may suffer.
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Current and future legislation may increase the difficulty and costs for us and any future collaborators to obtain reimbursement for any of our product
candidates that may receive marketing approval and our ability to generate revenue will be materially impaired.
In the United States and foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the
healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our
ability to profitably sell any product candidates for which we obtain marketing approval. We expect that current laws, as well as other healthcare reform
measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any
collaborators, may receive for any approved products. If reimbursement of our products is unavailable or limited in scope, our business could be materially
harmed.
In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education
Affordability Reconciliation Act, or collectively the ACA. Since enactment of the ACA, there have been, and continue to be, numerous legal challenges
and Congressional actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was
signed by President Trump on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most
Americans to carry a minimal level of health insurance, became effective in 2019. Further, on December 14, 2018, a U.S. District Court judge in the
Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because
the mandate was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well. The U.S. Supreme Court reversed
this decision and dismissed the case on standing grounds. Litigation and legislation over the ACA may continue, with unpredictable and uncertain results.
The Trump Administration also took executive actions to undermine or delay implementation of the ACA, including directing federal agencies with
authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would
impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. In
January 2021, however, President Biden issued a new Executive Order which directs federal agencies to reconsider rules and other policies that limit
Americans’ access to health care, and consider actions that will protect and strengthen that access. Under this Order, federal agencies are directed to re-
examine: policies that undermine protections for people with pre-existing conditions, including complications related to COVID-19; demonstrations and
waivers under Medicaid and the ACA that may reduce coverage or undermine the programs, including work requirements; policies that undermine the
Health Insurance Marketplace or other markets for health insurance; policies that make it more difficult to enroll in Medicaid and the ACA; and policies
that reduce affordability of coverage or financial assistance, including for dependents.
Current and future legislative efforts may limit the prices for our products, if and when they are licensed for marketing, which could materially impact
our ability to generate revenues.
The prices of prescription pharmaceuticals have also been the subject of considerable discussion in the United States. There have been several recent
U.S. congressional inquiries, as well as proposed and enacted state and federal legislation designed to, among other things, bring more transparency to
pharmaceutical pricing, review the relationship between pricing and manufacturer patient programs, and reduce the costs of pharmaceuticals under
Medicare and Medicaid. In 2020, President Trump issued several executive orders intended to lower the costs of prescription products and certain
provisions in these orders have been incorporated into regulations. These regulations included an interim final rule implementing a most favored nation
model for prices that would tie Medicare Part B payments for certain physician-administered pharmaceuticals to the lowest price paid in other
economically advanced countries, effective January 1, 2021. That rule, however, was subject to a nationwide preliminary injunction and, on December 29,
2021, CMS issued a final rule to rescind it. With issuance of this rule, CMS stated that it will explore all options to incorporate value into payments for
Medicare Part B pharmaceuticals and improve beneficiaries' access to evidence-based care.
In addition, in October 2020, HHS and the FDA published a final rule allowing states and other entities to develop a Section 804 Importation
Program, or SIP, to import certain prescription drugs from Canada into the United States. The final rule is currently the subject of ongoing litigation, but at
least six states (Vermont, Colorado, Florida, Maine, New Mexico, and New Hampshire) have passed laws allowing for the importation of drugs from
Canada with the intent of developing SIPs for review and approval by the FDA. Further, on November 20, 2020, HHS finalized a regulation removing safe
harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Medicare Part D, either directly or through pharmacy
benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration from January
1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as
well as a new safe harbor for certain fixed fee arrangements
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between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed by the Biden administration until January 1,
2023.
On July 9, 2021, President Biden signed Executive Order 14063, which focuses on, among other things, the price of pharmaceuticals. The
executive order directs the Department of Health and Human Services, or HHS, to create a plan within 45 days to combat “excessive pricing of prescription
pharmaceuticals and enhance domestic pharmaceutical supply chains, to reduce the prices paid by the federal government for such pharmaceuticals, and to
address the recurrent problem of price gouging.” On September 9, 2021, HHS released its plan to reduce pharmaceutical prices. The key features of that
plan are to: (a) make pharmaceutical prices more affordable and equitable for all consumers and throughout the health care system by supporting
pharmaceutical price negotiations with manufacturers; (b) improve and promote competition throughout the prescription pharmaceutical industry by
supporting market changes that strengthen supply chains, promote biosimilars and generic drugs, and increase transparency; and (c) foster scientific
innovation to promote better healthcare and improve health by supporting public and private research and making sure that market incentives promote
discovery of valuable and accessible new treatments.
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 healthcare organizations 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 healthcare programs. These measures could reduce the ultimate demand for our products,
once approved, or put pressure on our product pricing. We expect that additional state and federal healthcare reform measures will be adopted in the future,
any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced
demand for our product candidates or additional pricing pressures.
In the E.U., similar political, economic and regulatory developments may affect our ability to profitably commercialize our product candidates, if
approved. In markets outside of the U.S. and the E.U., reimbursement and healthcare payment systems vary significantly by country and many countries
have instituted price ceilings on specific products and therapies. In many countries, including those of the E.U. and the UK, the pricing of prescription
pharmaceuticals is subject to governmental control and access. In these countries, pricing negotiations with governmental authorities can take considerable
time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we or our collaborators may be
required to conduct a clinical trial that compares the cost-effectiveness of our product to other available therapies. If reimbursement of our products is
unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels, our business could be materially harmed.
Reporting and payment obligations under Medicare Part B, the Medicaid Drug Rebate Program and other governmental drug pricing programs are
complex and may involve subjective decisions. Any failure to comply with those obligations could subject us to penalties and sanctions.
As a condition of reimbursement by various federal and state health insurance programs, pharmaceutical companies are required to calculate and
report certain pricing information to federal and state agencies. The regulations governing the calculations, price reporting and payment obligations are
complex and subject to interpretation by various government and regulatory agencies, as well as the courts. Reasonable assumptions have been made where
there is lack of regulations or clear guidance and such assumptions involve subjective decisions and estimates. Pharmaceutical companies are required to
report any revisions to our calculation, price reporting and payment obligations previously reported or paid. Such revisions could affect liability to federal
and state payers and also adversely impact reported financial results of operations in the period of such restatement. We expect that Zimura, if approved for
GA, would be reimbursed by the "buy and bill" model under Medicare Part B, which requires that we report the average sale price, or ASP, for Zimura,
which will affect the level of reimbursement from Medicare. The determination of ASP can be complex and uncertain.
Uncertainty exists as new laws, regulations, judicial decisions, or new interpretations of existing laws, or regulations related to our calculations, price
reporting or payments obligations increases the chances of a legal challenge, restatement or investigation. If a company becomes subject to investigations,
restatements, or other inquiries concerning compliance with price reporting laws and regulations, it could be required to pay or be subject to additional
reimbursements, penalties, sanctions or fines, which could have a material adverse effect on the business, financial condition and results of operations. In
addition, it is possible that future healthcare reform measures could be adopted, which could result in increased pressure on pricing and reimbursement of
products and thus have an adverse impact on financial position or business operations.
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Further, state Medicaid programs may be slow to invoice pharmaceutical companies for calculated rebates resulting in a lag between the time a sale is
recorded and the time the rebate is paid. This results in a company having to carry a liability on its consolidated balance sheets for the estimate of rebate
claims expected for Medicaid patients. If actual claims are higher than current estimates, the company’s financial position and results of operations could be
adversely affected.
In addition to retroactive rebates and the potential for 340B Program refunds, if a pharmaceutical firm is found to have knowingly submitted any
false price information related to the Medicaid Drug Rebate Program to CMS, it may be liable for civil monetary penalties. Such failure could also be
grounds for CMS to terminate the Medicaid drug rebate agreement, pursuant to which companies participate in the Medicaid program. In the event that
CMS terminates a rebate agreement, federal payments may not be available under government programs, including Medicaid or Medicare Part B, for
covered outpatient drugs.
Additionally, if a pharmaceutical company overcharges the government in connection with the FSS program or Tricare Retail Pharmacy Program,
whether due to a misstated federal ceiling price or otherwise, it is required to refund the difference to the government. Failure to make necessary
disclosures and/or to identify contract overcharges can result in allegations against a company under the FCA and other laws and regulations. Unexpected
refunds to the government, and responding to a government investigation or enforcement action, would be expensive and time-consuming, and could have
a material adverse effect on our business, financial condition, results of operations and growth prospects.
Our collaborators are also subject to similar requirements outside of the U.S. and thus the attendant risks and uncertainties. If our collaborators suffer
material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products could be negatively impacted, which could
have a material and adverse impact on our revenues.
Inadequate funding for the FDA, the SEC and other government agencies, including from government shut downs, or other disruptions to these
agencies’ operations, could prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those
agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding
levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory and policy changes, which has caused average
review times to fluctuate in recent years. Disruptions at the FDA and other agencies may slow the time for new product candidates to be reviewed and/or
approved by necessary government agencies, which would adversely affect our business. For example, over the last decade the U.S. government has shut
down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough employees and stop critical activities. If a
prolonged government shutdown occurs, 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. Further, future government shutdowns could impact our ability to access the public markets and
obtain necessary capital in order to properly capitalize and continue our operations.
Separately, since the FDA placed most foreign and domestic inspections of facilities on hold in March 2020 due to the COVID-19 pandemic, the
FDA has been working to resume routine surveillance, research monitoring and pre-approval inspections on a prioritized basis. The FDA has developed a
rating system to assist in determining when and where it is safest to conduct prioritized domestic inspections. As of May 2021, certain inspections, such as
foreign preapproval, surveillance, and for-cause inspections that are not deemed mission-critical, remain temporarily postponed. In April 2021, the FDA
issued guidance for industry formally announcing plans to employ remote interactive evaluations, using risk management methods, to meet user fee
commitments and goal dates and in May 2021 announced plans to continue progress toward resuming standard operational levels. Should FDA determine
that an inspection is necessary for approval and an inspection cannot be completed during the review cycle due to restrictions on travel, and the FDA does
not determine a remote interactive evaluation to be adequate, the FDA has stated that it generally intends to issue a complete response letter, or CRL, or
defer action on the application until an inspection can be completed.
In 2020 and 2021, a number of companies announced receipt of CRLs due to the FDA’s inability to complete required inspections for their
applications. In May 2021, the FDA noted it was continuing to ensure timely reviews of applications for medical products during the ongoing COVID-19
pandemic in line with its user fee performance goals and conducting mission critical domestic and foreign inspections to ensure compliance of
manufacturing facilities with FDA quality standards. However, the FDA may not be able to continue its current pace and review timelines could be
prolonged, including where a pre-approval inspection or an inspection of clinical sites is required and due to the ongoing COVID-19 pandemic and travel
restrictions, the FDA is unable to complete such required inspections during the review period. Any of these delays may affect our regulatory submissions
and the FDA's timing for reviewing them. Regulatory authorities outside the U.S. may adopt similar
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restrictions or other policy measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities.
We are subject to U.S. and foreign anti-corruption and anti-money laundering laws with respect to our operations and non-compliance with such laws
can subject us to criminal and/or civil liability and harm our business.
We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C.
§ 201, the U.S. International Travel Act of 1961, the USA PATRIOT Act, and possibly other state and national anti-bribery and anti-money laundering laws
in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, third-party
intermediaries, joint venture partners and collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or
benefits to recipients in the public or private sector. We have relationships with certain officials and employees of government agencies or government-
affiliated hospitals, universities, and other organizations, including a number of public hospitals that are our clinical trial sites. In addition, we may engage
third party intermediaries to promote our clinical research activities abroad and/or to obtain necessary permits, licenses, and other regulatory approvals. We
can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and
agents, even if we do not explicitly authorize or have actual knowledge of such activities.
Noncompliance with anti-corruption and anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions,
settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions,
suspension and/or debarment from contracting with certain persons or governmental programs, the loss of export privileges, reputational harm, adverse
media coverage, and other collateral consequences. If any subpoenas, investigations, or other enforcement actions are launched, or governmental or other
sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be
materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and
significant defense and compliance costs and other professional fees. In certain cases, enforcement authorities may even cause us to appoint an independent
compliance monitor which can result in added costs and administrative burdens.
If we or our third-party manufacturers fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or
penalties or incur costs that could harm our business.
We and our third-party manufacturers are subject to numerous environmental, health and safety laws and regulations, including those governing
laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our
operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and produce hazardous waste
products. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our or our
contractors' use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources and any coverage
provided by our insurance. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws
and regulations.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting
from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for
environmental liability or toxic tort claims that may be asserted against us.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These
current or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations
also may result in substantial fines, penalties or other sanctions. We expect the Biden Administration to pass additional such laws and regulations. Some of
those laws and regulations may govern the health and safety measures that employers must implement to protect their workers from the COVID-19 virus.
Further, with respect to the operations of our third-party contract manufacturers, it is possible that if they fail to operate in compliance with applicable
environmental, health and safety laws and regulations or properly dispose of wastes associated with our product candidates or products, we could be held
liable for any resulting damages, suffer reputational harm or experience a disruption in the manufacture and supply of our product candidates or products.
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Risks Related to Our Common Stock
Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders,
more difficult and may prevent attempts by our stockholders to replace or remove members of our board of directors and management.
Provisions in our certificate of incorporation and our by-laws may discourage, delay or prevent a merger, acquisition or other change in control of our
company that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares.
These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the
market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these
provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for
stockholders to replace members of our board of directors. Among other things, these provisions:
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provide for a classified board of directors such that only one of three classes of directors is elected each year;
allow the authorized number of our directors to be changed only by resolution of our board of directors;
limit the manner in which stockholders can remove directors from our board of directors;
provide for advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board
of directors;
require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written
consent;
limit who may call stockholder meetings;
authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that
would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by
our board of directors; and
require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certain
provisions of our certificate of incorporation or by-laws.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law,
which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after
the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a
prescribed manner.
The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for stockholders.
Our stock price may be volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. The
stock market in general, and the market for smaller pharmaceutical and biotechnology companies in particular, have experienced extreme volatility that has
often been unrelated to the operating performance of particular companies, including as a result of short selling by institutional and retail investors. As a
result of this volatility, our stockholders may not be able to sell their shares of common stock at or above the price at which they purchased their shares.
The market price for our common stock may be influenced by many factors, including:
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results of research, preclinical development activities and clinical trials for our product candidates and the timing of the receipt of such results,
including any potential increase in the trading of our common stock and the resulting volatility of our stock price that may occur as we get
closer to the expected availability of top-line data from our GATHER2 trial;
results of regulatory interactions and review for our product candidates;
the success of products or technologies that compete with our product candidates, including results of clinical trials of product candidates of
our competitors. For example, in September 2021, Apellis announced top-line data
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from its Phase 3 trials for GA, and the price of our common stock was affected following the release of those results. Any subsequent
developments from Apellis or other competitors may have a significant impact on our stock price;
actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
the level of expenses related to any of our product candidates or development programs;
variations in our financial results or those of companies that are perceived to be similar to us;
the recruitment or departure of key personnel;
the results of our efforts to in-license or acquire the rights to other product candidates and technologies for the treatment of retinal diseases,
including sustained release delivery technologies for Zimura;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
relevant scientific and medical developments;
changes in the structure of healthcare payment systems;
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• market conditions in the pharmaceutical and biotechnology sectors;
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general economic, industry and market conditions, such as those caused by the COVID-19 pandemic;
political, social, regulatory or legal developments in the United States and other countries; and
the other factors described in this “Risk Factors” section.
In addition, the COVID-19 pandemic has caused significant disruptions in the financial markets, and may continue to cause such disruptions, and has
also impacted, and may continue to impact, the volatility of our stock price and trading in our stock. Following periods of volatility in the market price of a
company’s stock, securities class-action litigation has often been instituted against that company. For example, we and certain of our current and former
executive officers were named as defendants in a purported class action lawsuit and a related shareholder derivative action following our announcement in
December 2016 of the initial, top-line results from the first two of our Phase 3 Fovista trials for the treatment of wet AMD, which caused our stock price to
decline significantly. See “Risks Related to Our Business Plan, Financial Position and Need for Additional Capital—We and certain of our current and
former executive officers were named as defendants in lawsuits that could result in substantial costs and divert management’s attention. We are in the
process of settling those lawsuits but the settlements are not yet final.” These proceedings and other similar litigation, if instituted against us, could cause us
to incur substantial costs to defend such claims and divert management’s attention and resources, which could seriously harm our business, and cause
additional volatility in the price of our common stock.
If a significant portion of our total outstanding shares are sold into the market, the market price of our common stock could drop significantly, even if
our business is doing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market
that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. If the holders of a significant number
of shares our common stock sell, or the market perceives that these holders will sell, the shares currently held by them, the price of our common stock may
decline.
Moreover, we have filed, and expect to continue to file, registration statements on Form S-8 registering all shares of common stock that we may issue
under our equity compensation plans. Once registered on Form S-8, shares underlying these equity awards can be freely sold in the public market upon
issuance, subject to volume, notice and manner of sale limitations applicable to affiliates.
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The ownership percentage of our stockholders may be diluted in the future, which could dilute the voting power or reduce the value of our outstanding
shares of common stock.
As with any publicly traded company, the ownership percentage of our stockholders may be diluted in the future because of equity issuances for
acquisitions, capital markets transactions, business development transactions or otherwise, including equity awards that we intend to continue to grant to
our directors, officers and employees pursuant to our equity compensation plans. Our employees are also entitled, subject to certain conditions, to purchase
our common stock at a discount pursuant to our Employee Stock Purchase Plan.
In addition, the pre-funded warrants that we issued in connection with our December 2019 and June 2020 public offerings are exercisable at any time,
and any exercise of such warrants will increase the number of shares of our outstanding common stock, which may dilute the ownership percentage or
voting power of our stockholders. To date, pre-funded warrants representing approximately 2.5 million shares of common stock have been exercised and as
of December 31, 2021, pre-funded warrants representing 3,164,280 shares of common stock remain outstanding.
Also, our certificate of incorporation authorizes us to issue, without the approval of our shareholders, one or more classes or series of preferred stock
having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common stock
with respect to dividends and distributions, as our board of directors generally may determine. The terms of one or more classes or series of preferred stock
could dilute the voting power or reduce the value of our common stock. Similarly, the repurchase or redemption rights or liquidation preferences we could
assign to holders of preferred stock could affect the residual value of our common stock.
For more information about the dilutive effects of financing or business development transactions we may undertake, see the risk factor above,
“Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product
candidates.”
We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance
initiatives and corporate governance practices.
As a public company, we incur and will continue to incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002, the
Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq Global Select Market and other applicable securities
rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial
controls and corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives.
Moreover, these rules and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and
costly.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are required to furnish with our periodic Exchange Act reports a
report by our management on our internal control over financial reporting. To achieve compliance with Section 404, we must document and evaluate our
internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources and
engage outside consultants to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as
appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for
internal control over financial reporting. There is a risk that our internal control over financial reporting may, in the future, be found to be ineffective under
Section 404. Our identification of one or more material weaknesses could result in an adverse reaction in the financial markets due to a loss of confidence
in the reliability of our financial statements.
Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be our
stockholders’ sole source of gain.
We have never declared or paid cash dividends on our common stock. We currently intend to retain all of our future earnings, if any, to finance the
growth of our business. In addition, the terms of any future debt agreements that we enter into may preclude us from paying dividends. As a result, capital
appreciation, if any, of our common stock will be our stockholders’ sole source of gain for the foreseeable future.
Item 1B. Unresolved Staff Comments
None.
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Item 2. Properties
We lease properties in Parsippany, New Jersey, New York, New York, and Cranbury, New Jersey, all of which are used for office space and/or
storage of IT equipment. We also have several lab benches for use in Worcester, Massachusetts, which we license from the University of Massachusetts and
where we have four employees doing laboratory research and other preclinical development work.
Item 3. Legal Proceedings
Descriptions of legal proceedings are set forth in "Note 11-Commitments and Contingencies" in the notes to the financial statements filed with this
Annual Report on Form 10-K.
We deny any and all allegations of wrongdoing and intend to vigorously defend against these lawsuits. We are unable, however, to predict the
outcome of these matters at this time. Moreover, any conclusion of these matters in a manner adverse to us and for which we incur substantial costs or
damages not covered by our directors’ and officers’ liability insurance would have a material adverse effect on our financial condition and business. In
addition, the litigation could adversely impact our reputation and divert management’s attention and resources from other priorities, including the execution
of our business plan and strategies that are important to our ability to grow our business, any of which could have a material adverse effect on our business.
Item 4. Mine Safety Disclosures
None.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities
Our common stock has been publicly traded on The Nasdaq Global Select Market under the symbol "OPHT" from September 25, 2013 to April 16,
2019, and under the symbol "ISEE" since April 17, 2019.
Holders
As of January 31, 2022, there were approximately 101 holders of record of our common stock. This number does not include beneficial owners
whose shares are held by nominees in street name.
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.
Recent Sales of Unregistered Securities
We did not sell any of our equity securities or any options, warrants or rights to purchase our equity securities during the period covered by this
Annual Report on Form 10-K that were not registered under the Securities Act and that have not otherwise been described in a Current Report on Form 8-K
or a Quarterly Report on Form 10-Q.
Purchase of Equity Securities
We did not purchase any of our registered equity securities during the period covered by this Annual Report on Form 10-K.
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Stock Performance Graph
The following graph and chart compares the cumulative annual stockholder return on our common stock over the period commencing December 31,
2016 and ending on December 31, 2021, to that of the total return for the NASDAQ Composite Index and the NASDAQ Biotechnology Index, assuming an
investment of $100 on December 31, 2016. In calculating cumulative total annual stockholder return, reinvestment of dividends, if any, is assumed. The
indices are included for comparative purposes only. They do not necessarily reflect management’s opinion that such indices are an appropriate measure of
the relative performance of our common stock and are not intended to forecast or be indicative of future performance of our common stock. The following
graph and related information shall not be deemed “soliciting material” or be “filed” with the SEC, nor shall such information be incorporated by reference
in any of our filings under the Securities Act, or the Exchange Act, whether made before or after the date hereof and irrespective of any general
incorporation language in any such filing. We obtained information used on the graph from Research Data Group, Inc., a source we believe to be reliable.
Item 6. Reserved
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is meant to provide material information relevant to an assessment of the financial condition and results of
operations of our company, including an evaluation of the amounts and certainty of cash flows from operations and from outside sources, so as to allow
investors to better view our company from management’s perspective. This discussion and analysis should be read together with our financial statements
and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth
elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing,
includes forward-looking statements that involve risks and uncertainties and should be read together with the "Risk Factors" section of this Annual Report
on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and analysis.
Overview
We are a science-driven biopharmaceutical company focused on the discovery and development of novel treatments for retinal diseases with significant
unmet medical needs. We are committed to having a positive impact on patients’ lives by delivering high-quality, safe and effective treatments designed to
address debilitating retinal diseases, including earlier stages of age-related macular degeneration, or AMD.
Our lead asset is our clinical stage product candidate Zimura® (avacincaptad pegol), a complement C5 inhibitor. We are currently targeting the
following diseases with Zimura:
• Geographic Atrophy, or GA, which is the advanced stage of AMD and is characterized by marked thinning or atrophy of retinal tissue, leading to
irreversible loss of vision;
intermediate AMD, which is an earlier stage of AMD that precedes GA; and
autosomal recessive Stargardt disease, or STGD1, which is an orphan inherited condition characterized by progressive damage to the central
portion of the retina, or the macula, and other retinal tissue, leading to loss of vision.
•
•
In July 2021, we completed patient enrollment for GATHER2, our Phase 3 clinical trial evaluating the safety and efficacy of Zimura for the treatment
of GA secondary to AMD. We also received a written agreement from the U.S. Food and Drug Administration, or the FDA, under a Special Protocol
Assessment, or SPA, for the overall design of GATHER2. We expect topline data from the GATHER2 trial to become available during the second half of
2022, approximately one year after the enrollment of the last patient plus the time needed for database lock and analysis. We also plan to initiate a Phase 3
clinical trial evaluating Zimura for patients with intermediate AMD during the second half of 2022.
In addition to Zimura, we are developing our preclinical product candidate IC-500, a High temperature requirement A serine peptidase 1 protein, or
HtrA1, inhibitor, for GA and potentially other age-related retinal diseases. Based on current timelines, we expect to submit an investigational new drug
application, or IND, to the FDA for IC-500 in mid-2023.
Our portfolio also includes two preclinical stage gene therapy product candidates (IC-100 and IC-200) and several ongoing gene therapy research
programs, each of which uses adeno-associated virus, or AAV, for gene delivery. These AAV mediated gene therapy programs are targeting the following
orphan inherited retinal diseases, or IRDs:
•
•
•
•
•
rhodopsin-mediated autosomal dominant retinitis pigmentosa, or RHO-adRP, which is characterized by progressive and severe bilateral loss of
vision leading to blindness;
IRDs associated with mutations in the BEST1 gene, including Best vitelliform macular dystrophy, or Best disease;
Leber Congenital Amaurosis type 10, or LCA10, which is characterized by severe bilateral loss of vision at or soon after birth;
STGD1; and
IRDs associated with mutations in the USH2A gene, which include Usher syndrome type 2A, or Usher 2A, and USH2A-associated non-syndromic
autosomal recessive retinitis pigmentosa.
As we focus our efforts on and prioritize the development and potential commercialization of Zimura, we have been considering our development
options for IC-100 and IC-200, which we have been developing for RHO-adRP and BEST1-related IRDs, respectively. We currently plan to seek a
collaborator for the future development and potential commercialization of these product candidates.
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Research and Development Pipeline
We have summarized the current status of our ongoing research and development programs in the table below.
*We have an option to exclusively in-license intellectual property resulting from these programs.
Therapeutic Development Programs
Zimura
Zimura, our complement C5 inhibitor, is a chemically-synthesized, pegylated RNA aptamer. Aptamers are short molecules made up of a single
stranded nucleic acid sequence or amino acid sequence that binds molecular targets with high selectivity and specificity. The following are brief
descriptions of our ongoing and planned clinical trials for Zimura, and our manufacturing activities for Zimura.
GATHER2 (GA secondary to AMD - Ongoing)
Trial Design
GATHER2 is an international, randomized, double-masked, sham controlled, multi-center Phase 3 clinical trial evaluating the safety and efficacy of
Zimura for the treatment of GA secondary to AMD. In this trial, we enrolled 448 patients who were randomized to receive either monthly administration of
Zimura 2 mg or sham during the first 12 months of the trial, at which time we plan to analyze the primary efficacy endpoint of the mean rate of growth
(slope) estimated based on GA area, as measured by fundus autofluorescence, or FAF, based on readings at three time points: baseline, month 6 and month
12. At month 12, patients in the Zimura 2 mg arm are re-randomized to receive either monthly or every other month administration of Zimura 2 mg and
patients receiving monthly administrations of sham will continue to receive monthly administrations of sham. The final evaluation for patients will take
place at month 24.
Trial Progress
In July 2021, we completed patient enrollment in GATHER2, four months ahead of our original schedule. We expect 12-month top-line data from this
trial to become available during the second half of 2022, approximately one year after the enrollment of the last patient plus the time needed for database
lock and analysis. If the 12-month results are positive, we plan to file applications with the FDA and the EMA for marketing approval of Zimura for GA.
We are focusing on patient retention and continue to closely monitor the COVID-19 pandemic and its potential effect on the trial. We are targeting
and remain on track for patient retention for the trial, as measured by the injection fidelity rate through month 12, of greater than 90%. The 12-month
injection fidelity rate for our previously completed GATHER1 trial was 87%. The injection fidelity rate is calculated by dividing the total number of actual
injections for all patients by the total number of expected injections based on the total number of patients enrolled in the trial. In addition, more than 84%
of the scheduled first-year visits in the GATHER2 trial, which consists of all study visits up to and including the timepoint for assessing the primary
efficacy endpoint, have been completed or elapsed.
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Special Protocol Assessment
In July 2021, we received a written agreement from the FDA under a SPA for the overall design of GATHER2. The SPA is a procedure by which the
FDA provides a clinical trial sponsor with an official evaluation and written guidance on the design of a proposed protocol intended to form the basis for an
NDA. In connection with our SPA, the FDA recommended, and we accepted, modifying the primary efficacy endpoint for the GATHER2 trial from the
mean rate of change in GA area over 12 months measured by FAF at three timepoints: baseline, month 6 and month 12, to the mean rate of growth (slope)
estimated based on GA area measured by FAF in at least three timepoints: baseline, month 6 and month 12.
Planned Development of Zimura for Intermediate AMD
Previous Post-Hoc Analyses on GATHER1 Data
We conducted post-hoc analyses on the GATHER1 data, in which we evaluated the progression of incomplete Retinal Pigment Epithelial and Outer
Retinal Atrophy, or iRORA, to complete Retinal Pigment Epithelial and Outer Retinal Atrophy, or cRORA, and the progression of drusen to iRORA or
cRORA, in patients treated with Zimura 2 mg as compared to patients in the corresponding sham group. Drusen, iRORA and cRORA represent progressive
stages of AMD.
The post-hoc analysis data show a 19.6% absolute reduction in the rate of progression from drusen to iRORA or cRORA, for the Zimura 2 mg group
as compared to sham at 18 months, representing a relative risk reduction of 72%. The data also show a 21.8% absolute reduction in the rate of progression
from iRORA to cRORA for the Zimura 2 mg group as compared to sham at 18 months, representing a relative risk of reduction of 52%.
Planned Phase 3 Clinical Trial in Intermediate AMD
We have been encouraged by the post-hoc analyses data and currently plan to initiate a Phase 3 clinical trial studying Zimura in patients with
intermediate AMD. Intermediate AMD is an earlier stage of AMD that precedes GA.
We expect the intermediate AMD trial will be an international, randomized, double-masked, sham-controlled, multi-center trial with approximately
200 patients per treatment group. We expect to treat and follow patients for 24 months. We are currently evaluating other aspects of the design of this trial,
including patient inclusion criteria and primary efficacy endpoints. We plan to obtain feedback from regulatory authorities on our plans for this trial and our
development strategy in this indication, before initiating this trial during the second half of 2022.
STAR (STGD1 - Ongoing)
STAR is an international, randomized, double-masked, sham controlled, multi-center clinical trial evaluating the safety and efficacy of Zimura for the
treatment of STGD1. STAR, similar to GATHER1, was designed to be a Phase 2b screening trial, with the potential to demonstrate statistically significant
results depending on the magnitude of the potential benefit observed. If the results are positive and statistically significant, we believe this trial could
potentially serve as a clinical trial that can support an application for marketing approval. We initially enrolled 95 patients in the STAR trial, none of whom
have any remaining study visits.
In July 2020, we reopened enrollment in this trial in the United States. We continue to enroll new patients and plan to enroll approximately 25
additional patients, with the goal of enrolling a total of approximately 120 patients. As we continue to enroll new patients, we continue to monitor the
COVID-19 pandemic closely and may need to slow down or stop patient enrollment in certain geographies depending on the local situation. Newly
enrolled patients are randomized on a 1:1 basis to be treated with either Zimura 4 mg or sham for 18 months. We have been and plan to remain masked to
the treatment group of all patients in the trial. In addition, we have not reviewed and do not plan to review or analyze efficacy data for any patients in the
trial, until the 18-month data has been collected and analyzed for all patients enrolled in the trial. We expect results from this trial to be available after the
12-month top-line data from the GATHER2 trial.
Zimura Manufacturing
In early 2017, we completed the small scale manufacture of multiple batches of Zimura drug substance that we are using to support clinical drug
supply for the GATHER2 trial and the expanded STAR trial. We are working with our historical contract manufacturer for Zimura drug substance, Agilent
Technologies, Inc., or Agilent, to scale up and potentially validate the manufacturing process for Zimura drug substance. In parallel, we are working with a
new contract manufacturer with the goal of assessing whether this manufacturer can produce Zimura drug substance at an adequate scale for potential
commercial use. We have experienced issues during technology transfer of the existing manufacturing process to this manufacturer, which has resulted in
delays to our timelines with this manufacturer. Subject to successful completion of scale up and validation activities, we currently plan to use Agilent as the
primary source of supply of Zimura drug substance upon launch, if approved, and the new manufacturer as a second source of supply of Zimura drug
substance. Validation requires that we demonstrate that the drug
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substance produced through the scaled up process can be produced consistently, delivering quality product within a range of acceptable specifications. We
are continuing analytical method development and qualification with our contract manufacturers and laboratories.
Starting in 2020, we have worked with a contract manufacturer to provide us with additional supply of finished Zimura drug product to support our
needs for the GATHER2 trial and the expanded STAR trial. We believe we have sufficient finished Zimura drug product for these two clinical trials. In
addition, we are working with our historical fill/finish manufacturer, Ajinomoto Bio-Pharma Services, or Ajinomoto, on fill/finish of Zimura drug product
with a new vial, which we believe will allow us to support a more efficient and robust fill/finish operation at a commercial scale. Ajinomoto has produced
finished Zimura drug product using the new vial, which we plan to use for a portion of the second-year study visits for patients in the GATHER2 trial. We
believe Ajinomoto has the capacity to supply us with finished Zimura drug product with the new vial for our expected commercial supply needs upon
launch, if approved.
We order the polyethylene glycol, or PEG, starting material used to make Zimura drug substance from a sole source third-party manufacturer outside
the United States. We currently procure the supply on a purchase order basis and are continuing discussions regarding a long-term supply agreement with
this manufacturer for the PEG starting material. We believe this supplier will have the capacity to supply us with the PEG that we will need for commercial
manufacturing.
IC-500: HtrA1 Inhibitor
We are pursuing the preclinical development of IC-500 for the treatment of GA and potentially other age-related retinal diseases. We have selected
IC-500 as the lead compound from our HtrA1 inhibitor program, which includes a number of small molecule compounds that show high affinity and
specificity for HtrA1 when tested in vitro.
We are continuing the preclinical development of IC-500. In early 2021, we reviewed our IC-500 development program and explored the potential of
a less frequent dosing regimen than monthly dosing. In 2021, we initiated a number of preclinical tolerability and pharmacokinetic studies for IC-500, and
we are planning for IND-enabling GLP toxicology studies. We anticipate that the start of the IND-enabling toxicology studies will be later than what we
originally planned, primarily due to the limited availability of study slots at CROs attributable to rising demand for their services as well as increased
absenteeism of staff at those CROs in wake of the COVID-19 pandemic and the recent Omicron variant.
We have developed a formulation that we believe will be safe and effective for intravitreal administration into the eye, and are conducting current
Good Manufacturing Practices, or cGMP, manufacturing activities for IC-500. Based on current timelines and subject to successful preclinical development
and cGMP manufacturing, we expect to submit an IND to the FDA for IC-500 in mid-2023.
Gene Therapy Research and Development Programs
IC-100: Product Candidate for RHO-adRP
We have been conducting the preclinical development of IC-100, our novel AAV gene therapy product candidate for the treatment of RHO-adRP. We
worked with a gene therapy contract development and manufacturing organization, or CDMO, for preclinical and early-stage clinical supply of IC-100.
This CDMO produced, and we released, a cGMP batch of IC-100. In addition, we and the University of Pennsylvania, or Penn, conducted a number of
preclinical studies of IC-100 and a natural history study of RHO-adRP patients, including a preclinical toxicology and efficacy study of IC-100 in the
naturally occurring canine model of RHO-adRP. We have been considering our development options for this product candidate. We currently plan to seek a
collaborator for the future development and potential commercialization of IC-100.
IC-200: Product Candidate for BEST1-Related IRDs
We have been conducting the preclinical development of IC-200, our novel AAV gene therapy product candidate for the treatment of BEST1-related
IRDs. We worked with a gene therapy CDMO for preclinical and early-stage clinical supply of IC-200. This CDMO produced, and we released, a cGMP
batch of IC-200. In addition, we and Penn conducted a number of preclinical studies of IC-200 and natural history studies of patients with BEST1-related
IRDs, including a preclinical toxicology and efficacy study of IC-200 in the naturally occurring canine model of Best disease. We have been considering
our development options for this product candidate. We currently plan to seek a collaborator for the future development and potential commercialization of
IC-200.
Minigene Programs
AAV vectors are generally limited as a delivery vehicle by the size of their genetic cargo, which is restricted to approximately 4,700 base pairs of
genetic code. The use of minigenes seeks to deliver a smaller but still functional form of a
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larger gene packaged into a standard-size AAV delivery vector. The goal of minigene therapy is to deliver a gene expressing a protein that, although
smaller than the naturally occurring protein, is nonetheless functional for purposes of treating the associated disease.
Starting in 2018, we funded several sponsored research programs at the University of Massachusetts Medical School, or UMMS, seeking to use a
minigene approach to develop new gene therapies for several orphan IRDs. These programs (miniCEP290, miniABCA4 and miniUSH2A) are described
below. In July 2021, we hired four individuals who were previously at UMMS and working on these sponsored research programs, including the principal
investigator for these programs. We have transitioned the preclinical research activities for these programs from UMMS to us and we have established a
laboratory for these employees to continue working on these programs and other preclinical ocular research and development activities.
The following is a summary of these minigene programs and their status:
• miniCEP290 (LCA10): This program, which we refer to as the miniCEP290 program, is targeting LCA10, which is associated with mutations in
the CEP290 gene. In July 2019, we entered into a license agreement with the University of Massachusetts, or UMass, for exclusive development
and commercialization rights to this program. The sponsored research yielded a number of minigene constructs that show encouraging results
when tested in a mouse model. UMMS conducted additional experiments to optimize constructs, which were delayed during 2020 because of
restrictions placed by UMMS on animal research activities as a result of the COVID-19 pandemic. We have identified a lead construct from this
program and are considering preclinical development options.
• miniABCA4 (STGD1): This program, which we refer to as the miniABCA4 program, is targeting STGD1, which is associated with mutations in
the ABCA4 gene. UMMS granted us an option to obtain an exclusive license to certain patent applications for this program. UMMS generated and
evaluated several ABCA4 minigene constructs in both in vitro and in vivo experiments, which yielded what we believe to be encouraging results.
We are conducting additional experiments to optimize the constructs and assess their efficacy in the mouse model.
• miniUSH2A (USH2A-related IRDs): This program, which we refer to as the miniUSH2A program, is targeting IRDs associated with mutations
in the USH2A gene, including Usher 2A and USH2A-associated non-syndromic autosomal recessive retinitis pigmentosa. UMMS granted us an
option to obtain an exclusive license to certain patent applications for this program. Some of the activities in this program were delayed during
2020 as a result of the closure of UMMS animal research laboratories due to the COVID-19 pandemic. UMMS generated and evaluated several
USH2A minigene constructs in in vitro experiments and we are planning to evaluate their efficacy in animals. The animal experiments have been
delayed as a result of transitioning the work from UMMS to us.
Impact of COVID-19
Beginning in March 2020, the COVID-19 pandemic and measures taken to contain it have affected our business and operations in a number of ways.
These include, but are not limited to, the following:
•
Clinical Trial Operations. In March 2020, we decided to delay the initiation of patient enrollment in our GATHER2 trial. As we initiated patient
enrollment in June 2020, we and our clinical trial sites implemented new health and safety practices to mitigate the effects of the COVID-19
pandemic and to support patients and site staff. In addition, we added more than 30 new sites to the GATHER2 trial to help with patient
recruitment. Although we have since completed patient enrollment in GATHER2, we may face difficulties in retaining patients or maintaining
scheduled visits to the extent patients are affected by the virus or lockdown measures or are fearful of visiting or traveling to our clinical trial sites
because of the pandemic. We are aware that a number of patients initially enrolled in the STAR trial missed consecutive visits during the early
months of the pandemic, and that a number of patients in our Latin America sites for GATHER2 missed visits because of the COVID-19
pandemic. We do not yet know whether the number of missed visits will increase or decrease in the GATHER2 or STAR trials, or what the impact
of missed visits may be on patient retention in those trials or the trial results, especially because we are masked to the treatment of patients during
the conduct of the trials. We have been and continue to monitor the situation closely. For a more detailed discussion of the impact of the COVID-
19 pandemic on our clinical trial operations, please see the Risk Factor titled, “The COVID-19 pandemic has affected and may continue to affect
the initiation and conduct of our clinical trials, including the retention of patients for our GATHER2 clinical trial and patient recruitment and
retention for our STAR clinical trial. It may have long-lasting effects on the conduct of clinical trials, which can make our ongoing and any future
trials more difficult, costly or time consuming”.
•
Third-Party Collaborators and Vendors. Many of our third-party contract manufacturers, academic research collaborators and contract research
organizations limited their operations and staff during the COVID-19 pandemic,
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which resulted in delays to some of our manufacturing and research and development activities and limited our ability to be on site to oversee
these activities. For example, the closure of animal research laboratories at UMMS for several months during 2020 caused delays to the progress
of, and to our timelines for receipt of data from, our minigene research programs. Over the past year, several of our vendors have been facing
backlogs due to work and demands from other clients, including those who are developing vaccines or medicines for the COVID-19 pandemic,
which has limited their availability to perform work for us. For example, we anticipate that the start of the IND-enabling toxicology studies for IC-
500 will be later than what we originally planned, primarily due to the limited availability of study slots at CROs attributable to rising demand for
their services as well as increased absenteeism of staff at those CROs in wake of the COVID-19 pandemic and the recent Omicron variant. We are
also aware that some of our third-party contract manufacturers and storage vendors have experienced high levels of absenteeism due to the
Omicron variant and as a result started to limit their operations and on-site activities. These operational and staffing limitations may cause further
delays for our development and manufacturing activities. At this time, we do not know whether there will be further impact on the work of our
third-party vendors and collaborators due to the COVID-19 pandemic.
Supply Chain and Materials. Shortages, delays and governmental restrictions arising from the COVID-19 pandemic have disrupted and may
continue to disrupt the ability of our contract manufacturers to procure items, such as raw materials, that are essential for the manufacture of our
product candidates. For example, during 2020, our contract manufacturer for IC-500 drug substance experienced a shortage in obtaining one of the
raw materials that was sourced from China, which was caused by the shutdown of local suppliers and the slowdown in trade due to the COVID-19
pandemic. This shortage delayed our process development activities for the drug substance for IC-500 by a number of months. In addition, since
2020, there have been shortages of various animals used in research studies, such as several types of non-human primates, which are typically
sourced from China, due to the COVID-19 pandemic and disruptions to the global supply chain. Although our development programs have not yet
been affected by these shortages, we are continuing to monitor the situation. Furthermore, in October 2021 we learned that the new manufacturer
we are working with for second source supply of Zimura drug substance was experiencing issues with procuring an important raw material
common to many manufacturing processes, which occurred due to recent supply chain interruptions and caused a slight delay to our
manufacturing timelines with this contract manufacturer.
Remote Working. We instituted company-wide remote working starting in March 2020. In 2021, we began permitting employees to return to our
offices on a voluntary basis in compliance with new health and safety policies we implemented, including a vaccination policy for employees
working in our offices. We expect to operate under a hybrid (partially remote and partially in office) working model for the foreseeable near
future. We are continuing to monitor and support the health and well-being of our employees and their productivity as remote working continues.
•
•
We do not believe that the COVID-19 pandemic, and our actions in response and the costs of those actions, have had a material impact on our financial
position, results of operations, or cash flows for the three months or twelve months ended December 31, 2021. The progression of the COVID-19 pandemic
remains fluid and its impact on our business and operations remains uncertain. The full extent to which the COVID-19 pandemic will directly or indirectly
impact our business, results of operations and financial condition will depend on developments that are highly uncertain and cannot be accurately predicted,
including new information that may emerge concerning COVID-19 and new variants of the virus, the actions taken to contain it or lessen its impact,
including the availability, effectiveness and administration of vaccines, and the economic impact on local, regional, national and international markets. If
the delays and other disruptions due to the pandemic become prolonged or more extensive, then we may experience further delays or disruptions to our
research and development programs and our financial position, results of operations or cash flows for future periods may be materially affected.
For further information on actual and potential impacts to us as a result of the COVID-19 pandemic, see the other sections of this Management's
Discussion and Analysis of Results of Operations and Financial Position and the Risk Factors contained in this Annual Report on Form 10-K.
Business Development and Financing Activities
Beginning in 2017, we pursued a business development strategy focused on evaluating various available technologies to treat ophthalmic diseases,
particularly those in the back of the eye, and exploring opportunities to obtain rights to additional products and product candidates employing these
technologies. Our efforts resulted in the expansion of our research and development pipeline, including the addition of IC-500, IC-100, IC-200 and a
number of collaborative gene therapy sponsored research programs.
As we continue the development of our product candidates and programs, prepare for the potential commercialization of Zimura and evaluate our overall
strategic priorities, we will continue to pursue selective business development and financing opportunities that advance us toward our strategic goals. We
plan to continue to evaluate, on a selective and targeted basis,
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opportunities to potentially obtain rights to additional product candidates and technologies for retinal diseases, with a focus on sustained release delivery
technologies for Zimura. In addition, we continue to explore potential collaboration and out-licensing opportunities for the future development and
potential commercialization of our product candidates, including potential collaboration opportunities for the future development and potential
commercialization of Zimura in one or more territories outside the United States and collaboration opportunities for the future development and potential
commercialization of IC-100 and IC-200.
For information about our follow-on public offerings that we completed in July 2021 and October 2021, please see the Liquidity and Capital
Resources section of Management' s Discussion and Analysis of Financial Condition and Results of Operations. We expect to continue to pursue capital
raising transactions when they are available on terms favorable to us and if the opportunity advances our strategic goals.
Financial Matters
As of December 31, 2021, we had cash, cash equivalents and available-for-sale securities of $381.7 million. We estimate that our year-end 2022 cash,
cash equivalents and available-for-sale securities will range between $215 million and $225 million. We also estimate that our cash, cash equivalents and
available-for-sale securities will be sufficient to fund our planned capital expenditure requirements and operating expenses through at least mid-2024.
These estimates are based on our current business plan, which includes the continuation of our ongoing clinical development programs for Zimura in GA
and STGD1 and the initiation of an intermediate AMD clinical trial, preparation and potential filing of an NDA and a MAA for Zimura in GA, continuing
preparations for a potential commercial launch of Zimura in GA, investing in sustained release delivery technologies for Zimura, and the advancement of
our IC-500 development program. Excluded from these estimates are any potential approval or sales milestones payable to Archemix or any potential
expenses for actual commercial launch of Zimura, such as sales force expenses, any additional expenditures related to potentially studying Zimura in
indications outside of GA, STGD1 and intermediate AMD, or resulting from the potential in-licensing or acquisition of additional product candidates or
technologies, or any associated development we may pursue. We have based these estimates on assumptions that may prove to be wrong, and we could use
our available capital resources sooner than we currently expect.
Fovista
In December 2016 and August 2017, we received initial top-line data from our three pivotal clinical trials, referred to as OPH1002, OPH1003
and OPH1004, evaluating the anti-platelet derived growth factor, or anti-PDGF, aptamer Fovista® (pegpleranib) administered in combination with anti-
VEGF agents for the treatment of wet AMD. These top-line data indicated that the trials failed to achieve their pre-specified primary endpoints. We
terminated these trials, as well as several other smaller Fovista trials in wet AMD in 2017. We have no plans for the future development of Fovista.
Financial Operations Overview
Revenue
As we have no products approved for sale, we do not expect to receive any revenue related to our product candidates until we obtain regulatory
approval for and commercialize such products, or until we potentially enter into agreements with third parties for the development and commercialization
of our product candidates. If our development efforts for any of our product candidates result in regulatory approval or if we enter into collaboration
agreements with third parties, we may generate revenue from product sales or from such third parties.
Our ability to become and remain profitable depends on our ability to generate revenues in excess of our expenses. Our ability to generate revenues
from product sales is dependent on our obtaining marketing approval for and commercializing our product candidates or any product candidates we may in-
license or acquire. We may be unsuccessful in our efforts to develop and commercialize product candidates or in our efforts to in-license or acquire
additional product candidates. Even if we succeed in developing and commercializing one or more of our product candidates, we may never achieve
sufficient sales revenue to achieve or maintain profitability.
Research and Development Expenses
Our research and development expenses primarily consist of costs associated with the manufacturing, development, and preclinical and clinical
testing of our product candidates and costs associated with our gene therapy research programs. Our research and development expenses consist of:
•
external research and development expenses incurred under arrangements with third parties, such as academic research collaborators, contract
research organizations, or CROs, and other vendors and CDMOs for the production and analysis of drug substance and drug product; and
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•
employee-related expenses for employees dedicated to research and development activities, including salaries, benefits and share-based
compensation expense.
Research and development expenses also include costs of acquired product licenses, in-process research and development, and related technology rights
where there is no alternative future use, costs of prototypes used in research and development, consultant fees and amounts paid to collaborative partners.
All research and development expenses are charged to operations as incurred in accordance with ASC 730. We account for non-refundable
advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed
or when the goods have been received, rather than when the payment is made. We do not currently utilize a formal time allocation system to capture
expenses on a project-by-project basis because we record expenses by functional department. Accordingly, we do not allocate expenses to individual
projects or product candidates, although we do allocate some portion of our research and development expenses by project area or product candidate, as
shown below.
The following table summarizes our research and development expenses for the years ended December 31, 2021, 2020 and 2019:
Zimura
IC-500: HtrA1
IC-100: RHO-adRP
IC-200: BEST1
Other gene therapy
Fovista
Personnel-related
Share-based compensation
Other
2021
Years ended December 31,
2020
(in thousands)
2019
53,208 $
2,070
1,211
2,974
26
(7)
18,821
6,522
243
85,068 $
28,366 $
1,442
6,874
7,718
932
(741)
13,426
4,166
601
62,784 $
13,252
459
7,402
4,572
1,384
46
6,771
4,260
1,498
39,644
$
$
As we continue our ongoing clinical trials, plan for and initiate clinical development of Zimura in intermediate AMD and continue our ongoing and
planned manufacturing activities for Zimura, we expect our research and development expenses for Zimura to increase. We expect our research and
development expenses for IC-500 to increase as we continue preclinical development. We expect our research and development expenses for IC-100 and
IC-200 to remain minimal for the foreseeable near future. We expect our research and development expenses for our miniCEP290 program and other gene
therapy research programs to remain largely unchanged as we continue those programs. Our research and development expenses may increase if we in-
license or acquire any new product candidates or technologies, including potential sustained release delivery technologies for Zimura, or if we commence
any new development programs.
We expect the development of our product candidates will continue for at least the next several years. At this time, we cannot reasonably estimate that
the total remaining costs necessary to complete development, to complete process development and manufacturing scale-up and validation activities, and to
potentially seek marketing approval for Zimura for indications outside of GA or for any of our other product candidates.
The successful development of our product candidates is subject to numerous risks and uncertainties associated with developing drugs, including the
uncertainty of:
•
•
the scope, rate of progress and costs of our research and development activities, including manufacturing activities;
the potential benefits of our product candidates over other therapies;
• preclinical development results and clinical trial results;
•
the terms and timing of regulatory approvals;
• our ability to market, commercialize and achieve market acceptance for any of our product candidates; and
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• our ability to successfully file, prosecute, defend and enforce patent claims and other intellectual property rights, together with associated
expenses.
A change in the outcome of any of these variables with respect to the development of our product candidates could mean a significant change in the
costs and timing associated with the development of that product candidate. For example, we are conducting the GATHER2 trial, which is a Phase 3
clinical trial evaluating Zimura for GA, with the expectation that data collected from this trial, if positive, together with other available data, will be
sufficient to seek marketing approval for this indication in the United States and the European Union. We may subsequently decide to, or be required by
regulatory authorities to, enroll additional patients in the GATHER2 trial, conduct additional clinical trials for Zimura in GA or conduct additional
nonclinical studies of Zimura in order to seek or maintain regulatory approval or qualify for reimbursement approval. As a result of any of the above, we
could be required to expend significant additional financial resources and time on the completion of development of Zimura in GA. For example, based on
our assessment of the data we have collected for Zimura to date and the requirements of regulatory authorities, we are conducting a pharmacokinetic
substudy involving a portion of the patients enrolled in the GATHER2 trial and an additional nonclinical study of Zimura, which has increased the research
and development expenses for Zimura.
See the “Liquidity and Capital Resources” section of this Item 7 of this Annual Report on Form 10-K for more information regarding our current
and future financial resources and our expectations regarding our research and development expenses and funding requirements.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs for personnel, including share-based compensation expense, in our
executive, legal, finance, business development, commercial planning, human resources, investor relations and information technology functions. We
expect that our general and administrative expenses will increase as we continue to hire additional commercial planning personnel and undertake
commercial planning activities to prepare for the potential commercialization of Zimura. Other general and administrative expenses include facility costs
and professional fees for legal, including patent-related, services and expenses, consulting and accounting services, and travel expenses.
Interest Income
We currently have invested our cash, cash equivalents and available-for-sale securities in money market funds, U.S. Treasury securities,
investment-grade corporate debt securities, asset-backed securities and debt instruments issued by foreign governments, which generate a nominal amount
of interest income.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have
prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our
financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued research and development expenses,
revenue recognition, share-based compensation and income taxes described in greater detail below. We base our estimates on our limited historical
experience, known trends and events and various other factors that we believe are 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.
Our significant accounting policies are described in more detail in the notes to our financial statements appearing elsewhere in this Annual Report
on Form 10-K. Of those policies, we believe that the following accounting policies are the most critical to aid our stockholders in fully understanding and
evaluating our financial condition and results of operations.
Accrued Research and Development Expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing
quotations and contracts, identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost
incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us
monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date
in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our
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estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development expenses are
related to expenses related to our academic research collaborators, CROs, CDMOs and other vendors in connection with research and development and
manufacturing activities.
We base our expenses related to academic research collaborators, CROs and CDMOs on our estimates of the services received and efforts
expended pursuant to quotations and contracts with such vendors that conduct research and development and manufacturing activities on our behalf. The
financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be
instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the applicable research and
development or manufacturing expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort
to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or
prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the
status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that
are too high or too low in any particular period. There have been no material changes in estimates for the periods presented in this Annual Report on Form
10-K.
Share-Based Compensation
We account for all share-based compensation payments issued to employees, non-employee directors, and consultants by estimating the fair value
of each equity award. Accordingly, share-based compensation expense is measured based on the estimated fair value of the awards on the date of grant, net
of forfeitures. We recognize compensation expense for the portion of the award that is ultimately expected to vest over the period during which the
recipient renders the required services to us on a straight-line basis.
We apply the fair value recognition provisions of ASC 718, Compensation—Stock Compensation. Determining the amount of share-based
compensation to be recorded requires us to develop estimates of the fair value of stock options as of their grant date. We recognize share-based
compensation expense ratably over the requisite service period, which in most cases is the vesting period of the award. For grants containing performance-
based vesting provisions, expense is recognized over the estimated achievement period only when the performance-based milestone is deemed probable of
achievement. If performance-based milestones are later determined not to be probable of achievement, then all previously recorded stock-based
compensation expense associated with such options will be reversed during the period in which we make this determination. Calculating the fair value of
share-based awards requires us to make highly subjective assumptions.
We use the Black-Scholes option pricing model to value our stock option awards and the options to purchase shares under our employee stock purchase
plan. Use of this valuation methodology requires that we make assumptions as to the volatility of our common stock, the expected term of our stock
options, and the risk-free interest rate for a period that approximates the expected term of our stock options and the expected dividend yield of our common
stock. We calculate expected volatility based on daily historical volatility during the time period that corresponds to the expected option term. We calculate
the expected term of stock option grants to employees based on an analysis of actual option exercises. The risk-free interest rate used for each grant is
based on the U.S. Treasury yield curve in effect at the time of grant for instruments with a similar expected life. We utilize a dividend yield of zero based
on the fact that we have never paid cash dividends and have no current intention to pay cash dividends. The weighted-average assumptions used to estimate
grant date fair value of stock options using the Black-Scholes option pricing model were as follows for the years ended December 31, 2021, 2020 and
2019:
Expected common stock price volatility
Risk-free interest rate
Expected term of options (years)
Expected dividend yield
2021
114%
0.31%-1.22%
5.2
—
Years ended December 31,
2020
118%
0.22%-1.34%
4.6
—
2019
110%
1.38%-2.54%
4.8
—
We estimate the fair value of restricted stock units, or RSUs, granted to employees using the closing market price of our common stock on the date
of grant.
We also estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from our estimates. We
use historical data to estimate pre-vesting forfeitures and record share-based compensation expense only for those awards that are expected to vest. To the
extent that actual forfeitures differ from our estimates, the difference is recorded as a cumulative adjustment in the period when the estimates were revised.
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Share-based compensation expense for equity grants to employees, non-employee directors and consultants was $11.2 million, $8.3 million and
$9.2 million for the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, we had $56.3 million of total unrecognized
share-based compensation expense, which we expect to recognize over a weighted-average remaining vesting period of approximately 3.3 years. We expect
to grant additional stock options that will result in additional share-based compensation expense for our equity awards to employees, non-employee
directors and consultants.
For the years ended December 31, 2021, 2020 and 2019, we allocated share-based compensation as follows:
Research and development
General and administrative
Total
2021
Years ended December 31,
2020
(in thousands)
2019
$
$
6,522 $
4,723
11,245 $
4,166 $
4,157
8,323 $
4,260
4,920
9,180
In October 2019, our board of directors adopted the 2019 Inducement Stock Incentive Plan, or the Inducement Plan, pursuant to which we may grant,
subject to the terms of the Inducement Plan and the rules of The Nasdaq Global Select Market, or Nasdaq, nonstatutory stock options, restricted stock,
RSUs, and other stock-based awards up to an aggregate of 1,000,000 shares of our common stock. In March 2020, February 2021, September 2021 and
December 2021, our board of directors amended the Inducement Plan to reserve an additional 1,000,000 shares of our common stock, an additional
600,000 shares of our common stock, an additional 1,000,000 shares of our common stock and an additional 1,000,000 shares of our common stock,
respectively, for issuance under the plan. The Inducement Plan permits us to, subject to the approval of each grant by the compensation and talent strategy
committee of our board of directors, use the stock-based awards available under the Inducement Plan to attract key employees for the growth of our
business. As of December 31, 2021, we had approximately 1,372,000 shares available for issuance under the Inducement Plan.
Results of Operations
Statements of Operations Data:
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Interest income
Other income (expense), net
Loss before income tax benefit
Income tax benefit
Net loss
2021
Years ended December 31,
2020
(in thousands)
2019
$
$
85,068 $
29,689
114,757
(114,757)
245
(10)
(114,522)
—
(114,522) $
62,784 $
25,952
88,736
(88,736)
500
(6)
(88,242)
3,695
(84,547) $
39,644
21,628
61,272
(61,272)
2,151
151
(58,970)
111
(58,859)
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Research and Development Expenses
Our research and development expenses were $85.1 million for the year ended December 31, 2021, an increase of $22.3 million compared to
$62.8 million for the year ended December 31, 2020. The increase in research and development expenses for the year ended December 31, 2021 was
primarily due to a $24.8 million increase in costs associated with Zimura, a $7.8 million increase in personnel costs, including share-based compensation
associated with additional research and development staffing, and a $0.6 million increase in costs associated with IC-500 which were partially offset by a
$5.7 million decrease in costs associated with IC-100, a $4.7 million decrease in costs associated with IC-200 and a $0.9 million decrease in costs
associated with our collaborative gene therapy sponsored research programs. The increased costs for Zimura were primarily due to the commencement and
completion of patient enrollment for our GATHER2 trial and increased manufacturing activities. The decreased costs for IC-100 and IC-200 primarily
reflect decreased manufacturing and preclinical development activities.
General and Administrative Expenses
Our general and administrative expenses were $29.7 million for the year ended December 31, 2021, an increase of $3.7 million, compared to
$26.0 million for the year ended December 31, 2020. The increase in general and administrative expenses was primarily due to an increase in personnel
costs, including shares-based compensation costs, and an increase in external costs, including legal and consulting costs associated with litigation, pre-
commercialization activities and other administrative costs necessary to support our operations.
Interest Income
Interest income for the year ended December 31, 2021 was $0.2 million compared to interest income of $0.5 million for the year ended
December 31, 2020. The decrease in interest income earned during the year ended December 31, 2021 was primarily due to the decrease in interest rate
yields.
Income Tax Benefit
We recorded no benefit from income taxes for the year ended December 31, 2021. For the year ended December 31, 2020, we recorded an income
tax benefit of $3.7 million primarily to reflect the settlement of local tax audit.
Liquidity and Capital Resources
Sources of Liquidity
Since inception, we have financed our operations primarily through private placements of our common stock and preferred stock, venture debt
borrowings, funds received under the Novo Holdings A/S Agreement, our initial public offering, which we closed in September 2013, funds we received
under a prior agreement with Novartis Pharma AG related to the licensing and commercialization of Fovista, funds we received in connection with our
acquisition of Inception 4, Inc., or Inception 4, in October 2018 and our follow-on public offerings, which we closed in February 2014, December 2019,
June 2020, July 2021 and October 2021, including the sale of pre-funded warrants in December 2019 and June 2020. We do not have any committed
external source of funds.
We currently have an effective universal shelf registration statement on Form S-3, or the March 2021 Shelf Registration, on file with the SEC
registering for sale from time to time up to $300.0 million of common stock, preferred stock, debt securities, depositary shares, subscription rights,
warrants and/or units in one or more registered offerings, of which $100.0 million may be offered, issued and sold under an “at-the-market” Sales
Agreement, or the ATM Agreement, with Cowen and Company, LLC. We also have an automatically effective shelf registration statement on Form S-3, or
the October 2021 Shelf Registration, pursuant to which we may offer and sell an indeterminate amount of shares of common stock, preferred stock, debt
securities, depositary shares, subscription rights, warrants and/or units in one or more registered offerings.
In July 2021, we closed an underwritten public offering in which we sold 13,397,500 shares of our common stock under the March 2021 Shelf
Registration, which included the exercise in full of the underwriters’ option to purchase an additional 1,747,500 shares of our common stock, at a price to
the public of $8.60 per share and at a price to the underwriters of $8.084 per share. The net proceeds from the public offering, after deducting underwriting
discounts and commissions and other offering expenses payable by us totaling approximately $7.4 million, were approximately $107.8 million.
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In October 2021, we closed an underwritten public offering in which we sold 10,350,000 shares of our common stock under the October 2021 Shelf
Registration, which included the exercise in full of the underwriters’ option to purchase an additional 1,350,000 shares of our common stock, at a price to
the public of $16.750 per share and at a price to the underwriters of $15.745 per share. The net proceeds from the public offering, after deducting
underwriting discounts and commissions and other offering expenses payable by us totaling approximately $10.8 million, were approximately $162.6
million.
We have not yet issued and sold any shares of our common stock under the ATM Agreement.
Cash Flows
As of December 31, 2021, we had cash, cash equivalents and available-for-sale securities totaling $381.7 million and no debt. We primarily invest
our cash, cash equivalents and available-for-sale securities in money market funds, U.S. Treasury securities, certain investment-grade corporate debt
securities, asset-backed securities and debt instruments issued by foreign governments.
The following table shows a summary of our cash flows for the years ended December 31, 2021, 2020 and 2019:
Net cash (used in) provided by:
Operating Activities
Investing Activities
Financing Activities
Net change in cash and cash equivalents
Cash Flows from Operating Activities
2021
Years ended December 31,
2020
(in thousands)
2019
$
$
(98,559) $
21,298
272,335
195,074 $
(66,097) $
(143,810)
150,581
(59,326) $
(48,490)
150
42,838
(5,502)
The net cash used in operating activities, which was $98.6 million and $66.1 million for the years ended December 31, 2021 and 2020,
respectively, relates primarily to net cash used to fund our Zimura clinical trials and manufacturing activities and to support the preclinical development
activities of IC-500, IC-100 and IC-200.
See "—Funding Requirements" below for a description of how we expect to use our cash for operating activities in future periods.
Cash Flows from Investing Activities
Net cash provided by investing activities was $21.3 million for the year ended December 31, 2021, which primarily related to the maturities of
available-for-sale securities. Net cash used in investing activities for the year ended December 31, 2020 was $143.8 million and primarily related to the
purchases of available-for-sale securities.
Cash Flows from Financing Activities
Net cash provided by financing activities for the year ended December 31, 2021 was $272.3 million and relates primarily to cash received from
our July 2021 and October 2021 public offerings of our common stock. Net cash provided by financing activities for the year ended December 31, 2020
was $150.6 million and relates primarily to cash received from our June 2020 public offering of our common stock and concurrent private placement.
Funding Requirements
Zimura is in clinical development, IC-500 is in preclinical development, and we are advancing multiple gene therapy research programs. We expect
our research and development expenses to increase as we pursue these programs as currently planned. We could incur additional research and development
expenses if we modify or further expand the scope of our clinical trials, our preclinical development programs or our gene therapy research programs, or if
we in-license or acquire, and undertake development of, additional product candidates and technologies, including sustained release delivery technologies
for Zimura and any promising product candidates that emerge from our gene therapy research programs. We could also incur additional research and
development expenses if, for example, we are required by the FDA, the EMA or regulatory authorities in other jurisdictions, or if we otherwise decide, to
perform clinical trials and/or nonclinical or other studies in addition to those we currently expect to conduct. If we experience delays or disruptions to our
research and development programs, including delays in patient enrollment or issues with patient retention or patients missing scheduled visits and
treatments, if we experience issues with our preclinical development programs, such as unfavorable toxicology or other preclinical data, if we experience
issues with the manufacture and supply of product candidates for our development programs, including issues with process
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development or manufacturing scale-up activities, whether such delays or disruptions are due to the COVID-19 pandemic or other reasons, we could incur
additional and unexpected expenses as a result of such delays or disruptions and our business and financial results may be materially impacted.
Furthermore, if we successfully develop and expect to obtain marketing approval for any of our product candidates, we expect to incur significant
commercialization expenses related to product sales, marketing, distribution and manufacturing. We expect to start incurring these expenses as we prepare
for the potential commercialization of Zimura. We are party to agreements with Archemix with respect to Zimura, the former equityholders of Inception 4
with respect to IC-500, the University of Florida Research Foundation, Incorporated, or UFRF, and Penn, with respect to IC-100 and IC-200, and UMass
with respect to any potential product candidates from our miniCEP290 program, in each case, that impose significant milestone payment obligations on us
if we or a potential collaborator achieves specified clinical, regulatory and commercial milestones with respect to these product candidates, as well as
certain royalties on net sales with respect to IC-100, IC-200 and any product candidates we choose to develop from our miniCEP290 program. It is likely
that any future in-licensing or acquisition agreements that we enter into with respect to additional product candidates or technologies would include similar
obligations.
We expect that we will continue to incur significant expenses as we:
•
•
•
•
•
continue the development of Zimura in GA and STGD1 and initiate development of Zimura in intermediate AMD and potentially other
indications;
expand our outsourced manufacturing capabilities for Zimura and IC-500 and begin to establish commercial operations and sales, marketing
and distribution capabilities for Zimura;
prepare an NDA and an MAA for Zimura and seek marketing approval for any product candidates that successfully complete clinical trials;
in-license or acquire the rights to, and pursue the development of, other product candidates or technologies for retinal diseases, such as
sustained release delivery technologies for Zimura;
continue the development of IC-500 and pursue our gene therapy research programs;
• maintain, expand and protect our intellectual property portfolio;
•
•
hire additional clinical, commercial, medical affairs, regulatory, pharmacovigilance, manufacturing, quality control, quality assurance and
scientific personnel; and
expand our general and administrative functions to support our future growth.
As of December 31, 2021, we had cash, cash equivalents and available-for-sale securities of $381.7 million. We estimate that our year-end 2022 cash,
cash equivalents and available-for-sale securities will range between $215 million and $225 million. We also estimate that our cash, cash equivalents and
available-for-sale securities will be sufficient to fund our planned capital expenditure requirements and operating expenses through at least mid-2024.
These estimates are based on our current business plan, which includes the continuation of our ongoing clinical development programs for Zimura in GA
and STGD1 and the initiation of an intermediate AMD clinical trial, preparation and potential filing of an NDA and a MAA for Zimura in GA, continuing
preparations for a potential commercial launch of Zimura in GA, investing in sustained release delivery technologies for Zimura, and the advancement of
our IC-500 development program. Excluded from these estimates are any potential approval or sales milestones payable to Archemix or any potential
expenses for actual commercial launch of Zimura, such as sales force expenses, any additional expenditures related to potentially studying Zimura in
indications outside of GA, STGD1 and intermediate AMD, or resulting from the potential in-licensing or acquisition of additional product candidates or
technologies, or any associated development we may pursue. We have based these estimates on assumptions that may prove to be wrong, and we could use
our available capital resources sooner than we currently expect.
We expect the development of our product candidates will continue for at least the next several years. Although we believe we have sufficient
financial resources for the activities necessary to complete development of, including manufacturing scale-up and validation activities, and potentially seek
marketing approval of Zimura in GA, we expect we will require additional funding in order to launch and commercialize Zimura in GA, if approved. We
also expect we will require substantial, additional funding in order to complete the activities necessary to develop and commercialize Zimura for other
indications or any of our other product candidates. At this time, we cannot reasonably estimate the total remaining costs necessary to complete
development, to complete process development and manufacturing scale-up and validation activities and to potentially seek marketing approval for Zimura
for any other indication or for any of our other product candidates.
Our future capital requirements will depend on many factors, including:
•
the scope, progress, costs and results of our current and future Zimura clinical programs and any further development we may undertake to
enable us to file an NDA and an MAA for Zimura in one or more indications;
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•
•
•
•
•
•
•
•
•
•
the scope, progress, costs and results of process development, manufacturing scale-up and validation activities, analytical method
development and qualification, and stability studies associated with Zimura and our other product candidates;
the timing, scope and costs of establishing a commercial infrastructure for potential commercialization of Zimura and for any other product
candidates for which we receive, or expect to receive, marketing approval;
the costs, timing and outcome of regulatory filings and reviews of our product candidates, including the potential submission and regulatory
review of an NDA and an MAA for Zimura in GA;
our ability to establish collaborations on favorable terms, if at all, if we choose to do so, including a potential collaboration for the further
development and potential commercialization of Zimura in one or more territories outside the United States and a collaboration or out-license
for the further development and potential commercialization of IC-100 and IC-200;
the extent to which we in-license or acquire rights to, and undertake research or development of, additional product candidates or
technologies, including sustained release delivery technologies for Zimura;
the scope, progress, costs and results of our efforts to develop IC-500, including activities to establish manufacturing capabilities and other
preclinical development activities to enable us to file an IND for this product candidate;
the scope, progress, costs and results from our gene therapy research programs, including costs related to the in-license and future
development of any promising product candidates and technologies that emerge from these programs;
the timing and extent of delays or disruptions to our research and development programs as a result of the COVID-19 pandemic;
the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending
intellectual property-related claims; and
subject to receipt of marketing approval, net revenue received from commercial sales of any of our product candidates, after milestone
payments and royalty payments that we would be obligated to make.
We may require additional funding beyond what we currently expect due to unforeseen or other reasons. Our costs may exceed our expectations if we
experience an issue in our clinical trials, such as issues with patient enrollment, the retention of enrolled patients, enrolled patients maintaining scheduled
visits and receiving scheduled treatments, or the availability of drug supply, if we experience an issue with manufacturing, such as issues with process
development, scale-up and validation, or establishing and qualifying second source suppliers and ensuring adequate inventory for our expected needs, if we
experience an issue in our preclinical development programs, such as unfavorable toxicology or other preclinical data, or if we modify or further expand
the scope of our clinical trials, preclinical development programs or gene therapy research programs. Our costs may also exceed our expectations for other
reasons, for example, if we are required by the FDA, the EMA, or regulatory authorities in other jurisdictions to perform clinical trials or nonclinical or
other studies in addition to those we currently expect to conduct. For example, we are conducting the GATHER2 trial with the expectation that data
collected from such trial, if it is positive, together with other available data, will be sufficient to support an application for marketing approval in the United
States and the European Union and we may subsequently decide to, or be required by regulatory authorities to, enroll additional patients in the GATHER2
trial, or conduct additional clinical trials or nonclinical studies of Zimura in order to seek or maintain marketing approval or qualify for reimbursement
approval. In addition, the COVID-19 pandemic may result in disruptions to the progress of the GATHER2 or STAR trials, including slowing patient
enrollment in STAR or causing enrolled patients in either trial to miss their scheduled visits or drop out in greater numbers than we expect, or disruptions to
our other research and development programs, which could cause us to continue to expend our cash resources while not progressing our research and
development programs as expeditiously as we would have had the pandemic not occurred or persisted. As a result of any of the above, we may need or may
seek to obtain additional funding for our continuing operations sooner or in greater amounts than expected.
We do not have any committed external source of funds. Our ability to raise adequate additional financing when needed, and on terms acceptable to
us, will depend on many factors. These factors include investors' perceptions of the potential success of our ongoing business, including the development of
our product candidates and other programs, and the potential future growth of our business. Additionally, these factors include general market conditions
that also affect other companies. For example, the COVID-19 pandemic and governmental responses to the pandemic have caused volatility and
uncertainty in the financial markets as well as additional volatility in the price of our stock, which may result in prospective investors being less
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likely to invest new capital. These factors may make raising capital difficult, and may result in us accepting terms that are unfavorable to us, especially if
we are in need of financing at the particular time. Although we were successful in raising approximately $162.6 million in net proceeds in an underwritten
public offering of our common stock in October 2021, we may not be able to successfully raise additional capital in the future. The size of our company
and our status as a company listed on The Nasdaq Global Select Market, or Nasdaq, may also limit our ability to raise financing. For example, our ability to
raise adequate financing through a public offering may be limited by market conditions and SEC rules based on our current market capitalization. Nasdaq
listing rules also generally limit the number of shares we may issue in a private placement to a number less than 20% of the number of shares of our
common stock outstanding immediately prior to the transaction, unless we issue such shares at a premium, which investors may be unwilling to accept, or
unless we obtain shareholder approval, which can be expensive and time-consuming and can add risk to our ability to complete the financing transaction. If
we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate the development of one or more of our product
candidates, our gene therapy research programs, or our future commercialization efforts.
Until such time, if ever, when we can generate substantial product revenues, we may need or may seek to finance our operations through a
combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. In addition, we
may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current
or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our existing stockholders'
ownership interests would be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect our existing
stockholders' rights as common stockholders. The dilutive effect of future equity issuances may be substantial, depending on the price of our common stock
at the time of such capital raise, with a lower stock price translating to greater dilution for existing stockholders. Debt financing and preferred equity
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, declaring dividends or entering into certain investments or transactions. In addition, we have issued, and may in the
future issue additional, equity securities as consideration for business development transactions, which may also dilute our existing stockholders' ownership
interests.
If we raise additional funds through collaborations, royalty transactions, strategic alliances or marketing, distribution or licensing arrangements with
third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, products or product candidates or grant licenses on
terms that may not be favorable to us. If we choose to pursue a collaboration for any of our product candidates, we may be required to relinquish certain
valuable rights depending on the terms of such a transaction. If we are unable to raise additional funds through equity or debt financings when needed, we
may be required to grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
Our need for additional financing may continue even if we are able to successfully develop one or more of our product candidates. Our future
commercial revenues, if any, will be derived from sales of such product candidates, which may not be available for at least several years following
completion of successful product development, if at all. In addition, if approved, our product candidates may not achieve commercial success. Even if those
products are successful and we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Under most, if
not all, of the foregoing circumstances, we may need to obtain substantial additional financing to achieve our business objectives.
Archemix C5 License Agreement
In September 2011, we entered into the C5 License Agreement with Archemix relating to anti-C5 aptamers. In connection with the C5 License
Agreement, as amended, we paid Archemix an upfront licensing fee of $1.0 million and issued to Archemix an aggregate of 2,000,000 shares of our
series A-1 preferred stock and 500,000 shares of our series B-1 preferred stock. We have paid Archemix an aggregate of $9.0 million in fees based on our
achievement of specified clinical milestone events under the C5 License Agreement, including two milestone payments of $1.0 million and $6.0 million
triggered by the positive 12-month data from, and by completion of, the GATHER1 trial, which we paid in March 2020 and October 2020, respectively.
Under the C5 License Agreement, for each anti-C5 aptamer product that we may develop under the agreement, including Zimura, we are obligated
to make additional payments to Archemix of up to an aggregate of $50.5 million if we achieve specified development, clinical and regulatory milestones,
with $24.5 million of such payments relating to a first indication, $23.5 million of such payments relating to second and third indications and $2.5 million
of such payments relating to sustained delivery applications. Under the C5 License Agreement, we are also obligated to make additional payments to
Archemix of up to an aggregate of $22.5 million if we achieve specified commercial milestones based on net product sales of all anti-C5 products licensed
under the agreement. We are also obligated to pay Archemix a double-digit percentage of
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specified non-royalty payments we may receive from any sublicensee of our rights under the C5 License Agreement. We are not obligated to pay Archemix
a running royalty based on net product sales in connection with the C5 License Agreement.
For more information about the C5 License Agreement, please see the section entitled "Licensing and Other Arrangements—Zimura - Archemix C5
License Agreement" in Part I, Item 1 of this Annual Report on Form 10-K.
Inception 4 Merger Agreement
In October 2018, we and Inception 4 entered into the Inception 4 Merger Agreement, pursuant to which we acquired IC-500 and our other HtrA1
inhibitors through a merger transaction.
In addition, pursuant to the Inception 4 Merger Agreement, the former equityholders of Inception 4 will be entitled to receive contingent future payments
from us based on the achievement of certain clinical and regulatory milestones of up to an aggregate maximum amount of $105 million, with $45 million
of such potential payments relating to GA and $60 million of such potential payments relating to wet AMD. These future milestone payments will be
payable in the form of shares of our common stock, calculated based on the price of our common stock over a five-trading day period preceding the
achievement of the relevant milestone, unless and until the issuance of such shares would, together with all other shares issued in connection with the
Inception 4 Merger, exceed an overall maximum limit of approximately 7.2 million shares, which is equal to 19.9% of the number of issued and
outstanding shares of our common stock as of the close of business on the business day prior to the closing date of the Inception 4 Merger, and will be
payable in cash thereafter.
For more information about the Inception 4 Merger Agreement, please see the section entitled "Licensing and Other Arrangements—IC-500 - Inception
4 Merger Agreement" in Part I, Item 1 of this Annual Report on Form 10-K.
RHO-adRP License Agreement with UFRF and Penn
In June 2018, we entered into the RHO-adRP License Agreement with UFRF and Penn. Under the agreement, we agreed to pay an annual license
maintenance fee in the low double-digit thousands of dollars, which will be payable on an annual basis until the first commercial sale of a licensed product.
In addition, we agreed to reimburse UFRF for the costs and expenses of patent prosecution and maintenance related to the licensed patent rights.
We further agreed to pay UFRF, on behalf of both licensors, up to an aggregate of $23.5 million if we achieve specified clinical, marketing
approval and reimbursement approval milestones with respect to a licensed product and additionally, up to an aggregate of $70.0 million if we achieve
specified commercial sales milestones with respect to a licensed product.
We are also obligated to pay UFRF, on behalf of both licensors, royalties at a low single-digit percentage of net sales of licensed products. Such royalties
are subject to customary reductions for lack of patent coverage and loss of regulatory exclusivity. In addition, such royalties with respect to any licensed
product in any country may be offset by a specified portion of any royalty payments actually paid by us with respect to such licensed product in such
country under third-party licenses for patent rights or other intellectual property rights that are necessary to manufacture, develop and commercialize the
licensed product in such country. Our obligation to pay royalties under the RHO-adRP License Agreement will continue on a licensed product-by-licensed
product and country-by-country basis until the latest of:
•
•
•
the expiration of the last-to-expire licensed patent rights covering a licensed product in the country of sale;
the expiration of regulatory exclusivity covering a licensed product in the country of sale; and
ten years from the first commercial sale of the applicable licensed product in the country of sale.
Beginning on the earlier of the calendar year following the first commercial sale of a licensed product and the first business day of 2031, we are also
obligated to pay certain minimum royalties, not to exceed an amount in the low hundreds of thousands of dollars on an annual basis, which minimum
royalties are creditable against our royalty obligation with respect to net sales of licensed products due for the year in which the minimum royalty is paid.
If we or an affiliate sublicenses any of the licensed patent rights to a third party, we will be obligated to pay UFRF, on behalf of both licensors, a low
double-digit percentage of the consideration received in exchange for such sublicense, with the applicable percentage based upon the stage of development
of the sublicensed product at the time we or the applicable affiliate enters into the sublicense.
If we receive a rare pediatric disease priority review voucher from the FDA in connection with obtaining marketing approval for a licensed product and
we subsequently use such priority review voucher in connection with a different product candidate, we will be obligated to pay UFRF, on behalf of both
licensors, aggregate payments in the low double-digit millions
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of dollars based on certain marketing approval and commercial sales milestones with respect to such other product candidate. In addition, if we sell such a
priority review voucher to a third party, we will be obligated to pay UFRF, on behalf of both licensors, a low double-digit percentage of any consideration
received from such third party in connection with such sale.
For more information about the RHO-adRP License Agreement, please see the section entitled "Licensing and Other Arrangements—License Agreement
with UFRF and Penn for IC-100" in Part I, Item 1 of this Annual Report on Form 10-K.
BEST1 License Agreement with Penn and UFRF
In May 2019, we paid Penn, for the benefit of Penn and UFRF, a $0.2 million upfront license issuance fee in connection with entry into the BEST1
License Agreement, which was recorded as a research and development expense, and we paid UFRF accrued patent prosecution expenses of approximately
$18 thousand, which was recorded as a general and administrative expense. We have also agreed to pay Penn, for the benefit of Penn and UFRF, an annual
license maintenance fee in the low double-digit thousands of dollars, which fee will be payable on an annual basis until the first commercial sale of a
licensed product. In addition, we have agreed to pay Penn, for the benefit of Penn and UFRF, a one-time patent grant fee in the low triple-digit thousands of
dollars, upon the issuance of a U.S. patent that claims inventions disclosed in the licensed patent rights or know-how or inventions generated under certain
related sponsored research agreements with Penn or UFRF, and that is exclusively licensed to us. Furthermore, we have agreed to reimburse Penn and
UFRF for the costs and expenses of patent prosecution and maintenance related to the licensed patent rights.
We have further agreed to pay Penn, for the benefit of Penn and UFRF, up to an aggregate of $15.7 million if we achieve specified clinical,
marketing approval and reimbursement approval milestones with respect to one licensed product, and up to an aggregate of an additional $3.1 million if we
achieve these same milestones with respect to a different licensed product. In addition, we have agreed to pay Penn, for the benefit of Penn and UFRF, up
to an aggregate of $48.0 million if we achieve specified commercial sales milestones with respect to one licensed product, and up to an aggregate of an
additional $9.6 million if we achieve these same milestones with respect to a different licensed product.
We are also obligated to pay Penn, for the benefit of Penn and UFRF, royalties at a low single-digit percentage of net sales of licensed products.
Such royalties are subject to customary deductions, credits, and reductions for lack of patent coverage and loss of regulatory exclusivity. In addition, such
royalties with respect to any licensed product in any country may be offset by a specified portion of any royalty payments actually paid by us with respect
to such licensed product in such country under third-party licenses to patent rights or other intellectual property rights that are necessary to research,
develop, manufacture and commercialize the licensed product in such country. Our obligation to pay royalties under the BEST1 License Agreement will
continue on a licensed product-by-licensed product and country-by-country basis until the latest of:
•
•
•
the expiration of the last-to-expire licensed patent rights covering the sale of the applicable licensed product in the country of sale;
the expiration of regulatory exclusivity covering the applicable licensed product in the country of sale; and
10 years from the first commercial sale of the applicable licensed product in the country of sale.
Beginning on the earlier of the calendar year following the first commercial sale of a licensed product and calendar year 2032, we are also obligated to pay
certain minimum royalties, not to exceed an amount in the mid tens of thousands of dollars on an annual basis, which minimum royalties are creditable
against our royalty obligation with respect to net sales of licensed products due in the year the minimum royalty is paid.
If we or any of our affiliates sublicense any of the licensed patent rights to a third party, we will be obligated to pay Penn, for the benefit of Penn
and UFRF, a high single-digit to a mid ten's percentage of the consideration received in exchange for such sublicense, with the applicable percentage based
upon the stage of development of the sublicensed product at the time we or the applicable affiliate enters into the sublicense.
If we receive a rare pediatric disease priority review voucher from the FDA in connection with obtaining marketing approval for a licensed
product and we subsequently use such priority review voucher in connection with a different product candidate outside the scope of the BEST1 License
Agreement, we will be obligated to pay Penn, for the benefit of Penn and UFRF, aggregate payments in the low double-digit millions of dollars based on
certain approval and commercial sales milestones with respect to such other product candidate. In addition, if we sell such a priority review voucher to a
third party, we will be obligated to pay Penn, for the benefit of Penn and UFRF, a high single-digit percentage of any consideration received from such third
party in connection with such sale.
For more information about the BEST1 License Agreement, please see the section entitled "Licensing and Other Arrangements—License Agreement
with Penn and UFRF for IC-200" in Part I, Item 1 of this Annual Report on Form 10-K.
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miniCEP290 License Agreement with UMass
In July 2019, we issued to UMass 75,000 shares of our common stock following execution of the miniCEP290 License Agreement pursuant to an
exemption from registration afforded by Section 4(a)(2) of the Securities Act. In September 2019, we paid UMass a $0.4 million upfront license fee, which
was recorded as a research and development expense, and we paid UMass accrued patent prosecution expenses of approximately $18 thousand, which was
recorded as a general and administrative expense.
We have also agreed to pay UMass an annual license maintenance fee in the low double-digit thousands of dollars, which fee will be payable on
an annual basis until the expiration of the royalty term for the licensed products. Furthermore, we have agreed to reimburse UMass for the costs and
expenses of patent prosecution and maintenance related to the licensed patent rights.
We have further agreed to pay UMass up to an aggregate of $14.75 million in cash and issue up to 75,000 shares of our common stock if we
achieve specified clinical and regulatory milestones with respect to a licensed product. In addition, we have agreed to pay UMass up to an aggregate of
$48.0 million if we achieve specified commercial sales milestones with respect to a licensed product.
We are also obligated to pay UMass royalties at a low single-digit percentage of net sales of licensed products. Our obligation to pay royalties
under the miniCEP290 License Agreement will continue on a licensed product-by-licensed product and country-by-country basis until the later of: (a) the
expiration of the last-to-expire licensed patent rights covering the sale of the applicable licensed product in the country of sale, or (b) 10 years from the first
commercial sale of the applicable licensed product in the country of sale. Beginning with the calendar year following receipt of marketing approval for a
licensed product, we are also obligated to pay certain minimum royalties, not to exceed an amount in the mid-double-digit thousands of dollars on an
annual basis, which minimum royalties are creditable against our royalty obligation with respect to net sales of licensed products due in the year the
minimum royalty is paid.
If we or any of our affiliates sublicenses any of the licensed patent rights or know-how to a third party, we will be obligated to pay UMass a high
single-digit to a mid-tens percentage of the consideration received in exchange for such sublicense, with the applicable percentage based upon the stage of
development of the licensed products at the time we or the applicable affiliate enters into the sublicense.
If we receive a rare pediatric disease priority review voucher, or a priority review voucher, from the FDA in connection with obtaining marketing
approval for a licensed product, and we subsequently use such priority review voucher in connection with a different product candidate outside the scope of
the miniCEP290 License Agreement, we will be obligated to pay UMass a low-tens percentage of the fair market value of the priority review voucher at the
time of approval of such product candidate and a low-twenties percentage of the fair market value of the priority review voucher at the time of achievement
of a specified commercial sales milestone for such other product candidate. In addition, if we sell such a priority review voucher to a third party, we will be
obligated to pay UMass a low-thirties percentage of any consideration received from such third party in connection with such sale.
For more information about the minicCEP290 License Agreement, please see the section entitled "Licensing and Other Arrangements—License
Agreement with UMass for miniCEP290 Program" in Part I, Item 1 of this Annual Report on Form 10-K.
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Contractual Obligations and Commitments
As of December 31, 2021, we had contractual obligations and commitments to make payments under operating leases, settle obligations related to
agreements to purchase goods and services and settle tax and other liabilities. They are summarized in the table below:
Operating lease obligations
Purchase obligations:
Research activities
Manufacture and supply activities
Total contractual cash obligations
Total
Due Within 1 Year
$
$
(in thousands)
1,616 $
520
7,995
10,131 $
989
520
7,995
9,504
Purchase obligations include agreements and contracts that give the supplier recourse to us for cancellation or nonperformance under the contract
or contain terms that would subject us to liquidated damages. Such agreements and contracts may, for example, be related to direct materials and certain of
our manufacturing and supply agreements.
The table above excludes any milestone payments which may become payable to third parties under license or acquisition agreements as the
timing and likelihood of such payments are not known with certainty;
•
•
•
any royalty payments to third parties as the amounts, timing and likelihood of such payments are not known;
anticipated expenditures under supply agreements for periods for which we are not yet bound under binding purchase orders; or
contracts that are entered into in the ordinary course of business that are not material in the aggregate in any period presented above.
In addition to the amounts set forth in the table above, we may be required, under the agreements under which we acquired rights to Zimura,
IC-100, IC-200, IC-500 and our miniCEP290 program, to make milestone payments and/or pay royalties. These payments are described in further
detail in the descriptions of the applicable agreements set forth in this section.
We also have letter agreements with certain employees that require the funding of a specific level of payments, if certain events, such as a
termination of employment in connection with a change in control or termination of employment by the employee for good reason or by us without cause,
occur. For a description of these obligations, see our definitive proxy statement on Schedule 14A for our 2021 annual meeting of stockholders, as filed
with the SEC on April 7, 2021.
In addition, in the course of normal business operations, we have agreements with contract service providers to assist in the performance of our
research and development and manufacturing activities. Expenditures to CROs and CDMOs represent significant costs in preclinical and clinical
development. Subject to required notice periods and our obligations under binding purchase orders and any cancellation fees that we may be obligated to
pay, we can elect to discontinue the work under these agreements at any time. We may also enter into additional collaborative research, contract research,
manufacturing, and supplier agreements in the future, which may require upfront payments and/or long-term commitments of cash.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk related to changes in interest rates. We had cash, cash equivalents and available-for-sale securities of $381.7 million
as of December 31, 2021, consisting of cash and investments in money market funds, U.S. Treasury securities, corporate debt securities, asset-based
securities and supranational securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of
U.S. interest rates, particularly because a significant portion of our investments are in short-term securities. Due to the low risk profile of our investments,
an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.
We contract with CROs, CDMOs and certain other vendors to perform services outside the United States. We may be subject to fluctuations in
foreign currency rates in connection with certain of these agreements. Transactions denominated in currencies other than the U.S. dollar are recorded based
on exchange rates at the time such transactions arise. As of December 31, 2021, substantially all of our total liabilities were denominated in the U.S. dollar.
Item 8. Financial Statements and Supplementary Data
Our financial statements, together with the report of our independent registered public accounting firm (PCAOB ID: 42), appear on pages F-4
through F-31 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures as of December 31, 2021. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules
and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be
disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management,
including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their
objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation of our disclosure controls and procedures as of December 31, 2021, our Chief Executive Officer and Chief Financial
Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed by, or under the supervision of our Chief
Executive Officer and our Chief Financial Officer, and effected by our board of directors, management and other personnel 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.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the original Internal
Control—Integrated Framework updated in 2013. Based on that assessment, our management concluded that, as of December 31, 2021, our internal control
over financial reporting was effective.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2021, has been audited by Ernst & Young LLP, an
independent registered public accounting firm, as stated in their report which appears herein.
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Changes in Internal Control Over Financial Reporting
No changes occurred in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) during
the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting. Further, we have not experienced any material impact to our internal controls over financial reporting as a result of our employees working
remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the impact the COVID-19 pandemic has on the operating
effectiveness of our internal controls.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of IVERIC bio, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited IVERIC bio, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our
opinion, IVERIC bio, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021,
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of the Company as of December 31, 2021 and 2020, and the consolidated statements of operations, comprehensive income (loss),
stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021 and the related notes and our report dated
February 24, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Iselin, New Jersey
February 24, 2022
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Item 9B. Other Information
As previously disclosed, Glenn P. Sblendorio, Chief Executive Officer, intended to and did enter into a pre-arranged stock trading plan in
November 2021 pursuant to Exchange Act Rule 10b5-1(c). Mr. Sblendorio’s plan provides for the potential sale between December 21, 2021 and
December 21, 2022 of up to 100,000 shares of our common stock owned by Mr. Sblendorio and up to 125,000 shares of common stock issuable upon the
exercise of vested stock options, which, in the aggregate represent approximately 11% of Mr. Sblendorio’s combined holdings in our common stock as of
November 9, 2021, inclusive of Mr. Sblendorio’s shares of common stock and vested and unvested equity awards and excluding any future equity grants.
As of the date of this Annual Report on Form 10-K, Mr. Sblendorio has sold 60,000 shares of our common stock and 59,377 shares of our common stock
following the exercise of vested stock options under this plan.
Mr. Sblendorio’s plan is permitted under our Insider Trading Policy and Stock Retention and Ownership Guidelines. The foregoing information is
being provided on a voluntary basis. Actual transactions completed under Mr. Sblendorio’s plan have been and will continue to be reported from time to
time on Forms 4 filed by Mr. Sblendorio with the Securities and Exchange Commission. Except as may be required by law, we are not undertaking to
report modifications, terminations or other activities under Mr. Sblendorio’s plan or the adoption, modification, termination or other activities under any
future Rule 10b5-1 trading plans established by Mr. Sblendorio or any other officers or directors.
Item 9C. Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
PART III
The information required by this item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Shareholders and is incorporated in
this Annual Report on Form 10-K by reference.
Delinquent Section 16(a) Reports
The information required by this item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Shareholders and is incorporated in
this Annual Report on Form 10-K by reference.
Code of Ethics
We have adopted a code of business conduct and ethics, or the Code of Ethics, that applies to our directors and officers (including our principal
executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions) as well as our other
employees. In December 2019, we amended our Code of Ethics to better align the Code of Ethics with our stage of development, including, among other
things, updates relating to compliance with laws, rules and regulations applicable to pharmaceutical development, interactions with healthcare providers,
data privacy and international trade regulations. In early 2020, we provided training to our employees on our amended Code of Ethics and have been
providing annual training for all employees on our Code of Ethics.
A copy of our Code of Ethics is available on our website. We intend to post on our website all disclosures that are required by applicable law, the
rules of the SEC or Nasdaq concerning any amendment to, or waiver of, our Code of Ethics.
Director Nominees
The information required by this item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Shareholders and is incorporated in
this Annual Report on Form 10-K by reference.
Audit Committee
We have separately designated a standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Additional
information regarding the Audit Committee that is required by this item will be set forth in our Proxy Statement for the 2022 Annual Meeting of
Shareholders and is incorporated in this Annual Report on Form 10-K by reference.
Audit Committee Financial Expert
154
Table of Contents
Our board of directors has determined that Jane Henderson is an "audit committee financial expert" as defined by Item 407(d)(5) of Regulation S-
K of the Exchange Act and Ms. Henderson and the other members of our Audit Committee are "independent" under the rules of The Nasdaq Global Select
Market.
Item 11. Executive Compensation
The information required by this item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Shareholders and is incorporated in
this Annual Report on Form 10-K by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Shareholders and is incorporated in
this Annual Report on Form 10-K by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Shareholders and is incorporated in
this Annual Report on Form 10-K by reference.
Item 14. Principal Accountant Fees and Services
The information required by this item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Shareholders and is incorporated in this
Annual Report on Form 10-K by reference.
155
Table of Contents
Item 15. Exhibits and Financial Statement Schedules
(1) Financial Statements
PART IV
The following financial statements are filed as part of this Annual Report on Form 10-K:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Page
2
4
5
6
7
8
9
No financial statement schedules have been filed as part of this Annual Report on Form 10-K because they are not applicable, not required or
because the information is otherwise included in our financial statements or notes thereto.
(3) Exhibits
Exhibit
Number
Description of Exhibit
2.1 †
*
3.1
Agreement and Plan of Merger, dated October 30, 2018, by and among the Registrant, Orion Ophthalmology Merger Sub Inc., Orion
Ophthalmology LLC, Inception 4, Inc., and solely in its capacity as equityholder representative, Fortis Advisors LLC (incorporated by
reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed on October 31, 2018)
Restated Certificate of Incorporation of the Registrant, as amended on April 16, 2019 (incorporated by reference to Exhibit 3.1 of the
Registrant's Annual Report on Form 10-K filed on March 4, 2021)
3.2 Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.4 of the Registrant's Registration Statement on
Form S-1, as amended (File No. 333-190643))
4.1 Description of Registered Securities of the Registrant (incorporated by reference to Exhibit 4.1 of the Registrant's Annual Report on Form
4.2
10-K filed on February 27, 2020)
Specimen Stock Certificate evidencing the shares of common stock (incorporated by reference to Exhibit 4.2 of the Registrant's Annual
Report on Form 10-K filed on February 27, 2020)
10.1 + Amended and Restated 2007 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 of the Registrant's Registration
Statement on Form S-1 (File No. 333-190643))
10.2 + Form of Incentive Stock Option Agreement under Amended and Restated 2007 Stock Incentive Plan (incorporated by reference to Exhibit
10.2 of the Registrant's Registration Statement on Form S-1 (File No. 333-190643))
10.3 + Form of Nonstatutory Stock Option Agreement under Amended and Restated 2007 Stock Incentive Plan (incorporated by reference to
Exhibit 10.3 of the Registrant's Registration Statement on Form S-1 (File No. 333-190643))
10.4 + 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 of the Registrant's Annual Report on Form 10-K filed on March 2,
2015)
10.5 + Amendment No. 1 to Stock Incentive Plan, adopted June 4, 2015 (incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly
Report on Form 10-Q filed on August 10, 2015)
10.6 + Form of Incentive Stock Option Agreement under 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 of the Registrant's
Registration Statement on Form S-1, as amended (File No. 333-190643))
10.7 + Form of Nonqualified Stock Option Agreement under 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 of the
Registrant's Registration Statement on Form S-1, as amended (File No. 333-190643))
156
Table of Contents
10.8 + Form of Restricted Stock Unit Agreement under 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 of the Registrant's
Annual Report on Form 10-K filed on March 2, 2015)
10.9 + 2016 Employee Stock Purchase Plan (incorporated by reference to Exhibit 99.1 of the Registrant's Registration Statement on Form S-8
(File No. 333-211916))
10.10 + 2019 Inducement Stock Incentive Plan of the Registrant (incorporated by reference to Exhibit 99.1 of the Registrant's Registration
Statement on Form S-8 (File No. 333-234404) filed with the Securities and Exchange Commission on October 31, 2019)
10.11 + Amendment No. 1 to 2019 Inducement Stock Incentive Plan of the Registrant (incorporated by reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q filed on May 7, 2020)
10.12 + Amendment No. 2 to 2019 Inducement Stock Incentive Plan of the Registrant (incorporated by reference to Exhibit 10.12 of the
Registrant's Annual Report on Form 10-K filed on March 4, 2021)
10.13 + Amendment No. 3 to 2019 Inducement Stock Incentive Plan of the Registrant (incorporated by reference to Exhibit 10.3 of the
Registrant's Quarterly Report on Form 10-Q filed on November 9, 2021)
10.14 + Amendment No. 4 to 2019 Inducement Stock Incentive Plan of the Registrant
10.15 + Form of Restricted Stock Unit Agreement under the 2019 Inducement Stock Incentive Plan of the Registrant (incorporated by reference to
Exhibit 99.2 of the Registrant's Registration Statement on Form S-8 (File No. 333-234404) filed with the Securities and Exchange
Commission on October 31, 2019)
10.16 + Form of Nonstatutory Stock Option Agreement under the 2019 Inducement Stock Incentive Plan of the Registrant (incorporated by
reference to Exhibit 99.3 of the Registrant's Registration Statement on Form S-8 (File No. 333-234404) filed with the Securities and
Exchange Commission on October 31, 2019)
10.17 † Amended and Restated Exclusive License Agreement, dated as of September 12, 2011, by and between the Registrant and Archemix
Corp., as amended by Amendment No. 1 thereto dated December 20, 2011 and supplemented by a letter agreement, dated as of April 30,
2012 (incorporated by reference to Exhibit 10.11 of the Registrant's Registration Statement on Form S-1 (File No. 333-190643))
10.18 † Exclusive License Agreement with Know-How by and among The University of Florida Research Foundation, Incorporated, The Trustees
of the University of Pennsylvania and the Registrant dated June 6, 2018 (incorporated by reference to Exhibit 10.1 of the Registrant's
Quarterly Report on Form 10-Q filed on August 1, 2018)
10.19 ^ First Amendment to The Exclusive License Agreement with Know-How by and among The University of Florida Research Foundation,
Incorporated, The Trustees of the University of Pennsylvania and the Registrant dated December 13, 2021
10.20 ^ Exclusive License Agreement with Know-How by and among The Trustees of the University of Pennsylvania, The University of Florida
Research Foundation, Incorporated, and the Registrant dated April 10, 2019 (incorporated by reference to Exhibit 10.1 of the Registrant's
Quarterly Report on Form 10-Q filed on August 1, 2019)
10.21 ^ Amendment No. 1 to Exclusive License Agreement with Know-How, dated May 1, 2020 (incorporated by reference to Exhibit 10.3 of the
Registrant's Quarterly Report on Form 10-Q filed on May 7, 2020)
10.22 ^ Exclusive License Agreement by and between The University of Massachusetts and the Registrant dated July 22, 2019 (incorporated by
reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q filed on November 12, 2019)
10.23 + Letter Agreement between the Registrant and Glenn P. Sblendorio, dated January 4, 2016 (incorporated by reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q filed on May 9, 2016)
10.24 + Letter Agreement between the Registrant and Glenn P. Sblendorio, dated January 4, 2016 (incorporated by reference to Exhibit 10.2 of the
Registrant's Quarterly Report on Form 10-Q filed on May 9, 2016)
10.25 + Letter Agreement between the Registrant and Glenn P. Sblendorio, dated April 24, 2017 (incorporated by reference to Exhibit 10.2 of the
Registrant's Quarterly Report on Form 10-Q filed on August 2, 2017)
10.26 + Letter Agreement between the Registrant and Glenn P. Sblendorio, dated November 3, 2021 (incorporated by reference to Exhibit 10.4 of
the Registrant's Quarterly Report on Form 10-Q filed on November 9, 2021)
10.27 + Letter Agreement between the Registrant and David F. Carroll, dated April 24, 2017 (incorporated by reference to Exhibit 10.3 of the
Registrant's Quarterly Report on Form 10-Q filed on August 2, 2017)
10.28 + Letter Agreement between the Registrant and David F. Carroll, dated December 11, 2019 (incorporated by reference to Exhibit 10.34 of
the Registrant's Annual Report on Form 10-K filed on February 27, 2020)
10.29 + Promotion Letter between the Registrant and Keith Westby, dated January 30, 2017 (incorporated by reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q filed on May 3, 2017)
10.30 + Letter Agreement between the Registrant and Keith Westby, dated December 11, 2019 (incorporated by reference to Exhibit 10.36 of the
Registrant's Annual Report on Form 10-K filed on February 27, 2020)
10.31 + Offer Letter between the Registrant and Pravin U. Dugel dated March 11, 2020 (incorporated by reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q filed on August 6, 2020)
157
Table of Contents
10.32 + Letter Agreement between the Registrant and Pravin U. Dugel dated March 11, 2020 (incorporated by reference to Exhibit 10.2 of the
Registrant's Quarterly Report on Form 10-Q filed on August 6, 2020)
10.33 + Offer Letter between the Registrant and Christopher Simms dated June 16, 2021
10.34 + Letter Agreement between the Registrant and Christopher Simms dated June 16, 2021
10.35 + Offer Letter between the Registrant and Tony Gibney dated November 19, 2021
10.36 + Letter Agreement between the Registrant and Tony Gibney dated November 10, 2021
10.37 + Retirement and Consulting Agreement between the Registrant and David Guyer dated April 5, 2021 (incorporated by reference to Exhibit
10.1 of the Registrant's Current Report on Form 8-K filed on April 5, 2021)
10.38 + Form of Indemnification Agreement between the Registrant and each Director and Executive Officer (incorporated by reference to
Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q filed on August 5, 2016)
10.39 + Non-Employee Director Compensation Policy of the Registrant (incorporated by reference to Exhibit 10.3 of the Registrant's Quarterly
Report on Form 10-Q filed on August 1, 2019)
10.40 + Amendment No. 1 to Non-Employee Director Compensation Policy of the Registrant (incorporated by reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q filed on November 3, 2020)
10.41 + Amendment No. 2 to Non-Employee Director Compensation Policy of the Registrant (incorporated by reference to Exhibit 10.2 of the
Registrant's Quarterly Report on Form 10-Q filed on May 5, 2021)
10.42 + Amendment No. 3 to Non-Employee Director Compensation Policy of the Registrant (incorporated by reference to Exhibit 99.1 of the
14.1
21.1
23.1
31.1
31.2
32.1
32.2
Registrant's Current Report on Form 8-K filed on January 11, 2022)
Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 14.1 of the Registrant's Annual Report on
Form 10-K filed February 27, 2020)
List of Subsidiaries
Consent of Ernst & Young LLP
Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
Certification of principal executive officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
Certification of principal financial officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Label Linkbase Document
101.PRE XBRL Taxonomy Presentation Linkbase Document
†
Confidential treatment has been granted as to certain portions, which portions have been omitted and separately filed with the Securities and
Exchange Commission.
+ Management contract or compensatory plan or arrangement filed in response to Item 15(a)(3) of the Instructions to the Annual Report on Form 10-K.
Schedules have been omitted from this exhibit pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished
*
supplementally to the Securities and Exchange Commission upon request; provided, however, that the registrant may request confidential treatment
for any document so furnished.
Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
^
Item 16. Form 10-K Summary
None.
158
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: February 24, 2022
IVERIC bio, Inc.
By:
/s/ GLENN P. SBLENDORIO
Glenn P. Sblendorio
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, 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/ GLENN P. SBLENDORIO
Glenn P. Sblendorio
/s/ DAVID F. CARROLL
David F. Carroll
/s/ ADRIENNE L. GRAVES
Adrienne L. Graves, Ph.D.
/s/ MARK BLUMENKRANZ
Mark Blumenkranz
/s/ AXEL BOLTE
Axel Bolte
/s/ JANE P. HENDERSON
Jane P. Henderson
/s/ CHRISTINE MILLER
Christine Miller
/s/ CALVIN W. ROBERTS
Calvin W. Roberts, M.D.
Chief Executive Officer and Director (principal executive
officer)
February 24, 2022
Senior Vice President and Chief Financial Officer (principal
financial and accounting officer)
February 24, 2022
Chairman of the Board of Directors
February 24, 2022
Director
Director
Director
Director
Director
159
February 24, 2022
February 24, 2022
February 24, 2022
February 24, 2022
February 24, 2022
Table of Contents
IVERIC bio, Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
2
4
5
6
7
8
9
F-1
Table of Contents
To the Stockholders and the Board of Directors of IVERIC bio, Inc.
Opinion on the Financial Statements
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of IVERIC bio, Inc. (the Company) as of December 31, 2021 and 2020, the related
consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December
31, 2021 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's
internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 24, 2022 expressed an unqualified
opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit 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 consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion
on the critical audit matter or on the accounts or disclosures to which it relates.
Description of the Matter
Accrued research and development costs
During 2021, the Company incurred $85 million of research and development expenses and accrued $14 million for
research and development expenses as of December 31, 2021. As described in Note 2 to the Financial Statements, service
agreements with third party service providers including contract research organizations (“CROs”) and contract development
and manufacturing organizations (“CMOs”) comprise a significant component of the Company’s research and development
activities. The timing and the amount of payments required under each individual arrangement are often different from the
pattern of costs actually incurred. The Company accrues the cost of the services with these third-party organizations based
on the extent of activities completed by vendors and measured by internal project managers.
Auditing management’s accounting for accrued contract research and development expenses is especially challenging because
amounts owed to third parties are accrued based upon estimates of the proportion of work completed for each of the individual
clinical trial and manufacturing activities in accordance with the unique terms and conditions of each respective CRO and CMO
agreement. Estimating the proportion of work completed requires the application of judgments by management that are dependent
on inputs, such as the number of sites activated, the number of patients enrolled and the number of patient visits, obtained from
clinical personnel and third-party service providers and compiled from multiple sources.
F-2
Table of Contents
How We Addressed the Matter
in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the
completeness and valuation of accrued research and development expenses, including controls over the judgments made by
management and the data obtained from clinical personnel and third-party service providers.
To test the research and development accrual, our audit procedures included, among others, testing the accuracy and
completeness of the underlying data used in the estimates and evaluating the estimated proportion of work completed for each of
the individual clinical trial and manufacturing activities used by management to estimate the recorded accruals. We inspected the
contracts and any amendments to the contracts with third-party service providers, assessed the progress of clinical trials and other
research and development projects with the Company’s research and development personnel that oversee the clinical trials, and
obtained information directly from third parties, which included the third parties’ estimates of costs incurred to date. We also
inspected subsequent invoices received from third parties.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2008.
Iselin, New Jersey
February 24, 2022
F-3
IVERIC bio, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
Table of Contents
Assets
Current assets
Cash and cash equivalents
Available for sale securities
Prepaid expenses and other current assets
Income tax receivable
Total current assets
Property and equipment, net
Right-of-use assets, net
Other assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities
Accrued research and development expenses
Accounts payable and accrued expenses
Lease liability, current
Total current liabilities
Lease liability, non-current
Total liabilities
Stockholders' equity
Preferred stock—$0.001 par value, 5,000,000 shares authorized, no shares issued or outstanding
Common stock—0.001 par value, 200,000,000 shares authorized, 115,277,012 and 90,120,797 shares
issued and outstanding at December 31, 2021 and December 31, 2020, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Total stockholders' equity
Total liabilities and stockholders' equity
December 31, 2021
December 31, 2020
$
$
$
$
261,447 $
120,302
5,739
—
387,488
348
1,522
—
389,358 $
14,403 $
12,856
952
28,211
619
28,830
—
115
1,040,098
(679,595)
(90)
360,528
389,358 $
66,373
143,674
4,791
1,765
216,603
26
120
5
216,754
12,284
12,792
54
25,130
61
25,191
—
90
756,543
(565,073)
3
191,563
216,754
The accompanying notes are an integral part of these financial statements.
F-4
Table of Contents
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Interest income
Other income (expense), net
Loss before income tax benefit
Income tax benefit
Net loss
Net loss per common share:
Basic and diluted
Weighted average common shares outstanding:
Basic and diluted
IVERIC bio, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
2021
Years ended December 31,
2020
2019
85,068 $
29,689
114,757
(114,757)
245
(10)
(114,522)
—
(114,522) $
62,784 $
25,952
88,736
(88,736)
500
(6)
(88,242)
3,695
(84,547) $
39,644
21,628
61,272
(61,272)
2,151
151
(58,970)
111
(58,859)
(1.12) $
(1.14) $
(1.39)
101,866
74,185
42,224
$
$
$
The accompanying notes are an integral part of these financial statements.
F-5
Table of Contents
IVERIC bio, Inc.
Consolidated Statements of Comprehensive Loss
(in thousands)
Net loss
Other comprehensive income
Unrealized gain (loss) on available-for-sale securities, net of tax
Other comprehensive income (loss)
Comprehensive loss
2021
Years ended December 31,
2020
2019
(114,522) $
(84,547) $
(58,859)
(93)
(93)
(114,615) $
3
3
(84,544) $
—
—
(58,859)
$
$
The accompanying notes are an integral part of these financial statements.
F-6
Table of Contents
IVERIC bio, Inc.
Consolidated Statements of Stockholders' Equity
(in thousands)
Junior Series A
Preferred Stock
Common Stock
Shares
Amount
Shares
Amount
Additional
paid-in
capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Balance at December 31, 2018
Issuance of common stock through underwritten offering, net of
issuance costs
Issuance of common stock in connection with license acquisition
Issuance of common stock under employee stock compensation
plans
Share-based compensation
Net loss
Balance at December 31, 2019
Issuance of common stock and pre-funded warrants through
underwritten offering, net of issuance costs
Issuance of common stock in connection with private offering
Issuance of common stock under the exercise of pre-funded
warrants
Issuance of common stock under employee stock compensation
plans
Share-based compensation
Net loss
Unrealized gain on available for sale securities, net of tax
Balance at December 31, 2020
Issuance of common stock through underwritten offering, net of
issuance costs
Issuance of common stock under employee stock compensation
plans
Share-based compensation
Net loss
Unrealized loss on available for sale securities, net of tax
Balance at December 31, 2021
—
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
41,397
$
41
$
545,585
$
(421,667)
$
—
$
123,959
7,750
75
405
—
—
49,627
$
28,504
8,649
2,500
841
—
—
—
90,121
$
23,748
1,408
—
—
—
8
—
1
—
—
50
28
9
2
1
—
—
—
90
24
1
—
—
—
42,557
85
272
9,180
—
—
—
—
—
(58,859)
$
597,679
$
(480,526)
$
116,855
33,228
(2)
460
8,323
—
—
—
—
—
—
—
(84,547)
—
$
756,543
$
(565,073)
$
270,295
2,015
11,245
—
—
—
—
—
(114,522)
—
115,277
$
115
$
1,040,098
$
(679,595)
$
—
—
—
—
—
—
—
—
—
—
—
—
3
3
—
—
—
—
(93)
(90)
$
$
$
42,565
85
273
9,180
(58,859)
117,203
116,883
33,237
—
461
8,323
(84,547)
3
191,563
270,319
2,016
11,245
(114,522)
(93)
360,528
The accompanying notes are an integral part of these financial statements.
F-7
Table of Contents
IVERIC bio, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Operating Activities
Net loss
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation
Amortization of premium and discounts on investment securities
Gain on sale of property and equipment
Share-based compensation
Change in working capital
Stock-based consideration in connection with license acquisition
Changes in operating assets and liabilities:
Income tax receivable
Other assets
Prepaid expense and other assets
Accrued interest receivable
Accrued research and development expenses
Accounts payable and accrued expenses
Net cash used in operating activities
Investing Activities
Purchase of marketable securities
Maturities of marketable securities
Purchase of property and equipment
Proceeds from sale of assets
Net cash provided by (used in) investing activities
Financing Activities
Proceeds from follow-on public offering, net
Proceeds from issuance of common stock related to private placement
Proceeds from employee stock plan purchases and stock option exercises
Net cash provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents
Beginning of period
End of period
Supplemental disclosure of cash paid
Income taxes received, net
Supplemental disclosures of non-cash information related to investing activities
Change in unrealized gain (loss) on available for sale securities, net of tax
Operating right-of-use assets obtained in exchange for lease obligations
Years ended December 31,
2021
2020
2019
$
(114,522)
$
(84,547)
$
(58,859)
39
1,182
—
11,245
54
—
1,765
(943)
438
2,119
64
(98,559)
(142,821)
164,480
(361)
—
21,298
270,319
—
2,016
272,335
195,074
66,373
261,447
(1,765)
(93)
2,086
$
$
$
$
143
462
—
8,323
—
—
—
(2,742)
(323)
5,424
7,163
(66,097)
(143,810)
—
—
—
(143,810)
116,883
33,237
461
150,581
(59,326)
125,699
66,373
(3,327)
3
166
$
$
$
$
162
—
(150)
9,180
—
85
1,765
—
45
—
(477)
(241)
(48,490)
—
—
—
150
150
42,565
—
273
42,838
(5,502)
131,201
125,699
(1,893)
—
1,469
$
$
$
$
The accompanying notes are an integral part of these financial statements.
F-8
Table of Contents
IVERIC bio, Inc.
Notes to Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
1. Business
Description of Business and Organization
IVERIC bio, Inc. (“the Company” or “IVERIC”) is a science-driven biopharmaceutical company focused on the discovery and development of novel
treatments for retinal diseases with significant unmet medical needs. The Company is committed to having a positive impact on patients’ lives by
delivering high-quality, safe and effective treatments designed to address debilitating retinal diseases, including earlier stages of age-related macular
degeneration (“AMD”).
The Company’s lead asset is its clinical stage product candidate Zimura® (avacincaptad pegol), a complement C5
inhibitor. It is currently targeting the following diseases with Zimura:
• Geographic Atrophy (“GA”), which is the advanced stage of AMD and is characterized by marked thinning or atrophy of retinal tissue, leading to
irreversible loss of vision;
•
•
intermediate AMD, which is an earlier stage of AMD that precedes GA; and
autosomal recessive Stargardt disease (“STGD1”), which is an orphan inherited condition characterized by progressive damage to the central
portion of the retina (the “macula”) and other retinal tissue, leading to loss of vision.
In July 2021, the Company completed patient enrollment for GATHER2, its Phase 3 clinical trial evaluating the safety and efficacy of Zimura for
the treatment of GA secondary to AMD. The Company has also received a written agreement from the U.S. Food and Drug Administration (“FDA”) under
a Special Protocol Assessment ("SPA") for the overall design of GATHER2. The Company expects topline data from the GATHER2 trial to become
available during the second half of 2022, approximately one year after the enrollment of the last patient plus the time needed for database lock and analysis.
The Company also plans to initiate a Phase 3 clinical trial evaluating Zimura for patients with intermediate AMD during the second half of 2022.
In addition to Zimura, the Company is developing its preclinical product candidate IC-500, a High temperature requirement A serine peptidase 1
protein (“HtrA1”) inhibitor, for GA and potentially other age-related retinal diseases. Based on current timelines, the Company expects to submit an
investigational new drug application to the FDA for IC-500 in mid-2023.
The Company’s portfolio also includes two preclinical stage gene therapy product candidates (IC-100 and IC-200)
and several ongoing gene therapy research programs, each of which uses adeno-associated virus (“AAV”) for gene delivery. These AAV mediated gene
therapy programs are targeting the following orphan inherited retinal diseases (“IRDs”):
•
•
•
•
•
rhodopsin-mediated autosomal dominant retinitis pigmentosa (“RHO-adRP”), which is characterized by progressive and severe bilateral loss of
vision leading to blindness;
IRDs associated with mutations in the BEST1 gene, including Best vitelliform macular dystrophy (“Best disease”);
Leber Congenital Amaurosis type 10 (“LCA10”), which is characterized by severe bilateral loss of vision at or soon after birth;
STGD1; and
IRDs associated with mutations in the USH2A gene, which include Usher syndrome type 2A, and USH2A-associated non-syndromic autosomal
recessive retinitis pigmentosa.
F-9
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
1. Business (Continued)
As the Company focuses its efforts on and prioritize the development and potential commercialization of Zimura, it has been considering its
development options for IC-100 and IC-200, which the Company has been developing for RHO-adRP and BEST1-related IRDs, respectively. It currently
plans to seek a collaborator for the future development and potential commercialization of these product candidates.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America ("GAAP") and include all adjustments necessary for the fair presentation of the Company's financial position for the periods presented.
The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been
eliminated in consolidation.
Segment and geographic information
Operating segments are defined as components of an enterprise about 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 in assessing performance. The Company views its
operations and manages its business in one operating and reporting segment.
Use of Estimates
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and judgments that
affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates and judgments on historical experience
and on various other assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities reported in the Company's
Consolidated Balance Sheets and the amount of expenses reported for each of the periods presented are affected by estimates and assumptions, which are
used for, but not limited to, accounting for research and development costs and accounting for share-based compensation. Actual results could differ from
those estimates.
Cash and Cash Equivalents and Available-for-Sale Securities
The Company considers all highly liquid investments with an original maturity of 90 days or less when purchased to be cash equivalents. The carrying
amounts reported in the Company's Consolidated Balance Sheets for cash and cash equivalents are valued at cost, which approximates their fair value.
The Company considers securities with original maturities of greater than 90 days to be available-for-sale securities. Available-for-sale securities
with original maturities of greater than one year are recorded as non-current assets. Available-for-sale securities are recorded at fair value and unrealized
gains and losses are recorded within other comprehensive income.
On a quarterly basis, the Company reviews the status of each security in an unrealized loss position, to evaluate the existence of potential credit
losses. The Company first considers whether it intends to sell, or if it is more likely than not that the Company will be required to sell the security before
recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down
to fair value through income. For securities that do not meet this criteria, the Company considers a number of factors to determine if the decline in fair
value has resulted from credit losses or other factors, including but not limited to: (1) the extent of the decline; (2) changes to the rating of the security by a
rating agency; (3) any adverse conditions specific to the security; and (4) other market conditions that may affect the fair value of the security. If this
assessment indicates that a credit loss exists and the present value of cash flows expected to be collected is less than the amortized cost basis, an allowance
for credit losses is required for the credit loss. Any impairment that has not been recorded through an allowance for credit losses is recognized in other
comprehensive income.
As of December 31, 2021, the Company had cash, cash equivalents and available-for-sale securities of approximately $381.7 million. The Company
believes that its cash, cash equivalents and available-for-sale securities as of December 31, 2021 will be sufficient to fund its operations and capital
expenditure requirements as currently planned for at least the next 12 months from the filing of the Company's Annual Report on Form 10-K.
F-10
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
2. Summary of Significant Accounting Policies (Continued)
Concentration of Credit Risk
The Company's financial instruments that are exposed to concentration of credit risk consist primarily of cash, cash equivalents and available-for-sale
securities. The Company maintains its cash in bank accounts, the balances of which generally exceed federally insured limits. The Company maintains its
cash equivalents and available-for-sale securities in investments in money market funds, in U.S. Treasury securities, investment-grade corporate debt
securities, asset-backed securities and debt instruments issued by foreign governments with original maturities of 90 days or less.
The Company believes it is not exposed to significant credit risk on its cash, cash equivalents and available-for-sale securities.
Concentration of Suppliers
The Company historically relied upon a single third-party manufacturer to provide the drug substance for Zimura on a purchase order basis. The
Company also historically relied upon a single third-party manufacturer to provide fill/finish services for clinical supplies of Zimura. The Company has
engaged one additional third-party manufacturer to provide drug substance for Zimura and one additional third-party manufacturer to provide fill/finish
services for clinical supplies of Zimura. In addition, the Company currently relies upon a single third-party supplier to supply on a purchase order basis the
polyethylene glycol starting material used to manufacture Zimura. Furthermore, the Company and its contract manufacturers currently rely upon sole-
source suppliers of certain raw materials and other specialized components of production used in the manufacture and fill/finish of Zimura. The Company
currently relies exclusively upon a single third-party contract manufacturer for IC-100 and IC-200, and also relies on sole-source suppliers for certain
starting materials used in the manufacture of such product candidates. The Company currently relies upon a single third-party contract manufacturer to
provide the drug substance for IC-500 for preclinical toxicology studies and early-stage clinical trials and a single third-party contract manufacturer to
conduct fill/finish services for IC-500 drug product. If the Company’s third-party manufacturers or fill/finish service providers should become unavailable
to the Company for any reason, including as a result of capacity constraints, different business objectives, financial difficulties, insolvency or the COVID-
19 pandemic, the Company believes that there are a limited number of potential replacement manufacturers, and the Company likely would incur added
costs and delays in identifying or qualifying such replacements.
Foreign Currency Translation
The Company considers the U.S. dollar to be its functional currency. Expenses denominated in foreign currencies are translated at the exchange
rate on the date the expense is incurred. The effect of exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars is
included in the Consolidated Statements of Operations and Comprehensive Loss. Foreign exchange transaction gains and losses are included in the results
of operations and are not material in the Company's financial statements.
Financial Instruments
Cash equivalents are reflected in the accompanying financial statements at fair value. The carrying amount of accounts payable and accrued expenses,
including accrued research and development expenses, approximates fair value due to the short-term nature of those instruments.
Accounting Standards Codification, or ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell
an asset, or paid to transfer a liability, in the principal or most advantageous market in an orderly transaction between market participants on the
measurement date. The fair value standard also establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value.
The Company reviews investments on a periodic basis for other than temporary impairments. This review is subjective as it requires management
to evaluate whether an event or change in circumstances has occurred in the period that may have a significant adverse effect on the fair value of the
investment. The Company uses the market approach to measure fair value for its cash, cash equivalents and available-for-sale financial assets. The market
approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The valuation hierarchy is
based upon
F-11
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
2. Summary of Significant Accounting Policies (Continued)
the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:
Level 1—inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market. The Company's
Level 1 assets consist of investments in money market funds and U.S. Treasury securities.
Level 2—inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations
in which all significant inputs are observable for substantially the full term of the asset or liability. The Company's Level 2 assets consist of
investments in investment-grade corporate debt securities.
Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability. The
Company does not hold any assets that are measured using Level 3 inputs.
•
•
•
Leases
The Company determines if an arrangement contains a lease at inception. For arrangements where the Company is the lessee, it recognizes a right-of-use
("ROU") asset and operating lease liability on the Company's Consolidated Balance Sheet. ROU assets represent the Company's right to use the underlying
asset for the lease term and the lease obligation represents the Company's commitment to make the lease payments arising from the lease. Right-of-use
lease assets and obligations are recognized at the commencement date based on the present value of remaining lease payments over the lease term. As the
Company’s leases do not provide an implicit discount rate, the Company has used an estimated incremental borrowing rate based on the information
available at the commencement date in determining the present value of lease payments. ROU assets include any lease payments made prior to
commencement and excludes any lease incentives. The lease term may include options to extend or terminate the lease when it is reasonably certain that
the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease
or expectations regarding the terms. Variable lease costs such as common area costs and property taxes are expensed as incurred. For all office lease
agreements the Company combines lease and nonlease components. Leases with an initial term of 12 months or less are not recorded on the Company's
Consolidated Balance Sheet.
Property and Equipment
Property and equipment, which consists mainly of clinical equipment, laboratory equipment, computers, software, other office equipment, automobiles
and leasehold improvements, are carried at cost less accumulated depreciation. Depreciation is computed over the estimated useful lives of the respective
assets, generally three to ten years, using the straight-line method. Amortization of leasehold improvements is recorded over the shorter of the lease term or
estimated useful life of the related asset.
Research and Development
The Company's research and development expenses primarily consist of costs associated with the manufacturing, development, and preclinical and
clinical testing of the Company's product candidates and costs associated with its gene therapy research programs. The Company's research and
development expenses consist of:
•
•
external research and development expenses incurred under arrangements with third parties, such as academic research collaborators, contract
research organizations ("CROs") and contract development and manufacturing organizations ("CDMOs") and other vendors for the
production and analysis of drug substance and drug product; and
employee-related expenses for employees dedicated to research and development activities, including salaries, benefits and share-based
compensation expense.
Research and development expenses also include costs of acquired product licenses, in-process research and development, and related technology rights
where there is no alternative future use, costs of prototypes used in research and development, consultant fees and amounts paid to collaborators.
F-12
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
2. Summary of Significant Accounting Policies (Continued)
All research and development expenses are charged to operations as incurred in accordance with ASC 730, Research and Development. The Company
accounts for non-refundable advance payments for goods and services that will be used in future research and development activities as expenses when the
service has been performed or when the goods have been received, rather than when the payment is made.
Income Taxes
The Company utilizes the liability method of accounting for deferred income taxes, as set forth in ASC 740, Income Taxes. Under this method,
deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the
tax basis of assets and liabilities. A valuation allowance is established against deferred tax assets when, based on the weight of available evidence, it is
more likely than not that some or all of the deferred tax assets will not be realized. The Company's policy is to record interest and penalties on uncertain tax
positions as income tax expense.
Share-Based Compensation
The Company follows the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of
compensation expense for all share-based payment awards made to employees, non-employee directors and certain other individuals, including employee
stock options, restricted stock units (“RSUs”) and options granted to employees to purchase shares under the 2016 Employee Stock Purchase Plan (the
“ESPP”). Share-based compensation expense is based on the grant date fair value estimated in accordance with the provisions of ASC 718 and is generally
recognized as an expense over the requisite service period, net of estimated forfeitures. For grants containing performance-based vesting provisions,
expense is recognized over the estimated achievement period only when the performance-based milestone is deemed probable of achievement. If
performance-based milestones are later determined not to be probable of achievement, then all previously recorded stock-based compensation expense
associated with such options will be reversed during the period in which the Company makes this determination.
The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from its estimates.
The Company uses historical data to estimate pre-vesting forfeitures and record share-based compensation expense only for those awards that are expected
to vest. To the extent that actual forfeitures differ from the Company's estimates, the difference is recorded as a cumulative adjustment in the period the
estimates were revised.
Stock Options
The Company estimates the fair value of stock options granted to employees, non-employees and non-employee directors on the date of grant using the
Black-Scholes option-pricing model. The Company's computation of stock-price volatility is based on daily historical volatility during the time period that
corresponds to the expected option term. The Company's computation of expected term is determined using the expected term of stock option grants to
employees based on an analysis of actual option exercises. The Company utilizes a dividend yield of zero based on the fact that the Company has never
paid cash dividends to stockholders and has no current intentions to pay cash dividends. The risk-free interest rate is based on the zero-coupon U.S.
Treasury yield at the date of grant for a term equivalent to the expected term of the option.
The weighted-average assumptions used to estimate grant date fair value of stock options using the Black-Scholes option pricing model were as follows
for the years ended December 31, 2021, 2020 and 2019:
Expected common stock price volatility
Risk-free interest rate
Expected term of options (years)
Expected dividend yield
RSUs
2021
114%
0.31%-1.22%
5.2
—
Years ended December 31,
2020
118%
0.22%-1.34%
4.6
—
2019
110%
1.38%-2.54%
4.8
—
F-13
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
2. Summary of Significant Accounting Policies (Continued)
The Company estimates the fair value of RSUs granted to employees using the closing market price of the Company's common stock on the date of
grant.
ESPP
In April 2016, the Company's board of directors adopted the ESPP pursuant to which the Company may sell up to an aggregate of 1,000,000 shares of its
common stock. The ESPP was approved by the Company’s stockholders in June 2016. The ESPP is considered compensatory and the fair value of the
discount and look back provision are estimated using the Black-Scholes option-pricing model and recognized over the six month withholding period prior
to purchase.
Share-based compensation expense includes expenses related to stock options and RSUs granted to employees, non-employee directors and consultants,
as well as the option granted to employees to purchase shares under the ESPP, all of which have been reported in the Company’s Statements of Operations
as follows:
Research and development
General and administrative
Total
-
Recently Adopted Accounting Pronouncements
Years ended December 31,
2020
2021
2019
$
$
6,522 $
4,723
11,245 $
4,166 $
4,157
8,323 $
4,260
4,920
9,180
The Company has evaluated recent accounting pronouncements through the date the financial statements were issued and filed with the SEC and
believes that there are none that will have a material impact on the Company’s financial statements.
3. Common Stock
October 2021 Follow-on Public Offering
In October 2021, the Company completed an underwritten public offering in which the Company sold 10,350,000 shares of its common stock, which
included the exercise in full of the underwriters’ option to purchase 1,350,000 shares of the Company’s common stock, at a price to the public of $16.75
per share and at a price to the underwriters of $15.745 per share.
The net proceeds from the October 2021 public offering, after deducting underwriting discounts and commissions and other expenses payable by the
Company totaling approximately $10.8 million, were approximately $162.6 million.
July 2021 Follow-on Public Offering
In July 2021, the Company completed an underwritten public offering in which the Company sold 13,397,500 shares of its common stock, which
included the exercise in full of the underwriters’ option to purchase an additional 1,747,500 shares of the Company’s common stock, at a price to the public
of $8.60 per share and at a price to the underwriters of $8.084 per share.
The net proceeds from the July 2021 public offering, after deducting underwriting discounts and commissions and other expenses payable by the
Company totaling approximately $7.4 million, were approximately $107.8 million.
June 2020 Follow-on Public Offering and Private Placement
In June 2020, the Company closed an underwritten public offering in which it sold 28,503,220 shares of its common stock, which includes the
exercise in full of the underwriters’ option to purchase additional shares of its common stock, at a price to the public of $4.10 per share, and at a price to the
underwriters of $3.854 per share. The Company also sold to certain investors in lieu of common stock, pre-funded warrants to purchase 1,914,280 shares of
its common stock at a price to the public of $4.099 per share underlying each pre-funded warrant, and at a price to the underwriters of $3.853 per share
underlying each pre-funded warrant. The pre-funded warrants are immediately exercisable with certain restrictions and do not expire.
F-14
Table of Contents
3. Common Stock (Continued)
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
Concurrently with the June 2020 public offering, the Company completed a private placement exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), in which it sold 8,649,453 shares of its common stock to affiliates of Vivo Capital, LLC and
Samsara BioCapital, LP (the "Private Placement Purchasers"), at a purchase price equal to $4.10 per share, which is the price to the public in the public
offering. The shares in the private placement were issued pursuant to a stock purchase agreement entered into among the Company and the Private
Placement Purchasers.
The net proceeds from the public offering and private placement, after deducting underwriting discounts, placement agent fees and other offering
expenses of approximately $10.1 million, were approximately $150.1 million.
The Company evaluated the pre-funded warrants for liability or equity classification in accordance with the provisions of ASC 480, Distinguishing
Liabilities from Equity, and ASC 815-40, Derivatives and Hedging. Based on the provisions governing the pre-funded warrants in the applicable
agreement, the Company determined that the pre-funded warrants meet the criteria required to be classified as an equity award subject to the guidance in
ASC 815-10 and 815-40 and should effectively be treated as outstanding common shares in both basic and diluted EPS calculations.
4. Net Income (Loss) Per Common Share
Basic and diluted net loss per common share is determined by dividing net loss by the weighted average common shares and pre-funded warrants
outstanding during the period. Basic and diluted shares outstanding includes the weighted average effect of the Company's outstanding pre-funded warrants
as the exercise of such pre-funded warrants requires nominal consideration to be given for the delivery of the corresponding shares of common stock. As of
December 31, 2021 and 2020, the Company had 3,164,280 and 3,164,280 pre-funded warrants outstanding, respectively, which if exercised, would increase
the number of shares of common stock issued and outstanding. For the periods when there is a net loss, shares underlying stock options and RSUs have
been excluded from the calculation of diluted net loss per common share because the effect of including such shares would be anti-dilutive. Therefore, the
weighted average common shares used to calculate both basic and diluted net loss per common share would be the same.
The following table sets forth the computation of basic and diluted net income (loss) per common share for the periods indicated:
Basic and diluted net income (loss) per common share calculation:
Net loss
Weighted average common shares outstanding - dilutive
Net loss per common share - basic and diluted
2021
Years ended December 31,
2020
2019
$
$
(114,522) $
101,866
(1.12) $
(84,547) $
74,185
(1.14) $
(58,859)
42,224
(1.39)
The following potentially dilutive securities have been excluded from the computations of diluted weighted average common shares outstanding for
the periods presented, as the effect of including such shares would be anti-dilutive:
Stock options outstanding
Restricted stock units
Total
2021
Years ended December 31,
2020
2019
10,861
2,246
13,107
8,928
1,958
10,886
6,780
1,481
8,261
F-15
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
5. Cash, Cash Equivalents and Available-for-Sale Securities
As of December 31, 2021 and December 31, 2020 the Company had cash and cash equivalents of approximately $261.4 million and $66.4 million,
respectively. Cash and cash equivalents at December 31, 2021 and December 31, 2020 included cash of $9.9 million and $8.4 million, respectively. As of
December 31, 2021 and December 31, 2020, cash and cash equivalents also included $251.5 million and $58.0 million, respectively, of investments in
money market funds.
As of December 31, 2021 and December 31, 2020, the Company held available-for-sale securities of approximately $120.3 million and $143.7
million, respectively, all of which have maturities of less than one year.
As of December 31, 2021, the Company determined that there were no credit losses in fair value of its investments. Factors considered in
determining whether a loss resulted from a credit loss or other factors included the length of time and extent to which the investment’s fair value has been
less than the cost basis, the financial condition and near-term prospects of the investee, the extent of the loss related to credit of the issuer, the expected cash
flows from the security, the Company’s intent to sell the security, and whether or not the Company will be required to sell the security before the recovery
of its amortized cost.
The Company classifies these securities as available-for-sale. However, the Company has not sold and does not currently intend to sell its
investments and the Company believes it is more likely than not that the Company will recover the carrying value of these investments.
Available-for-sale securities, including carrying value and estimated fair values, are summarized as follows:
U.S. Treasury securities
Corporate debt securities
Asset-backed securities
Supranational securities
Total
U.S. Treasury securities
Corporate debt securities
Asset-backed securities
Total
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
As of December 31, 2021
18,202 $
82,138
16,008
4,044
120,392 $
— $
—
—
—
— $
(16) $
(57)
(14)
(3)
(90) $
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
As of As of December 31, 2020
54,225 $
79,282
10,164
143,671 $
8
4
1
13 $
— $
(10)
—
(10) $
18,185
82,081
15,995
4,041
120,302
54,233
79,276
10,165
143,674
$
$
$
$
F-16
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
6. Fair Value Measurements
The Company classifies its marketable debt securities within the fair value hierarchy as Level 2 assets, as it primarily utilizes quoted market prices or
rates for similar instruments to value these securities.
The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company's assets and liabilities that are
measured at fair value on a recurring basis as of December 31, 2021:
Assets
Investments in money market funds*
Investments in U.S. Treasury securities
Investments in corporate debt securities
Investments in asset-backed securities
Investments in supranational securities
Fair Value Measurement Using
Quoted prices in
active markets for
identical assets
(Level 1)
Significant other
observable inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$
$
$
$
$
251,488 $
18,185 $
— $
— $
— $
— $
— $
82,081 $
15,995 $
4,041 $
The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company's assets and liabilities that are
measured at fair value on a recurring basis as of December 31, 2020:
Assets
Investments in money market funds*
Investments in U.S. Treasury securities
Investments in corporate debt securities
Investments in asset-backed securities
Fair Value Measurement Using
Quoted prices in
active markets for
identical assets
(Level 1)
Significant other
observable inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$
$
$
$
58,042 $
54,233 $
— $
— $
— $
— $
79,275 $
10,166 $
—
—
—
—
—
—
—
—
—
*
Investments in money market funds are reflected in cash and cash equivalents in the accompanying Consolidated Balance Sheets.
No transfer of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the years ended December 31, 2021 or
December 31, 2020.
7. Licensing and Commercialization Agreements
Zimura License Agreement with Archemix Corp.
In September 2011, the Company entered into an amended and restated exclusive license agreement with Archemix Corp. ("Archemix") relating
to anti-C5 aptamers (as amended, the "C5 License Agreement"). The C5 License Agreement superseded a July 2007 agreement between the Company and
Archemix. Under the C5 License Agreement, the Company holds exclusive worldwide licenses, subject to certain pre–existing rights, under specified
patents and technology owned or controlled by Archemix to develop, make, use, sell, offer for sale, distribute for sale, import and export pharmaceutical
products comprised of or derived from an anti-C5 aptamer, including Zimura, for the prevention, treatment, cure or control of human
F-17
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
7. Licensing and Commercialization Agreements (Continued)
indications, diseases, disorders or conditions of the eye, adnexa of the eye, orbit and optic nerve, other than certain expressly excluded applications.
In connection with the C5 License Agreement, the Company paid Archemix an upfront licensing fee of $1.0 million and issued to Archemix an
aggregate of 2,000,000 shares of its series A-1 preferred stock and 500,000 shares of its series B-1 preferred stock. The Company has paid Archemix an
aggregate of $9.0 million in fees based on its achievement of specified clinical milestone events under the C5 License Agreement, including two milestone
payments of $1.0 million and $6.0 million, respectively, triggered by the positive 12-month data from, and by completion of, the GATHER1 trial, which the
Company paid in March 2020 and October 2020, respectively.
Under the C5 License Agreement, for each anti-C5 aptamer product that the Company may develop under the agreement, including Zimura, it is
obligated to make additional payments to Archemix of up to an aggregate of $50.5 million if it achieves specified development, clinical and regulatory
milestones, with $24.5 million of such payments relating to a first indication, $23.5 million of such payments relating to second and third indications and
$2.5 million of such payments relating to sustained delivery applications. Under the C5 License Agreement, it is also obligated to make additional
payments to Archemix of up to an aggregate of $22.5 million if it achieves specified commercial milestones based on net product sales of all anti-C5
products licensed under the agreement. It is also obligated to pay Archemix a double-digit percentage of specified non-royalty payments it may receive
from any sublicensee of its rights under the C5 License Agreement. The Company is not obligated to pay Archemix a running royalty based on net product
sales in connection with the C5 License Agreement.
Unless earlier terminated, the C5 License Agreement will expire upon the latest of 12 years after the first commercial sale in any country of the
last licensed product, the expiration of the last-to-expire valid claim of the licensed patents that covers a licensed product, and the date on which no further
payments of sublicensing income are to be received by the Company.
Either the Company or Archemix may terminate the C5 License Agreement if the other party materially breaches the agreement and the breach
remains uncured for a specified period. Archemix may also terminate the C5 License Agreement, or may convert the Company's exclusive license under
the agreement to a non-exclusive license, if the Company challenges or assists a third party in challenging the validity or enforceability of any of the
patents licensed under the agreement. The Company may terminate the agreement at any time and for any or no reason effective at the end of a specified
period following its written notice of termination to Archemix.
RHO-adRP License Agreement with the University of Florida Research Foundation and the University of Pennsylvania
In June 2018, the Company entered into an exclusive global license agreement (the "RHO-adRP License Agreement") with the University of Florida
Research Foundation, Incorporated ("UFRF") and the University of Pennsylvania ("Penn" and collectively with UFRF, the "Licensors"). Under the
agreement, the Licensors granted the Company a worldwide, exclusive license under specified patent rights and a worldwide, non-exclusive license under
specified know-how, including specified preclinical data, to manufacture, develop and commercialize certain AAV gene therapy products for the treatment
of rhodopsin-mediated diseases. The rights granted under the RHO-adRP License Agreement included certain patent rights covering IC-100, the
Company's novel AAV gene therapy product candidate intended to treat RHO-adRP.
Under the agreement, the Company agreed to pay an annual license maintenance fee in the low double-digit thousands of dollars, which will be payable
on an annual basis until the first commercial sale of a licensed product. In addition, the Company agreed to reimburse UFRF for the costs and expenses of
patent prosecution and maintenance related to the licensed patent rights.
The Company further agreed to pay UFRF, on behalf of both Licensors, up to an aggregate of $23.5 million if the Company achieves specified clinical,
marketing approval and reimbursement approval milestones with respect to a licensed product and additionally, up to an aggregate of $70.0 million if the
Company achieves specified commercial sales milestones with respect to a licensed product.
The Company is also obligated to pay UFRF, on behalf of both Licensors, royalties at a low single-digit percentage of net sales of licensed products.
Such royalties are subject to customary reductions for lack of patent coverage and loss of
F-18
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IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
7. Licensing and Commercialization Agreements (Continued)
regulatory exclusivity. In addition, such royalties with respect to any licensed product in any country may be offset by a specified portion of any royalty
payments actually paid by the Company in such country under third-party licenses for patent rights or other intellectual property rights that are necessary to
manufacture, develop and commercialize the licensed product in such country. The Company's obligation to pay royalties under the RHO-adRP License
Agreement will continue on a licensed product-by-licensed product and country-by-country basis until the latest of:
•
•
•
the expiration of the last-to-expire licensed patent rights covering a licensed product in the country of sale;
the expiration of regulatory exclusivity covering a licensed product in the country of sale; and
ten years from the first commercial sale of the applicable licensed product in the country of sale.
Beginning on the earlier of (i) the calendar year following the first commercial sale of a licensed product and (ii) the first business day of 2031, the
Company is also obligated to pay certain minimum royalties, not to exceed an amount in the low hundreds of thousands of dollars on an annual basis,
which minimum royalties are creditable against the Company's royalty obligation with respect to net sales of licensed products due for the year in which
the minimum royalty is paid.
In addition, if the Company or an affiliate sublicenses any of the licensed patent rights to a third party, the Company will be obligated to pay UFRF, on
behalf of both Licensors, a low double-digit percentage of the consideration received in exchange for such sublicense. If the Company receives a rare
pediatric disease priority review voucher from the FDA in connection with obtaining marketing approval for a licensed product and the Company
subsequently uses such priority review voucher in connection with a different product candidate, the Company will be obligated to pay UFRF, on behalf of
both Licensors, aggregate payments in the low double-digit millions of dollars based on certain marketing approval and commercial sales milestones with
respect to such other product candidate. If the Company sells such priority review voucher to a third party, it will be obligated to pay UFRF, on behalf of
both licensors, a low double-digit percentage of any consideration received from such third party in connection with such sale.
Unless earlier terminated by the Company, the RHO-adRP License Agreement will expire upon the expiration of the Company’s obligation to pay
royalties to UFRF on net sales of licensed products. The Company may terminate the agreement at any time for any reason upon prior written notice to
UFRF. Penn or UFRF may terminate the RHO-adRP License Agreement in the event of certain breaches by the Company or in the event of certain
insolvency events regarding the Company.
BEST1 License Agreement with University of Pennsylvania and University of Florida Research Foundation
In April 2019, the Company entered into an exclusive global license agreement (the "BEST1 License Agreement") with Penn and UFRF. Under the
BEST1 License Agreement, Penn and UFRF granted the Company a worldwide, exclusive license under specified patent rights and specified know-how
and a worldwide, non-exclusive license under other specified know-how to research, develop, manufacture and commercialize certain AAV gene therapy
products, including IC-200, for the treatment of Best disease and other BEST1-related IRDs.
In May 2019, the Company paid Penn, for the benefit of the Licensors, a $0.2 million upfront license issuance fee, which was recorded as a
research and development expense, and the Company paid UFRF accrued patent prosecution expenses of approximately $18 thousand, which was recorded
as a general and administrative expense. The Company has also agreed to pay Penn, for the benefit of the Licensors, an annual license maintenance fee in
the low double-digit thousands of dollars, which will be payable on an annual basis until the first commercial sale of a licensed product. In addition, the
Company have agreed to pay Penn, for the benefit of the Licensors, a one-time patent grant fee in the low triple-digit thousands of dollars, upon the
issuance of a U.S. patent that claims inventions disclosed in the licensed patent rights or know-how or inventions generated under certain related sponsored
research agreements with Penn or UFRF, and that is exclusively licensed to the Company. Furthermore, it has agreed to reimburse Penn and UFRF for the
costs and expenses of patent prosecution and maintenance related to the licensed patent rights.
The Company has further agreed to pay Penn, for the benefit of the Licensors, up to an aggregate of $15.7 million if it achieves specified clinical,
marketing approval and reimbursement approval milestones with respect to one licensed product,
F-19
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
7. Licensing and Commercialization Agreements (Continued)
and up to an aggregate of an additional $3.1 million if it achieves these same milestones with respect to a different licensed product. In addition, it has
agreed to pay Penn, for the benefit of the Licensors, up to an aggregate of $48.0 million if it achieves specified commercial sales milestones with respect to
one licensed product, and up to an aggregate of an additional $9.6 million if it achieves these same milestones with respect to a different licensed product.
The Company is also obligated to pay Penn, for the benefit of the Licensors, royalties at a low single-digit percentage of net sales of licensed
products. Such royalties are subject to customary deductions, credits, and reductions for lack of patent coverage and loss of regulatory exclusivity. In
addition, such royalties with respect to any licensed product in any country may be offset by a specified portion of any royalty payments actually paid by
the Company in such country under third-party licenses to patent rights or other intellectual property rights that are necessary to research, develop,
manufacture and commercialize the licensed product in such country. Its obligation to pay royalties under the BEST1 License Agreement will continue on a
licensed product-by-licensed product and country-by-country basis until the latest of:
•
•
•
the expiration of the last-to-expire licensed patent rights covering the sale of the applicable licensed product in the country of sale;
the expiration of regulatory exclusivity covering the applicable licensed product in the country of sale; and
10 years from the first commercial sale of the applicable licensed product in the country of sale.
Beginning on the earlier of the calendar year following the first commercial sale of a licensed product and calendar year 2032, the Company is also
obligated to pay certain minimum royalties, not to exceed an amount in the mid tens of thousands of dollars on an annual basis, which minimum royalties
are creditable against its royalty obligation with respect to net sales of licensed products due in the year the minimum royalty is paid.
If the Company or any of its affiliates sublicense any of the licensed patent rights to a third party, it will be obligated to pay Penn, for the benefit of
the Licensors, a high single-digit to a mid ten's percentage of the consideration received in exchange for such sublicense, with the applicable percentage
based upon the stage of development of the sublicensed product at the time it or the applicable affiliate enters into the sublicense.
If the Company receives a rare pediatric disease priority review voucher from the FDA in connection with obtaining marketing approval for a
licensed product and the Company subsequently uses such priority review voucher in connection with a different product candidate outside the scope of the
BEST1 License Agreement, it will be obligated to pay Penn, for the benefit of the Licensors, aggregate payments in the low double-digit millions of dollars
based on certain approval and commercial sales milestones with respect to such other product candidate. In addition, if it sells such a priority review
voucher to a third party, it will be obligated to pay Penn, for the benefit of the Licensors, a high single-digit percentage of any consideration received from
such third party in connection with such sale.
The BEST1 License Agreement, unless earlier terminated by the Company or Penn or UFRF, will expire upon the expiration of the Company's
obligation to pay royalties on net sales of licensed products. Before the effectiveness of an IND for a licensed product, the Company may terminate the
BEST1 License Agreement with respect to such licensed product or in its entirety, at any time for any reason upon prior written notice to Penn and UFRF.
Following the effectiveness of an IND for a licensed product, it may terminate the BEST1 License Agreement with respect to such licensed product by
providing Penn prior written notice and a certification that it is ceasing all use, research and development and commercialization of such licensed product,
subject to certain limited exceptions. It may also terminate the BEST1 License Agreement if Penn or UFRF materially breaches the BEST1 License
Agreement and does not cure such breach within a specified cure period.
Penn or UFRF may terminate the BEST1 License Agreement if the Company materially breaches the BEST1 License Agreement and does not
cure such breach within a specified cure period, if it experiences a specified insolvency event, if it ceases to carry on the entirety of its business related to
the licensed patent rights, if it ceases for more than four consecutive quarters to make any payment of earned royalties on net sales of licensed products
following the commencement of commercialization thereof, unless such cessation is based on safety concerns that the Company is actively attempting to
address, or if it, any of its affiliates or any of its sublicensees challenges or assists a third party in challenging the validity, scope, patentability, and/or
enforceability of the licensed patent rights. If it materially breaches certain diligence obligations
F-20
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
7. Licensing and Commercialization Agreements (Continued)
under the BEST1 License Agreement with respect to only one licensed product, then Penn and UFRF may only terminate its rights and licenses under the
BEST1 License Agreement for such licensed product, but not for other licensed products.
License Agreement with University of Massachusetts for the miniCEP290 Program
In July 2019, the Company entered into the miniCEP290 License Agreement with UMass. Under the miniCEP290 License Agreement, UMass granted it
a worldwide, exclusive license under specified patent rights and specified biological materials and a non-exclusive license under specified know-how to
make, have made, use, offer to sell, sell, have sold and import products for the treatment of diseases associated with mutations in the CEP290 gene,
including LCA10.
In July 2019, the Company issued to UMass 75,000 shares of its common stock following execution of the miniCEP290 License Agreement
pursuant to an exemption from registration afforded by Section 4(a)(2) of the Securities Act. In September 2019, it paid UMass a $0.4 million upfront
license fee, which was recorded as a research and development expense, and it paid UMass accrued patent prosecution expenses of approximately $18
thousand, which was recorded as a general and administrative expense.
The Company has also agreed to pay UMass an annual license maintenance fee in the low double-digit thousands of dollars, which will be payable
on an annual basis until the expiration of the royalty term for the licensed products. Furthermore, it has agreed to reimburse UMass for the costs and
expenses of patent prosecution and maintenance related to the licensed patent rights.
The Company has further agreed to pay UMass up to an aggregate of $14.75 million in cash and issue up to 75,000 shares of its common stock if
it achieves specified clinical and regulatory milestones with respect to a licensed product. In addition, the Company has agreed to pay UMass up to an
aggregate of $48.0 million if it achieves specified commercial sales milestones with respect to a licensed product.
The Company is also obligated to pay UMass royalties at a low single-digit percentage of net sales of licensed products. Its obligation to pay
royalties under the miniCEP290 License Agreement will continue on a licensed product-by-licensed product and country-by-country basis until the later of:
(a) the expiration of the last-to-expire licensed patent rights covering the sale of the applicable licensed product in the country of sale, or (b) 10 years from
the first commercial sale of the applicable licensed product in the country of sale. Beginning with the calendar year following receipt of marketing approval
for a licensed product, it is also obligated to pay certain minimum royalties, not to exceed an amount in the mid-double-digit thousands of dollars on an
annual basis, which minimum royalties are creditable against its royalty obligation with respect to net sales of licensed products due in the year the
minimum royalty is paid.
If the Company or any of its affiliates sublicenses any of the licensed patent rights or know-how to a third party, it will be obligated to pay UMass
a high single-digit to a mid-tens percentage of the consideration received in exchange for such sublicense, with the applicable percentage based upon the
stage of development of the licensed products at the time it or the applicable affiliate enters into the sublicense.
If the Company receives a rare pediatric disease priority review voucher from the FDA in connection with obtaining marketing approval for a
licensed product, and it subsequently uses such priority review voucher in connection with a different product candidate outside the scope of the
miniCEP290 License Agreement, it will be obligated to pay UMass a low-tens percentage of the fair market value of the priority review voucher at the time
of approval of such product candidate and a low-twenties percentage of the fair market value of the priority review voucher at the time of achievement of a
specified commercial sales milestone for such other product candidate. In addition, if it sells such a priority review voucher to a third party, it will be
obligated to pay UMass a low-thirties percentage of any consideration received from such third party in connection with such sale.
The miniCEP290 License Agreement, unless earlier terminated by the Company or UMass, will expire upon the expiration of its obligation to pay
royalties to UMass on net sales of licensed products. The Company may terminate the miniCEP290 License Agreement at any time for any reason upon
prior written notice to UMass. It may also terminate the
F-21
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
7. Licensing and Commercialization Agreements (Continued)
miniCEP290 License Agreement if UMass materially breaches the miniCEP290 License Agreement and does not cure such breach within a specified cure
period.
UMass may terminate the miniCEP290 License Agreement if the Company materially breaches the miniCEP290 License Agreement and does not
cure such breach within a specified cure period.
8. Property and Equipment
Property and equipment as of December 31, 2021 and 2020 were as follows:
Research, manufacturing and clinical equipment
Computer, software and other office equipment
Automobile
Accumulated depreciation
Property and equipment, net
Useful Life
(Years)
5 - 10
5
5
$
$
December 31,
2021
December 31,
2020
283 $
933
125
1,341
(993)
348 $
47
933
—
980
(954)
26
For the years ended December 31, 2021, 2020 and 2019, depreciation expense was $39 thousand, $143 thousand and $162 thousand, respectively.
9. Income Taxes
The Company utilizes the liability method of accounting for deferred income taxes. Under this method, deferred tax assets and liabilities are recognized
for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation
allowance is established against deferred tax assets when, based on the weight of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. The Company's policy is to record interest and penalties on uncertain tax positions as income tax expense.
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. A reconciliation of the statutory U.S. federal rate to the Company's effective tax rate is as follows:
Percent of pre-tax income:
U.S. federal statutory income tax rate
State taxes, net of federal benefit
Permanent items
Impact of state rate changes
Research and development credit
Change in valuation allowance
Effective income tax rate
2021
Years ended December 31,
2020
2019
21.0 %
8.1 %
0.7 %
(3.8)%
3.3 %
(29.3)%
— %
21.0 %
14.8 %
0.2 %
0.1 %
3.1 %
(34.8)%
4.4 %
21.0 %
10.9 %
(1.0)%
0.1 %
2.8 %
(33.6)%
0.2 %
F-22
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
9. Income Taxes (Continued)
The components of income tax benefit are as follows:
Current:
Federal
State
Deferred:
Federal
State
Income tax benefit
2021
Years ended December 31,
2020
2019
$
$
— $
—
—
—
— $
— $
(3,695)
—
—
(3,695) $
—
(111)
—
—
(111)
Significant components of the Company's deferred tax assets (liabilities) for 2021 and 2020 consist of the following:
Deferred tax assets (liabilities)
License and technology payments
Share-based compensation
Accrued expenses
Right-of-use asset
Lease obligation
Depreciation
Federal and state net operating loss carryforwards
Research and development credits
Other
Deferred income tax assets
Valuation allowance
Net deferred tax assets
As of December 31,
2021
2020
$
5,356 $
21,614
320
(430)
444
1
165,401
13,742
20
206,468
(206,468)
$
— $
7,479
23,266
427
(40)
38
6
130,524
9,959
7
171,666
(171,666)
—
The Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of taxable income during the periods in which the temporary differences representing net
future deductible amounts become deductible.
The Company incurred tax losses in 2021 and 2020. The Company has carried forward its federal and state tax losses due to the inability of carryback
claims. Federal NOLs incurred prior to 2018 will begin to expire in 2034 if not utilized. Post 2017 Federal NOLs have an unlimited life. The state NOLs
are expected to begin to expire in 2025. Due to the Company's history of losses and lack of other positive evidence to support taxable income, the Company
has recorded a valuation allowance against those remaining deferred tax assets that are not expected to be realized. As of December 31, 2021, the Company
has federal NOL carryforwards of approximately $562 million.
For the year ended December 31, 2021, the Company recorded no benefit from income taxes. For the years ended December 31, 2020 and 2019, the
Company recorded an income tax benefit of $3.7 million and $0.1 million, respectively, due primarily to reflect the settlements of local tax audits.
On March 27, 2020, in response to the COVID-19 pandemic, the U.S. Congress enacted the Coronavirus Aid, Relief, and Economic Security Act
("CARES Act"). The CARES Act provides numerous tax provisions and other stimulus measures,
F-23
Table of Contents
9. Income Taxes (Continued)
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
including the immediate refund of minimum tax credits. In April 2021, the Company received the remaining balance, approximately $1.8 million, of its
minimum tax credits refund.
With respect to the remaining deferred tax assets, except for the AMT credits previously discussed above, there was no change in the amount of assets
realizable at December 31, 2021.
Pursuant to ASC 740, Income Taxes, the Company routinely evaluates the likelihood of success if challenged on income tax positions claimed on its
income tax returns. During the year ended December 31, 2021, there was no change in the Company's uncertain tax liability.
The Company's position with respect to uncertain tax positions is set forth below:
Opening balance
Gross amount of increases in unrecognized tax benefits during the period - current year provisions
Gross amount of increases in unrecognized tax benefits during the period - prior year provisions
Gross amount of decreases in unrecognized tax benefits during the period - other
Decreases due to settlement with tax authorities during the period
Reduction of unrecognized tax benefits due to expiration of the state of limitations during the period
Closing Balance
$
$
6,723
—
—
—
—
—
6,723
The Company will continue to evaluate its ability to realize its deferred tax assets on a periodic basis and will adjust such amounts in light of
changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the
progress of ongoing tax audits and the regulatory approval of product candidates currently under development. Any additional changes to the valuation
allowance recorded on deferred tax assets in the future would impact the Company’s income taxes.
The Company is currently subject to audit by the U.S. Internal Revenue Service, or IRS, for the years 2018 through 2020, and state tax jurisdictions
for the years 2017 through 2020. However, the IRS or state tax authorities may still examine and adjust an NOL or R&D credit arising from a closed year
to the extent it is utilized in a year that remains subject to audit. The Company’s previously filed income tax returns are not presently under audit by the
IRS or state tax authorities.
10. Operating Leases
The Company's principal executive office was previously at One Penn Plaza, New York, NY. The term of this lease expired in December 2020.
In December 2020, the Company entered into a lease agreement for office space located in Parsippany, New Jersey. The Company recognized a right-
to-use asset and lease liability when the term of the lease commenced in April 2021. The term of the lease for the Company's Parsippany office will expire
in August 2023.
The Company leases office space located in Cranbury, New Jersey under non-cancelable operating lease arrangements. The lease for the Company's
Cranbury office commenced in February 2020 and expires in February 2023.
The Company is party to an office service agreement with Regus Management Group, LLC for use of office space at Five Penn Plaza, New York, NY.
This agreement currently expires in May 2022.
For the years ended December 31, 2021, 2020 and 2019, lease and rent expense was $0.7 million, $0.6 million, and $1.0 million, respectively. Cash
paid from operating cash flows for amounts included in the measurement of lease liabilities was $0.7 million and $0.6 million for the years ended
December 31, 2021 and 2020, respectively. At December 31, 2021, the Company's operating leases had a weighted average remaining lease term of 1.6
years and a weighted average estimated incremental borrowing rate of 3.2% .
F-24
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
The following presents the maturity of the Company's operating lease liabilities as of December 31, 2021:
2022
2023
2024
Total minimum lease payments
Less imputed interest
Present value of minimum lease payments
Less current portion
Total long-term operating lease liabilities
11. Commitments and Contingencies
Zimura - Archemix Corp.
December 31, 2021
989
627
—
1,616
(45)
1,571
952
619
$
$
The Company is party to an agreement with Archemix Corp., or Archemix, under which the Company in-licensed rights in certain patents, patent
applications and other intellectual property related to Zimura and pursuant to which the Company may be required to pay sublicense fees and make
milestone payments (the "C5 License Agreement"). For each anti-C5 aptamer product that the Company may develop under the agreement, including
Zimura, the Company is obligated to make additional payments to Archemix of up to an aggregate of $50.5 million if the Company achieves specified
development, clinical and regulatory milestones, with $24.5 million of such payments relating to a first indication, $23.5 million of such payments relating
to second and third indications and $2.5 million of such payments relating to sustained delivery applications. Under the C5 License Agreement, the
Company is also obligated to make additional payments to Archemix of up to an aggregate of $22.5 million if the Company achieves specified commercial
milestones based on net product sales of all anti-C5 licensed products. The Company is also obligated to pay Archemix a double-digit percentage of
specified non-royalty payments the Company may receive from any sublicensee of its rights under the C5 License Agreement. The Company is not
obligated to pay Archemix a running royalty based on net product sales in connection with the C5 License Agreement.
IC-100 - University of Florida Research Foundation and the University of Pennsylvania
Under its exclusive license agreement with UFRF and Penn for rights to IC-100, the Company is obligated to make payments to UFRF, for the benefit of
the Licensors, of up to an aggregate of $23.5 million if the Company achieves specified clinical, marketing approval and reimbursement approval
milestones with respect to a licensed product and up to an aggregate of an additional $70.0 million if the Company achieves specified commercial sales
milestones with respect to a licensed product. The Company is also obligated to pay UFRF, for the benefit of the Licensors, a low single-digit percentage of
net sales of licensed products. The Company is also obligated to pay UFRF, for the benefit of the Licensors, a double-digit percentage of specified non-
royalty payments the Company may receive from any third-party sublicensee of the licensed patent rights. Further, if the Company receives a rare pediatric
disease priority review voucher from the FDA in connection with obtaining marketing approval for a licensed product and the Company subsequently uses
such priority review voucher in connection with a different product candidate, the Company will be obligated to pay UFRF, for the benefit of the Licensors,
aggregate payments in the low double-digit millions of dollars based on certain approval and commercial sales milestones with respect to such other
product candidate. In addition, if the Company sells such a priority review voucher to a third party, the Company will be obligated to pay UFRF, for the
benefit of the Licensors, a low double-digit percentage of any consideration received from such third party in connection with such sale.
IC-200 - University of Pennsylvania and the University of Florida Research Foundation
Under its exclusive license agreement with Penn and UFRF for rights to IC-200, the Company is obligated to make payments to Penn, for the benefit of
the Licensors, of up to an aggregate of $15.7 million if the Company achieves specified
F-25
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
11. Commitments and Contingencies (Continued)
clinical, marketing approval and reimbursement approval milestones with respect to one licensed product and up to an aggregate of an additional
$3.1 million if the Company achieves these same milestones with respect to a different licensed product. In addition, the Company is obligated to make
payments to Penn, for the benefit of the Licensors, of up to an aggregate of $48.0 million if the Company achieves specified commercial sales milestones
with respect to one licensed product and up to an aggregate of an additional $9.6 million if the Company achieves these same milestones with respect to a
different licensed product. The Company is also obligated to pay Penn, for the benefit of the Licensors, a low single-digit percentage of net sales of
licensed products. The Company is also obligated to pay Penn, for the benefit of the Licensors, a high single-digit to a mid-ten's percentage of specified
non-royalty payments the Company may receive from any third-party sublicensee of the licensed patent rights, with the applicable percentage based upon
the stage of development of the sublicensed product at the time the Company enters into the sublicense. Further, if the Company receives a rare pediatric
disease priority review voucher from the FDA in connection with obtaining marketing approval for a licensed product and the Company subsequently uses
such priority review voucher in connection with a different product candidate outside the scope of the agreement, the Company will be obligated to pay
Penn, for the benefit of the Licensors, aggregate payments in the low double-digit millions of dollars based on certain approval and commercial sales
milestones with respect to such other product candidate. In addition, if the Company sells such a priority review voucher to a third party, the Company will
be obligated to pay Penn, for the benefit of the Licensors, a high single-digit percentage of any consideration received from such third party in connection
with such sale.
miniCEP290 Program - University of Massachusetts
Under the miniCEP290 License Agreement, the Company is obligated to pay UMass up to an aggregate of $14.75 million in cash and issue up to 75,000
shares of common stock of the Company if the Company achieves specified clinical and regulatory milestones with respect to a licensed product. In
addition, the Company is obligated to pay UMass up to an aggregate of $48.0 million if the Company achieves specified commercial sales milestones with
respect to a licensed product. The Company is also obligated to pay UMass royalties at a low single-digit percentage of net sales of licensed products. If the
Company or any of its affiliates sublicenses any of the licensed patent rights or know-how to a third party, the Company will be obligated to pay UMass a
high single-digit to a mid-tens percentage of the consideration received in exchange for such sublicense, with the applicable percentage based upon the
stage of development of the licensed products at the time the Company or the applicable affiliate enters into the sublicense. If the Company receives a
priority review voucher from the FDA in connection with obtaining marketing approval for a licensed product, and the Company subsequently uses such
priority review voucher in connection with a different product candidate outside the scope of the agreement, the Company will be obligated to pay UMass a
low-tens percentage of the fair market value of the priority review voucher at the time of approval of such product candidate and a low-twenties percentage
of the fair market value of the priority review voucher at the time of achievement of a specified commercial sales milestone for such product candidate. In
addition, if the Company sells such a priority review voucher to a third party, the Company will be obligated to pay UMass a low-thirties percentage of any
consideration received from such third party in connection with such sale.
IC-500 - Former Equityholders of Inception 4
Under the Inception 4 Merger Agreement, the Company is obligated to make payments to the former equityholders of Inception 4 of up to an aggregate
of $105 million, subject to the terms and conditions of the Inception 4 Merger Agreement, if the Company achieves certain specified clinical and regulatory
milestones with respect to a product candidate from its HtrA1 inhibitor program, including IC-500, with $45 million of such potential payments relating to
GA and $60 million of such potential payments relating to wet AMD. Under the Inception 4 Merger Agreement, the Company does not owe any
commercial milestones or royalties based on net sales. The future milestone payments will be payable in the form of shares of the Company's common
stock, calculated based on the price of its common stock over a five-trading day period preceding the achievement of the relevant milestone, unless and
until the issuance of such shares would, together with all other shares issued in connection with the Inception 4 Merger, exceed an overall maximum limit
of approximately 7.2 million shares, which is equal to 19.9% of the number of issued and outstanding shares of the Company's common stock as of the
close of business on the business day prior to the closing date of the Inception 4 Merger, and will be payable in cash thereafter. The Inception 4 Merger
Agreement also includes customary indemnification obligations to the former equityholders of Inception 4, including for breaches of the representations
and warranties, covenants and agreements of the Company and its subsidiaries (other than Inception 4) in the Inception 4 Merger Agreement.
F-26
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IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
11. Commitments and Contingencies (Continued)
Employment Contracts
The Company also has letter agreements with certain employees that require the funding of a specific level of payments if certain events, such as a
termination of employment in connection with a change in control or termination of employment by the employee for good reason or by the Company
without cause, occur.
Contract Service Providers
In addition, in the course of normal business operations, the Company has agreements with contract service providers to assist in the performance of the
Company’s research and development and manufacturing activities. Expenditures to CROs and CDMOs represent significant costs in preclinical and
clinical development. Subject to required notice periods and the Company’s obligations under binding purchase orders and any cancellation fees that the
Company may be obligated to pay, the Company can elect to discontinue the work under these agreements at any time.
Legal Proceedings
On January 11, 2017, a putative class action lawsuit was filed against the Company and certain of its current and former executive officers in the
United States District Court for the Southern District of New York, captioned Frank Micholle v. IVERIC bio, Inc., et al., No. 1:17-cv-00210. On March 9,
2017, a related putative class action lawsuit was filed against the Company and the same group of its current and former executive officers in the United
States District Court for the Southern District of New York, captioned Wasson v. IVERIC bio, Inc., et al., No. 1:17-cv-01758. These cases were
consolidated on March 13, 2018. On June 4, 2018, the lead plaintiff filed a consolidated amended complaint (the “CAC”). The CAC purports to be brought
on behalf of shareholders who purchased the Company’s common stock between March 2, 2015 and December 12, 2016. The CAC generally alleges that
the Company and certain of its officers violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder by making allegedly false and/or misleading statements concerning the results of the Company’s Phase 2b trial and the prospects of the
Company’s Phase 3 trials for Fovista in combination with anti-VEGF agents for the treatment of wet AMD. The CAC seeks unspecified damages,
attorneys’ fees, and other costs. The Company and individual defendants filed a motion to dismiss the CAC on July 27, 2018. On September 18, 2019, the
court issued an order dismissing some, but not all, of the allegations in the CAC. On November 18, 2019, the Company and the individual defendants filed
an answer to the complaint. On June 12, 2020, the lead plaintiff filed a motion for class certification. On August 11, 2020, the defendants filed a notice of
non-opposition to lead plaintiff's motion for class certification. On April 23, 2021, the court issued an order staying the action until July 1, 2021, 10 days
after a mediation scheduled for June 21, 2021. On July 1, 2021, following the June 21, 2021 mediation, the parties notified the court that they had reached
an agreement in principle to settle the class action. On September 8, 2021, the parties executed a settlement agreement, which has been submitted to the
court for approval. Under the terms of the settlement agreement, the Company agreed to pay $29 million, which includes the attorneys' fees and costs and
expenses for the plaintiffs' counsel, and the Company expects this settlement amount will be fully covered and paid directly to the plaintiffs by its insurance
carriers. The Company does not expect this settlement, if approved in its current form, to have a material impact on its financial condition.
On August 31, 2018, a shareholder derivative action was filed against current and former members of the Company's Board of Directors and certain
current and former officers of the Company in the United States District Court for the Southern District of New York, captioned Luis Pacheco v. David R.
Guyer, et al., Case No. 1:18-cv-07999. The complaint, which is based substantially on the facts alleged in the CAC, alleges that the defendants breached
their fiduciary duties to the Company and wasted the Company's corporate assets by failing to oversee the Company's business, and also alleges that the
defendants were unjustly enriched as a result of the alleged conduct, including through receipt of bonuses, stock options and similar compensation from the
Company, and through sales of the Company's stock between March 2, 2015 and December 12, 2016. The complaint purports to seek unspecified damages
on the Company's behalf, attorneys’ fees, and other costs, as well as an order directing the Company to reform and improve its corporate governance and
internal procedures to comply with applicable laws, including submitting certain proposed amendments to the Company's corporate charter, bylaws and
corporate governance policies for vote by the Company's stockholders. On December 14, 2018, the Company filed a motion to dismiss the complaint. On
September 19, 2019, the court denied its motion to dismiss this complaint. This matter was subsequently referred to a special litigation committee (“SLC”)
of the Company's board of directors. On February 18, 2020, the Company filed an answer to the complaint. The Company and the plaintiff agreed to stay
this litigation while the SLC conducts its investigation. On May 4, 2020, the court approved the stipulation and stayed the litigation through November 1,
2020. By agreement of the parties, the court has since extended the stay through June 26, 2021. The Company also entered into tolling agreements with the
F-27
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
11. Commitments and Contingencies (Continued)
defendant directors to December 2022. On October 18, 2021, the parties notified the court overseeing the Pacheco matter that they had reached an
agreement in principle to settle the action. . On January 27, 2022, the parties executed a settlement agreement, which has been submitted to the court for
approval.
On October 16, 2018, the Company’s board of directors received a shareholder demand to investigate and commence legal proceedings against
certain members of the Company’s board of directors. The demand alleges facts that are substantially similar to the facts alleged in the CAC and the
Pacheco complaint and asserts claims that are substantially similar to the claims asserted in the Pacheco complaint. On January 30, 2019, the Company’s
board of directors received a second shareholder demand from a different shareholder to investigate and commence legal proceedings against certain
current and former members of the Company’s board of directors based on allegations that are substantially similar to the allegations contained in the first
demand letter. These shareholder demands were referred to a demand review committee of the Company's board of directors. On May 6, 2021, the
shareholders who served the October 16, 2018 demand filed a shareholder derivative action against current and former members of the Company’s Board
of Directors and certain current and former officers of the Company in the New York Supreme Court, captioned Brian Ferber et al., derivatively on behalf
of Ophthotech Corporation v. Axel Bolte et al., Index No. 154462/2021. The complaint asserts the same claims as those asserted in the Pacheco complaint
and is based on factual allegations that are materially similar to the allegations in the Pacheco complaint. On June 22, 2021, the parties filed a stipulation
staying the Ferber action until 60 days after the SLC concludes its investigation. The Company has entered into tolling agreements with the directors
named in the demands to December 2022. On January 27, 2022, the parties executed a settlement agreement.
The Company denies any and all allegations of wrongdoing and intends to vigorously defend against these lawsuits. The Company is unable,
however, to predict the outcome of these matters, including that of the settlement agreement discussions, at this time. Moreover, any conclusion of these
matters in a manner adverse to the Company and for which it incurs substantial costs or damages not covered by the Company's directors’ and officers’
liability insurance would have a material adverse effect on its financial condition and business. In addition, the litigation could adversely impact the
Company's reputation and divert management’s attention and resources from other priorities, including the execution of its business plan and strategies that
are important to the Company's ability to grow its business, any of which could have a material adverse effect on the Company's business.
12. Stock-Based Compensation and Compensation Plans
The Company adopted its 2007 Stock Incentive Plan (the "2007 Plan") for employees, non-employee directors and consultants for the purpose of
advancing the interests of the Company's stockholders by enhancing its ability to attract, retain and motivate persons who are expected to make important
contributions to the Company. The 2007 Plan provided for the granting of stock option awards, RSUs, and other stock-based and cash-based awards.
Following the effectiveness of the 2013 Stock Incentive Plan described below in connection with the closing of the Company's initial public offering, the
Company is no longer granting additional awards under the 2007 Plan.
In August 2013, the Company's board of directors adopted, and the Company's stockholders approved, the 2013 Stock Incentive Plan (the "2013
Plan"), which became effective immediately prior to the closing of the Company's initial public offering. In June 2015, the Company’s board of directors
adopted a first amendment to the 2013 Plan. The 2013 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation
rights, RSUs, restricted stock awards and other stock-based awards. Upon the effectiveness of the 2013 Plan, the number of shares of the Company's
common stock that were reserved for issuance under the 2013 Plan was the sum of (1) a number of shares (up to a maximum of approximately 3,359,641
shares) that is equal to the sum of 739,317 shares (the number of shares of the Company's common stock then available for issuance under the 2007 Plan),
and such number of shares of the Company's common stock that are subject to outstanding awards under the 2007 Plan that expire, terminate or are
otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right, plus
(2) an annual increase, to be added the first business day of each fiscal year, beginning with the fiscal year ending December 31, 2014 and continuing until,
and including, the fiscal year ending December 31, 2023, equal to the lowest of 2,542,372 shares of the Company's common stock, 4% of the number of
shares of the Company's common stock outstanding on the first day of the fiscal year and an amount determined by its board of directors. The Company's
employees, officers, directors, consultants and advisors are eligible to receive awards under the 2013 Plan. However, incentive stock options may only be
granted to employees of the Company.
F-28
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
12. Stock-Based Compensation and Compensation Plans (Continued)
Annual increases under the evergreen provisions of the 2013 Plan have resulted in the addition of an aggregate of approximately 15,624,000
additional shares to the 2013 Plan, including for 2022, an increase of approximately 2,542,000 shares. As of December 31, 2021, the Company had
approximately 1,168,000 shares available for grant under the 2013 Plan.
In October 2019, the Company's board of directors adopted the 2019 Inducement Stock Incentive Plan (the “2019 Inducement Plan”) to reserve
1,000,000 shares of its common stock to be used exclusively for grants of awards to individuals that were not previously employees or directors of the
Company as a material inducement to such individuals’ entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq
Listing Rules. In March 2020, the Company's board of directors amended the 2019 Inducement Plan to reserve an additional 1,000,000 shares of its
common stock for issuance under the plan and in February 2021, the Company's board of directors further amended the 2019 Inducement Plan to reserve an
additional 600,000 shares of its common stock for issuance under the plan. In September 2021 and December 2021, the Company's board of directors
further amended the 2019 Inducement Plan to reserve an additional 1,000,000 shares of common stock and an additional 1,000,000 shares of common
stock, respectively, for issuance under the plan. The terms and conditions of the 2019 Inducement Plan are substantially similar to those of the 2013 Plan.
As of December 31, 2021, the Company had approximately 1,372,000 shares available for grant under the 2019 Inducement Plan.
In April 2016, the board of directors adopted the ESPP pursuant to which the Company may sell up to an aggregate of 1,000,000 shares of
common stock. The ESPP was approved by the Company’s stockholders in June 2016. The ESPP allows eligible employees to purchase common stock at a
price per share equal to 85% of the lower of the fair market value of the common stock at the beginning or end of each six month offering period during the
term of the ESPP. The first offering period began in September 2016.
A summary of the stock option activity, weighted average exercise prices, options outstanding and exercisable as of December 31, 2021, 2020 and
2019 is as follows (in thousands except weighted average exercise price):
Outstanding, December 31, 2020
Granted
Exercised
Expired or forfeited
Outstanding, December 31, 2021
2021
Weighted
Average
Exercise
Price
Common
Stock
Options
8,928 $
3,204 $
(646) $
(625) $
10,861 $
9.22
13.03
2.80
8.87
10.94
Years ended December 31,
2020
Common
Stock
Options
Weighted
Average
Exercise
Price
6,780 $
2,630 $
(109) $
(373) $
8,928 $
10.89
6.10
2.89
19.49
9.22
2019
Weighted
Average
Exercise
Price
Common
Stock
Options
5,903 $
1,610 $
(80) $
(653) $
6,780 $
Options exercisable at December 31, 2021
Weighted average grant date fair value (per share) of options granted during the period $
5,584
10.53 $
4,462
4.83 $
2021
Years ended December 31,
2020
2019
As of December 31, 2021, there were approximately 10,386,000 options outstanding, net of estimated forfeitures, that had vested or are expected
to vest. The weighted-average exercise price of these options was $10.98 per option; the weighted-average remaining contractual life of these options was
7.4 years; and the aggregate intrinsic value of these options was approximately $88.8 million. A summary of the stock options outstanding and exercisable
as of December 31, 2021 is as
F-29
13.72
4.26
2.66
21.16
10.89
3,317
3.37
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
12. Stock-Based Compensation and Compensation Plans (Continued)
follows (in thousands except exercise prices and weighted average exercise price):
Range of Exercise Prices
$1.20-$2.96
$2.97-$4.88
$4.89-$8.07
$8.08-$15.00
$15.01-$73.22
Options Outstanding
Options Exercisable
December 31, 2021
Total
Options
Outstanding
Weighted
Average
Remaining
Life (Years)
Weighted
Average
Exercise
Price
Number
Exercisable
Weighted
Average
Exercise
Price
2,286
1,917
2,749
2,079
1,830
10,861
6.3 $
6.9 $
8.7 $
9.3 $
5.6 $
7.4 $
2.39
4.07
6.66
13.38
32.49
10.94
2,081 $
1,447 $
801 $
136 $
1,119 $
5,584 $
2.49
4.16
6.35
10.33
42.69
11.72
Aggregate Intrinsic Value
$
88,821
$
56,986
Cash proceeds from, and the aggregate intrinsic value of, stock options exercised during the years ended December 31, 2021, 2020 and 2019,
respectively, were as follows:
Cash proceeds from options exercised
Aggregate intrinsic value of options exercised
2021
Years ended December 31,
2020
2019
$
$
1,808 $
4,997 $
314 $
393 $
192
135
In connection with stock option awards granted to employees, non-employees directors and certain other individuals, the Company recognized
approximately $6.5 million, $4.7 million and $5.9 million in share-based compensation expense during the years ended December 31, 2021, 2020 and
2019, respectively, net of expected forfeitures. As of December 31, 2021, there were approximately $37.6 million of unrecognized compensation costs, net
of estimated forfeitures, related to stock option awards grants, which are expected to be recognized over a remaining weighted average period of 3.4 years.
The following table presents a summary of the Company's outstanding RSU awards granted as of December 31, 2021 (in thousands except
weighted average grant-date fair value)
Outstanding, December 31, 2020
Awarded
Vested
Expired or forfeited
Outstanding, December 31, 2021
Restricted
Stock
Units
Weighted Average
Grant-Date
Fair Value
1,958 $
1,274 $
(711) $
(275) $
2,246 $
6.95
13.07
5.03
17.50
9.82
As of December 31, 2021, there were approximately 2,044,000 RSUs outstanding, net of estimated forfeitures, that are expected to vest. The
weighted-average fair value of these RSUs was $9.82 per share; and the aggregate intrinsic value of these RSUs was approximately $34.2 million.
In connection with RSUs granted to employees, non-employees directors and certain other individuals, the Company recognized approximately $4.6
million, $3.3 million and $3.0 million in share-based compensation expense during the years ended December 31, 2021, 2020 and 2019, respectively, net of
expected forfeitures. As of December 31, 2021, there was approximately $18.8 million of unrecognized compensation costs, net of estimated forfeitures,
related to RSU grants, which are
F-30
Table of Contents
IVERIC bio, Inc.
Notes to Financial Statements (Continued)
(tabular dollars and shares in thousands, except per share data)
12. Stock-Based Compensation and Compensation Plans (Continued)
expected to be recognized over a remaining weighted average period of 3.2 years. The total fair value of the RSUs that vested during the year ended
December 31, 2021 was $3.7 million.
In connection with the ESPP made available to employees, the Company recognized approximately $0.2 million and $0.1 million of share-based
compensation expense during the years ended December 31, 2021 and December 31, 2020, respectively, net of expected forfeitures. As of December 31,
2021, there was a de minimis amount of unrecognized compensation costs, net of estimated forfeitures, related to the ESPP, which are expected to be
recognized over 0.2 years. There were 51,951 and 76,402 shares of common stock issued under the ESPP during the year ended December 31, 2021 and
2020, respectively. Cash proceeds from ESPP purchases were approximately $0.3 million and $0.1 million during the year ended December 31, 2021 and
2020, respectively. As of December 31, 2021, 753,410 shares were available for future purchases under the ESPP.
13. Employee Benefit Plan
The Company maintains a defined contribution 401(k) plan available to employees. Employee contributions are voluntary and are determined on an
individual basis, limited by the maximum amounts allowable under federal tax regulations. The Company's matching contributions to employees totaled
approximately $0.6 million, $0.3 million and $0.2 million during the years ended December 31, 2021, 2020 and 2019, respectively.
F-31
Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of
information that the registrant treats as private or confidential. Double asterisks denote omissions.
FIRST AMENDMENT TO
LICENSE AGREEMENT NO. A18025
This First Amendment to License Agreement No. A18025 effective December 13, 2021 (“First Amendment”), is
entered into among The University of Florida Research Foundation, Inc., a not-for-profit corporation duly organized
and existing under the laws of the State of Florida and having its principal office at 310 Walker Hall, Gainesville,
Florida 32611 (“UFRF”), The Trustees of the University of Pennsylvania, a nonprofit corporation with offices located
at Penn Center for Innovation, 3600 Civic Center, 9 floor, Philadelphia, PA 19104 (“Penn”, together with UFRF, the
“Licensors”) and IVERIC Bio Gene Therapy LLC, a Delaware limited liability company having a place of business at
Five Penn Plaza, Suite 2372, New York, NY 10001 (hereinafter referred to as “Licensee”).
th
WHEREAS, the parties entered into and are party to a license agreement effective June 6, 2018 (hereinafter
“License Agreement”) Capitalized terms used but not defined herein shall have the meaning ascribed to them in the
License Agreement; and;
WHEREAS, the parties now wish to amend the License Agreement by this First Amendment;
NOW THEREFORE, in consideration of the premises and mutual covenants contained herein the parties hereto
agree as follows:
1. Section 3.2(a) of the License Agreement is hereby deleted and replaced with the following::
(a) Licensee agrees that the First Commercial Sale of Licensed Products to a customer shall occur on or before [**]. In
addition, if Licensee fails to achieve such First Commercial Sale within such timeframe or to meet the milestones shown in
Appendix E (as such dates or milestones may be extended in accordance with Section 3.2(b), Licensors may terminate this
Agreement pursuant to Section 9.3. Licensee shall notify Licensors in writing as each milestone is met.
2. The Milestones detailed in Appendix E – Milestones of the License Agreement is hereby deleted and
replaced with the attached Amended Appendix E - Milestones.
3. This First Amendment, together with the License Agreement, constitute the entire agreement between the
parties. All other provisions of the License Agreement, except as expressly amended by this First Amendment, shall
remain in full force and effect and unmodified by this First Amendment.
4. Licensors acknowledge Licensee may file a copy of this First Amendment with the securities and exchange
commission, in accordance with its rules and regulations.
5. This First Amendment may be executed in two or more counterparts, each of which shall be deemed an original
and together shall be deemed one and the same instrument.
UNIVERSITY OF FLORIDA IVERIC Bio Gene Therapy LLC
RESEARCH FOUNDATION, INC.
By: _/s/ Jim O’Connell________________ By: __/s/ Keith Westby_____________
Name: Jim O'Connell Name: Keith Westby
Title: Director, UF Innovate|Tech Licensing Title: SVP, Chief Operating Officer
Date: _12/14/2021________________ Date: _12/17/2021______________
THE TRUSTEES OF THE UNIVERSITY OF
PENNSYLVANIA
By: _/s/ Benjamin Dibling____________
Name: Benjamin Dibling, Ph.D.
Title: Executive Director of Licensing, Penn Center for Innovation
Date: 12/13/2021____________________
AMENDED APPENDIX E – MILESTONES
Event Time
[**] [**]
[**] [**]
[**] [**]
June 16, 2021
[**]
Dear Chris:
On behalf of IVERIC bio, Inc. (the “Company”) it is my pleasure to extend to you this offer of employment with the Company
for the position of Senior Vice President & Chief Commercial Officer, reporting to Glenn Sblendorio, Chief Executive Officer.
The terms of this offer, which are contingent on you and us determining a mutually agreed upon start date (the “Start Date”) and
satisfactory completion of a background investigation, are as follows:
1.
2.
Employment. You will be employed on a full-time basis. You will carry out duties and responsibilities consistent with
your position and other duties as may from time to time be assigned to you by the Company. The Company reserves the
right to change your title and responsibilities at any time, with or without notice. You shall perform and discharge
faithfully and diligently your duties and responsibilities hereunder. You agree to devote your full business time, efforts,
skill, knowledge, attention and energies to the advancement of the Company’s business and interests and to the
performance of your duties and responsibilities as an employee of the Company. You agree to abide by the rules,
regulations, instructions, practices and policies of the Company and any changes to these that may be adopted from
time to time by the Company.
Base Salary. Your base salary will be at the annual rate of $415,000, less all applicable taxes and withholdings, to be
paid in accordance with the Company’s regular payroll practices. Such base salary may be adjusted from time to time in
accordance with normal business practices and in the sole discretion of the Company. Your position is classified as
“exempt” according to federal wage law which means you are not eligible for overtime pay for hours worked in excess
of 40 in a given week.
3. Discretionary Bonus. Following the end of each calendar year and subject to the approval of the Company’s Board of
Directors (the “Board”), you will be eligible for a performance bonus of up to 45% of your annualized base salary,
based on your personal performance and the Company’s performance during the applicable calendar year, as
determined by the Company in its sole discretion. To receive a bonus for the current performance year, you must be an
active employee by September 30 and you must be an active employee of the Company on the date the bonus is
distributed in
th
4.
5.
order to be eligible for and to earn any bonus award. Provided that you are an active employee of the Company on the
date the bonus is distributed, we will guarantee your full bonus payout (based on your 45% target, but subject to the
Company’s and your performance) for 2021 and you will be able to participate (on a pro rata basis based on your hire
date) to the extent the Company achieves its stretch goals for up to an additional 50% of your target bonus.
Equity. In connection with the commencement of your employment and as an inducement to becoming an employee,
you will be eligible to receive an option to purchase 160,000 shares of the Company’s common stock (the “Option”),
subject to approval by the Board (acting in its sole discretion) and contingent upon your execution of the corresponding
stock option agreement. The Option would be issued with an exercise price equal to the fair market value of the
Company’s common stock (as determined by the Board) as of your Start Date (the “Grant Date”) and would vest over a
four-year period, with 25% of the shares vesting on the first anniversary of the Grant Date and the remainder of the
shares vesting in equal monthly amounts thereafter until the fourth anniversary of the Grant Date, pursuant to the terms
of the stock option agreement and subject to your continued employment with the Company. In addition, in connection
with the commencement of your employment and as an inducement to becoming an employee, you will be eligible to
receive a restricted stock unit grant for 75,000 shares (the “Joining RSU Grant”) on the Grant Date, subject to approval
by the Board (acting in its sole discretion) and contingent upon your execution of a corresponding restricted stock unit
agreement. The Joining RSU Grant would vest over a four-year period, with 25% of the shares vesting on each of the
first, second, third and fourth anniversaries of the Grant Date, pursuant to the terms of the restricted stock unit
agreement and subject to your continued employment with the Company. Subject to Board approval each year, the
Company grants additional equity awards annually based on performance. You would be eligible for an annual
performance-based equity award for 2021 on a pro-rata basis (pro-rated at 75%).
Sign On Bonus: In connection with the commencement of your employment and as an inducement to becoming an
employee, you will be eligible receive, as a sign-on bonus, a restricted stock unit grant for 15,000 shares of the
Company’s common stock (the “Sign-On RSU Grant”) on the Grant Date, subject to approval by the Board (acting in
its sole discretion) and contingent upon your execution of a corresponding restricted stock unit agreement. The Sign-On
RSU Grant would vest with respect to 100% of the shares underlying the grant on the first anniversary of the Grant
Date, pursuant to the
terms of the restricted stock unit agreement and subject to your continued employment with the Company.
6.
7.
Benefits. You may participate in any and all benefit programs that the Company establishes and makes generally
available to similarly situated employees from time to time, provided that you are eligible under (and subject to all
provisions of) the plan documents that govern those programs. A summary of current benefits is enclosed with this
letter. Benefits are subject to change at any time in the Company’s sole discretion.
Severance. You will be eligible to receive the severance and change in control benefits set forth in a separate written
agreement with the Company to be executed contemporaneous herewith.
8. Car Allowance. You will receive a semi-monthly car allowance in the amount of $675 less taxes ($1,350 per month).
9. Vacation. You will be entitled to vacation time as set forth in the Employee Handbook, as such vacation policy may be
amended by the Company from time to time.
10. Fair Competition & Confidentiality Agreement. As a condition of employment, you will be required to execute the
attached Fair Competition & Confidentiality Agreement.
11. No Conflict. You represent that you are not bound by any employment contract, restrictive covenant or other restriction
preventing you from entering into employment with or carrying out your responsibilities for the Company, or which is
in any way inconsistent with the terms of this offer letter.
12. Proof of Legal Right to Work. You will be required to complete an Employment Eligibility Verification Form and
submit an original document or documents that establish identity and employment eligibility within 3 business days of
starting employment. Your employment with the Company is contingent on your satisfactory completion of this
requirement.
13. At-Will Employment. This letter shall not be construed as an agreement, either express or implied, to employ you for
any stated term, and shall in no way alter the Company’s policy of employment at-will, under which both the Company
and you
remain free to end the employment relationship for any reason, at any time, with or without cause or notice. Although
your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may
change from time to time, the “at-will” nature of your employment may only be changed by a written agreement signed
by you and the Company’s Chief Executive Officer that expressly states the intention to modify the at-will nature of
your employment. Similarly, nothing in this letter shall be construed as an agreement, either express or implied, to pay
you any compensation or grant you any benefit beyond the end of your employment with the Company. This letter
supersedes all prior understandings, whether written or oral, relating to the terms of your employment.
14. Background Investigation. The required notices and forms for our background investigation are enclosed herewith.
You must submit a completed form with your signed offer letter. Employment is contingent upon successful completion
of the background check.
If you decide to accept this offer, and agree to the employment terms set forth in this letter, please sign the letter in the space
provided below and return it to me. If you do not accept this offer by Thursday, June 24, 2021, the offer will be deemed
withdrawn.
Sincerely,
By: /s/ Amy Sheehan_______________________
Amy R. Sheehan
Senior Vice President & Chief HR Officer
The foregoing letter correctly sets forth the terms of my at-will employment with IVERIC bio, Inc., which I hereby accept.
Nothing contained in this letter abrogates the at-will status of my proposed employment. I am not relying on any representations
other than those set forth above.
/s/ Chris Simms_________________ ________________________
Christopher Simms Date
June 16, 2021
Mr. Christopher Simms
c/o IVERIC bio, Inc.
5 Penn Plaza, Suite 2372
New York, NY 10001
Dear Chris:
IVERIC bio, Inc. (the “Company”) will provide for the following severance benefits for you in the event of your termination
of employment with the Company, on the terms and conditions set forth herein.
1. Severance.
(a) Subject to Section 1(b), if your employment is terminated (1) at any time by the Company without Cause or by you for
Good Reason (as such terms are herein defined) or (2) within one year following a Change in Control Event (as defined in the
Company’s 2013 Stock Incentive Plan), by the Company, or its successor, without Cause or by you for Good Reason, the
Company or its successor will (i) pay you in a lump sum on the Payment Date (as herein defined) (A) an amount equal to twelve
(12) months of your then-current base salary, less standard employment-related withholdings and deductions and (B) an amount
equal to a pro-rated portion of your then-current target bonus for the year in which your employment terminates, provided,
however, that if your employment is terminated under the circumstances described in (2) of this Section 1(a), the Company or its
successor will instead pay you an amount equal to your then-current target bonus for the year in which your employment
terminates, in either case, without regard to whether the performance goals with respect to such target bonus have been
established or met and less standard employment-related withholdings and deductions, and (ii) provided you elect to continue
your and your eligible dependents’ participation in the Company’s medical and dental benefit plans pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1986 (“COBRA”), reimburse you for the monthly premium to continue such coverage for
the lesser of the twelve (12) full calendar months immediately following the month in which the termination of your employment
occurs and the end of the calendar month in which you become eligible to receive group health plan coverage under another
employee benefit plan. Notwithstanding the foregoing, if the reimbursement of monthly premiums would otherwise violate the
nondiscrimination rules or cause the reimbursement of claims to be taxable under the Patient Protection and Affordable Care Act
of 2010, together with the Health Care and Education Reconciliation Act of 2010 (collectively, the “Healthcare Reform Act”) or
Section 105(h) of the
Five Penn Plaza Suite 2372 New York, New York 10001 • 212-845-8200 • www.ivericbio.com
IVERIC bio, Inc.
Internal Revenue Code of 1986, as amended (the “Code”), these payments shall be treated as taxable payments to you and you
shall be subject to imputed income tax treatment to the extent necessary to eliminate any discriminatory treatment or taxation
under the Act or Section 105(h).
(b) Notwithstanding the foregoing, (i) the Company shall not be obligated to pay you the severance payments provided
for herein unless you have timely executed (and not revoked) a separation agreement in a form to be provided by the Company.
Such separation agreement must be executed and become binding and enforceable within sixty (60) calendar days after the
effective date of your termination of employment (such 60th day, the “Payment Date”); provided however, that if the 60th day
following the date of termination occurs in the next calendar year following the date of termination, then the Payment Date shall
be no earlier than January 1 of such following calendar year and (ii) the severance payments provided for herein shall be reduced
by any payments to which you may be entitled as a result of any applicable laws regarding plant closings or mass layoffs which
require notice prior to termination or pay or benefits following termination, such that the amount of the payments made to you
pursuant to such laws (whether such payments are made to you during any notice period prior to termination (regardless of
whether the Company requires you to work during such notice period) or any period following termination), will reduce the
severance payments otherwise due to you under Section 1(a).
(c) For purposes hereof, “Cause” shall mean that: (i) you failed to attempt in good faith, refused or willfully neglected
to perform and discharge your material duties and responsibilities; (ii) you have been convicted of, or pled nolo contendere to, a
felony or other crime involving fraud or moral turpitude; (iii) you breached your fiduciary duty of loyalty to the Company, or
acted fraudulently or with material dishonesty in discharging your duties to the Company; (iv) you undertook an intentional act or
omission of misconduct that materially harmed or was reasonably likely to materially harm the business, interests, or reputation
of the Company; (v) you materially breached any material provision of this letter or any other agreement with the Company; or
(vi) you materially breached any material provision of any Company code of conduct or ethics policy. Notwithstanding the
foregoing, “Cause” shall not be deemed to have occurred unless: (A) the Company provides you with written notice that it
intends to terminate your employment hereunder for one of the grounds set forth in subsections (i), (v) or (vi) within sixty (60)
days of such reason(s) occurring, (B) if such ground is capable of being cured, you have failed to cure such ground within a
period of thirty (30) days from the date of such written notice, and (C) the Company terminates your employment within six
(6) months from the date that Cause first occurs.
(d) For purposes hereof, “Good Reason” shall mean, without your written consent: (i) any change in your position or
reporting relationship with the Company that diminishes in any material respect your authority, duties or responsibilities; (ii) any
material reduction in your base compensation; (iii) a material change in the primary geographic location at which services are to
be performed by you (unless the new location is closer to your primary residence than the prior location); or (iv) a material
breach of any provision hereof by the Company or any successor or assign. Notwithstanding the foregoing, “Good Reason” shall
not be deemed to have occurred unless: (A) you provide the Company with written notice that you intend to terminate your
employment hereunder for one of the grounds set forth in subsections (i), (ii), (iii) or (iv) of the
immediately preceding sentence within sixty (60) days of such reason(s) occurring, (B) if such ground is capable of being cured,
the Company has failed to cure such ground within a period of thirty (30) days from the date of such written notice, and (C) you
terminate your employment within six (6) months from the date that Good Reason first occurs. For purposes of clarification, the
above-listed conditions shall apply separately to each occurrence of Good Reason and failure to adhere to such conditions in the
event of Good Reason shall not disqualify you from asserting Good Reason for any subsequent occurrence of Good Reason.
2. Equity Acceleration. If your employment with the Company, or its successor, is terminated by the Company or
such successor without Cause or by you for Good Reason within the one (1) year period following a Change in Control Event,
then the then-unvested portion of any equity awards held by you that vest solely based on the passage of time shall immediately
vest in full and become exercisable or free from forfeiture or repurchase, as applicable, as of the date of such termination.
3. Modified Cutback.
(a) Notwithstanding any other provision of this letter agreement, the letter agreement evidencing your offer of
employment with us, or any other agreements between you and us, except as set forth in Section 3(b) hereof, in the event that the
Company undergoes a “Change in Ownership or Control” (as defined below), the Company shall not be obligated to provide you
a portion of any “Contingent Compensation Payments” (as defined below) that you would otherwise be entitled to receive to the
extent necessary to eliminate any “excess parachute payments” (as defined in Section 280G(b)(l) of the Code) for you. For
purposes of this Section 3(a), the Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated
Payments” and the aggregate amount (determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-30 or any
successor provision) of the Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated Amount.”
(b) Notwithstanding the provisions of Section 3(a), no such reduction in Contingent Compensation Payments shall be
made if (1) the Eliminated Amount (computed without regard to this sentence) exceeds (2) 100% of the aggregate present value
(determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-31 and Q/A-32 or any successor provisions) of the
amount of any additional taxes that would be incurred by you if the Eliminated Payments (determined without regard to this
sentence) were paid to you (including, state and federal income taxes on the Eliminated Payments, the excise tax imposed by
Section 4999 of the Code payable with respect to all of the Contingent Compensation Payments in excess of your “base amount”
(as defined in Section 280G(b)(3) of the Code), and any withholding taxes). The override of such reduction in Contingent
Compensation Payments pursuant to this Section 3(b) shall be referred to as a “Section 3(b) Override.” For purpose of this
paragraph, if any federal or state income taxes would be attributable to the receipt of any Eliminated Payment, the amount of
such taxes shall be computed by multiplying the amount of the Eliminated Payment by the maximum combined federal and state
income tax rate provided by law.
(c) For purposes of this Section 3 the following terms shall have the following respective meanings:
(i) “Change in Ownership or Control” shall mean a change in the ownership or effective control of the
Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with
Section 280G(b)(2) of the Code.
(ii) “Contingent Compensation Payment” shall mean any payment (or benefit) in the nature of compensation that
is made or made available (under this Agreement or otherwise) to a “disqualified individual” (as defined in
Section 280G(c) of the Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the Code) on a
Change in Ownership or Control of the Company.
(d) Any payments or other benefits otherwise due to you following a Change in Ownership or Control that could
reasonably be characterized (as determined by the Company) as Contingent Compensation Payments (the “Potential Payments”)
shall not be made until the dates provided for in this Section 3(d). Within 30 days after each date on which you first become
entitled to receive (whether or not then due) a Contingent Compensation Payment relating to such Change in Ownership or
Control, the Company shall determine and notify you (with reasonable detail regarding the basis for its determinations) (1) which
Potential Payments constitute Contingent Compensation Payments, (2) the Eliminated Amount and (3) whether the
Section 3(b) Override is applicable. Within 30 days after delivery of such notice to you, you shall deliver a response to the
Company (the “Executive Response”) stating either (A) that you agree with the Company’s determination pursuant to the
preceding sentence or (B) that you disagree with such determination, in which case you shall set forth (x) which Potential
Payments should be characterized as Contingent Compensation Payments, (y) the Eliminated Amount, and (z) whether the
Section 3(b) Override is applicable. In the event that you fail to deliver an Executive Response on or before the required date, the
Company’s initial determination shall be final. If you state in the Executive Response that you agree with the Company’s
determination, the Company shall make the Potential Payments to you within three business days following delivery to the
Company of the Executive Response (except for any Potential Payments which are not due to be made until after such date,
which Potential Payments shall be made on the date on which they are due). If you state in the Executive Response that you
disagree with the Company’s determination, then, for a period of 60 days following delivery of the Executive Response, you and
the Company shall use good faith efforts to resolve such dispute. If such dispute is not resolved within such 60-day period, such
dispute shall be settled exclusively by arbitration in New York, New York, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The
Company shall, within three business days following delivery to the Company of the Executive Response, make to you those
Potential Payments as to which there is no dispute between the Company and you regarding whether they should be made (except
for any such Potential Payments which are not due to be made until after such date, which Potential Payments shall be made on
the date on which they are due). The balance of the Potential Payments shall be made within three business days following the
resolution of such dispute.
(e) The Contingent Compensation Payments to be treated as Eliminated Payments shall be determined by the
Company by determining the “Contingent Compensation Payment Ratio” (as defined below) for each Contingent Compensation
Payment and then reducing the
Contingent Compensation Payments in order beginning with the Contingent Compensation Payment with the highest Contingent
Compensation Payment Ratio. For Contingent Compensation Payments with the same Contingent Compensation Payment Ratio,
such Contingent Compensation Payment shall be reduced based on the time of payment of such Contingent Compensation
Payments with amounts having later payment dates being reduced first. For Contingent Compensation Payments with the same
Contingent Compensation Payment Ratio and the same time of payment, such Contingent Compensation Payments shall be
reduced on a pro rata basis (but not below zero) prior to reducing Contingent Compensation Payment with a lower Contingent
Compensation Payment Ratio. The term “Contingent Compensation Payment Ratio” shall mean a fraction the numerator of
which is the value of the applicable Contingent Compensation Payment that must be taken into account by you for purposes of
Section 4999(a) of the Code, and the denominator of which is the actual amount to be received by you in respect of the applicable
Contingent Compensation Payment. For example, in the case of an equity grant that is treated as contingent on the Change in
Ownership or Control because the time at which the payment is made or the payment vests is accelerated, the denominator shall
be determined by reference to the fair market value of the equity at the acceleration date, and not in accordance with the
methodology for determining the value of accelerated payments set forth in Treasury Regulation Section 1.280G-1Q/A-24(b) or
(c)).
(f) The provisions of this Section 3 are intended to apply to any and all payments or benefits available to you under
this letter agreement or any other agreement or plan of the Company under which you receive Contingent Compensation
Payments.
4. Miscellaneous.
(a) Code Section 409A. The intent of the parties is that payments and benefits under this letter comply with, or be
exempt from, Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code
Section 409A”). Accordingly, if any provision of this letter is ambiguous, such that one interpretation would subject a payment or
benefit to the excise tax imposed by Code Section 409A and an alternative interpretation would not so subject the payment or
benefit, the parties intend the interpretation that would not so subject the payment or benefit to apply. With regard to any
provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code
Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another
benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not
affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that this
clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(a) of the Code
solely because such expenses are subject to a limit related to the period the arrangement is in effect, and (iii) such payments shall
be made on or before the last day of your taxable year following the taxable year in which the expense occurred, provided that
any tax gross-ups may be reimbursed by the end of the calendar year following the calendar year in which such taxes are remitted
to the taxing authorities. For purposes of Code Section 409A, each payment hereunder shall be treated as a separate payment and
your right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate
and distinct payments. In no event may you, directly or
indirectly, designate the calendar year of any payment to be made under this letter that is considered nonqualified deferred
compensation. Termination of employment as used herein shall mean separation from service within the meaning of Code
Section 409A. In the event at the time of any separation from service you are a “specified employee” within the meaning of Code
Section 409A, any deferred compensation subject to Code Section 409A payable as a result of such termination shall not be paid
prior to the earlier of six (6) months after such termination and your death and shall be paid immediately thereafter.
(b) Governing Law. This letter shall be governed by and construed in accordance with the laws of the State of New
York (without reference to the conflicts of laws provisions thereof). Any action, suit, or other legal proceeding which is
commenced to resolve any matter arising under or relating to any provision of this letter shall be commenced only in a court of
the State of New York (or, if appropriate, a federal court located within New York), and the Company and you each consents to
the jurisdiction of such a court. The Company and you each hereby irrevocably waive any right to a trial by jury in any action,
suit or other legal proceeding arising under or relating to any provision hereof.
(c) Conflict; Amendment: Counterparts. This letter agreement sets forth the Company’s sole obligation, subject to the
terms and conditions set forth herein, to provide severance benefits to you. The severance benefits set forth in this letter
agreement are therefore in lieu of, and not in addition to, any severance benefits that may be described in the letter agreement
evidencing your offer of employment with us, or any other agreement or arrangement between you and us. Except as modified
hereby, the terms of the letter agreement evidencing your offer of employment with us remain in full force and effect. The Prior
Agreement is superseded by this agreement and shall be of no further force or effect. This agreement may only be modified in a
document signed by both the Company and you. This agreement may be executed in counterparts, each of which will be deemed
an original, but all of which will be deemed one and the same instrument.
[Remainder of page intentionally left blank]
If the provisions of this agreement are acceptable to you, please sign and date this agreement below and return the signed
and dated agreement to me on or before Thursday, June 24, 2021.
Sincerely,
IVERIC bio, Inc.
By /s/ Amy Sheehan
Amy R. Sheehan
Senior Vice President & Chief HR Officer
ACCEPTED AND AGREED:
/s/ Chris Simms
Christopher Simms
Date
Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of
information that the registrant treats as private or confidential. Double asterisks denote omissions.
November 19, 2021
Mr. Anthony Gibney
[**]
Dear Tony:
On behalf of IVERIC bio, Inc. (the “Company”) it is my pleasure to extend to you this offer of employment with the Company
for the position of Executive Vice President & Chief Business & Strategy Officer, reporting directly to Glenn Sblendorio, Chief
Executive Officer. The terms of this offer, which are contingent on you and us determining a mutually agreed upon start date,
which is expected to be no later than January 3, 2022 (the “Start Date”) and satisfactory completion of a background
investigation, are as follows:
1.
Employment. You will be employed on a full-time basis. You will carry out duties and responsibilities consistent with
your position and such other duties as may from time to time be assigned to you by the Company. The Company
reserves the right to change your title and responsibilities at any time, with or without notice, provided that such change
in title and responsibilities is in connection with the addition of responsibilities and/or a more senior position. You shall
perform and discharge faithfully and diligently your duties and responsibilities hereunder. You agree to devote your full
business time, efforts, skill, knowledge, attention and energies to the advancement of the Company’s business and
interests and to the performance of your duties and responsibilities as an employee of the Company. Notwithstanding
the foregoing, you may (i) manage your personal financial affairs, (ii) engage in civic and charitable activities, and (iii)
continue to serve on the board of directors of the company on which you currently serve as a board member and, with
the prior approval of the Board (not to be unreasonably withheld), serve on one additional board of directors, provided
that such activities described in (i), (ii) and (iii) do not, individually or in the aggregate, unreasonably interfere with
your duties and responsibilities hereunder or create a conflict of interests. You will be indemnified for your services to
and on behalf of the Company to the extent provided for under the Company’s certificate of incorporation and standard
form of director and executive officer indemnification agreement (which the Company will execute and deliver to you)
and you shall be covered by directors’ and officers’ or other third-party liability insurance on a basis no less favorable
than other senior executives of the Company are so covered. You agree to abide by the rules, regulations, instructions,
practices and policies of the Company and any changes to these that may be adopted from time to time by the
Company.
2.
Base Salary. Your base salary will be at the annual rate of $420,000, less all applicable taxes and withholdings, to be
paid in accordance with the Company’s regular payroll practices. Such base salary may be adjusted for possible
increase, but not decrease, from time to time in accordance with normal business practices and in the sole discretion of
the Company. Your position is classified as “exempt” according to
www.ivericbio.com
federal wage law which means you are not eligible for overtime pay for hours worked in excess of 40 in a given week.
3. Discretionary Bonus. Following the end of each calendar year beginning with 2022 and subject to the approval of the
Company’s Board of Directors (the “Board”), you will be eligible for a target performance bonus of 45% of your
annualized base salary, based on your personal performance and the Company’s performance during the applicable
calendar year, as determined by the Company in good faith based on your and the Company’s achievement of
performance objectives communicated to you at the beginning of each calendar year during the term of your
employment.
4.
Equity. In connection with the commencement of your employment and as an inducement to becoming an employee,
you will receive an option to purchase 200,000 shares of the Company’s common stock (the “Option”), subject to
approval by the Board (acting in its sole discretion) and contingent upon your execution of the corresponding stock
option agreement. The Option would be issued with an exercise price per share equal to the closing sale price (for the
primary trading session) of the Company’s common stock on the Nasdaq Global Select Market on your Start Date (the
“Grant Date”) and would vest over a four-year period, with 25% of the shares vesting on the first anniversary of the
Grant Date and the remainder of the shares vesting in equal monthly amounts thereafter until the fourth anniversary of
the Grant Date, pursuant to the terms of the stock option agreement and subject to your continued employment with the
Company. In addition, in connection with the commencement of your employment and as an inducement to becoming
an employee, you will be receive, on the Grant Date, two separate restricted stock unit grants consisting of (a) a grant
for 100,000 shares of the Company’s common stock (the “Joining RSU Grant”) and (b) a grant for 75,000 shares of the
Company’s common stock (the “Performance RSU Grant”), in each case, subject to approval by the Board (acting in its
sole discretion) and contingent upon your execution of a corresponding restricted stock unit agreements. The Joining
RSU Grant would vest over a four-year period, with 25% of the shares vesting on each of the first, second, third and
fourth anniversaries of the Grant Date and the Performance RSU Grant would vest based on key performance
milestones as set forth on Exhibit A attached hereto, in each case, pursuant to the terms of the applicable restricted
stock unit agreement and subject to your continued employment with the Company except as provided herein. Subject
to Board approval each year, the Company grants additional equity awards annually based on performance and you will
be eligible for such grants beginning with those awarded based on 2022 performance.
5.
Sign On Bonus: In connection with your employment, the Company will award you a sign-on bonus in the amount of
$50,000, less applicable taxes, that will be included in your first paycheck. Should you voluntarily resign from the
Company (excluding for this purpose, your termination with Good Reason as such term is defined in your severance
agreement with the Company to be executed contemporaneous herewith (the “Severance Agreement”)) within your first
year of employment you would be required
2
to repay to the Company 100% of the sign-on bonus awarded to you (including any taxes deducted through payroll).
For the avoidance of doubt, no repayment will be due upon your involuntary termination without Cause (as such term is
defined in the Severance Agreement) or upon your termination of employment due to death or disability. In addition, in
connection with the commencement of your employment and as an inducement to becoming an employee, you will
receive, as a sign-on bonus on the Grant Date, a restricted stock unit grant for 6,000 shares of the Company’s common
stock (the “Sign-On RSU Grant”), subject to approval by the Board (acting in its sole discretion) and contingent upon
your execution of a corresponding restricted stock unit agreement. The Sign-On RSU Grant would vest with respect to
100% of the shares underlying the grant on the first anniversary of the Grant Date, pursuant to the terms of the
restricted stock unit agreement and subject to your continued employment with the Company.
6.
7.
Benefits. You may participate in any and all benefit programs that the Company establishes and makes generally
available to similarly situated employees from time to time, provided that you are eligible under (and subject to all
provisions of) the plan documents that govern those programs. A summary of current benefits is enclosed with this
letter. Benefits are subject to change at any time in the Company’s sole discretion.
Severance. You will be eligible to receive the severance and change in control benefits set forth in the Severance
Agreement.
8. Vacation. You will be entitled to vacation time as set forth in the Employee Handbook, as such vacation policy may be
amended by the Company from time to time.
9.
Fair Competition & Confidentiality Agreement. As a condition of employment, you will be required to execute the
attached Fair Competition & Confidentiality Agreement.
10. No Conflict. You represent that you are not bound by any employment contract, restrictive covenant or other restriction
preventing you from entering into employment with or carrying out your responsibilities for the Company, or which is
in any way inconsistent with the terms of this offer letter.
11. Proof of Legal Right to Work. You will be required to complete an Employment Eligibility Verification Form and
submit an original document or documents that establish identity and employment eligibility within 3 business days of
starting employment. Your employment with the Company is contingent on your satisfactory completion of this
requirement.
12. At-Will Employment. This letter shall not be construed as an agreement, either express or implied, to employ you for
any stated term, and shall in no way alter the Company’s policy of employment at-will, under which both the Company
and you
3
remain free to end the employment relationship for any reason, at any time, with or without cause or notice. Although
your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may
change from time to time, the “at-will” nature of your employment may only be changed by a written agreement signed
by you and the Company’s Chief Executive Officer that expressly states the intention to modify the at-will nature of
your employment. Similarly, nothing in this letter shall be construed as an agreement, either express or implied, to pay
you any compensation or grant you any benefit beyond the end of your employment with the Company. This letter
supersedes all prior understandings, whether written or oral, relating to the terms of your employment.
13. Background Investigation. The required notices and forms for our background investigation are enclosed herewith.
You must submit a completed form with your signed offer letter. Employment is contingent upon successful completion
of the background check.
4
If you decide to accept this offer and agree to the employment terms set forth in this letter, please sign the letter in the space
provided below, together with the enclosed documents, and return them to me. If you do not accept this offer by November 22,
2021, the offer will be deemed withdrawn.
Sincerely,
By: /s/ Amy R. Sheehan
Amy R. Sheehan
Senior Vice President & Chief HR Officer
The foregoing letter correctly sets forth the terms of my at-will employment with IVERIC bio, Inc., which I hereby accept.
Nothing contained in this letter abrogates the at-will status of my proposed employment. I am not relying on any representations
other than those set forth above.
/s/ Anthony Gibney November 19, 2021
Anthony Gibney Date:
5
Exhibit A
[**]
November 10, 2021
Mr. Anthony Gibney
c/o IVERIC bio, Inc.
Five Penn Plaza, Suite 2372
New York, NY 10001
Dear Tony:
The board of directors of IVERIC bio, Inc. (the “Company”) has provided for the following severance benefits to be provided
to you in the event of your termination of employment with the Company, on the terms and conditions set forth herein.
1. Severance.
(a) Subject to Section 1(b), if your employment is terminated (1) at any time by the Company without Cause or by you for
Good Reason (as such terms are herein defined) or (2) within one year following a Change in Control Event (as defined in the
Company’s 2013 Stock Incentive Plan), by the Company, or its successor, without Cause or by you for Good Reason, the
Company or its successor will (i) pay you in a lump sum on the Payment Date (as herein defined) (A) an amount equal to twelve
(12) months of your then-current base salary, less standard employment-related withholdings and deductions and (B) an amount
equal to a pro-rated portion of your then-current target bonus for the year in which your employment terminates, provided,
however, that if your employment is terminated under the circumstances described in (2) of this Section 1(a), the Company or its
successor will instead pay you an amount equal to your then-current target bonus for the year in which your employment
terminates, in either case, without regard to whether the performance goals with respect to such target bonus have been
established or met and less standard employment-related withholdings and deductions, and (ii) provided you elect to continue
your and your eligible dependents’ participation in the Company’s medical and dental benefit plans pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1986 (“COBRA”), reimburse you for the monthly premium to continue such coverage for
the lesser of the twelve (12) full calendar months immediately following the month in which the termination of your employment
occurs and the end of the calendar month in which you become eligible to receive group health plan coverage under another
employee benefit plan. Notwithstanding the foregoing, if the reimbursement of monthly premiums would otherwise violate the
nondiscrimination rules or cause the reimbursement of claims to be taxable under the Patient Protection and Affordable Care Act
of 2010, together with the Health Care and Education Reconciliation Act of 2010 (collectively, the “Healthcare Reform Act”) or
Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”), these payments shall be treated as taxable
payments to you and you shall be subject to imputed income tax treatment to the extent necessary to eliminate any discriminatory
treatment or taxation under the Act or Section 105(h).
Five Penn Plaza Suite 2372 New York, New York 10001 • 212-845-8200 • www.ivericbio.com
IVERIC bio, Inc.
(b) Notwithstanding the foregoing, (i) the Company shall not be obligated to pay you the severance payments provided
for herein unless you have timely executed (and not revoked) a separation agreement in a form to be provided by the Company.
Such separation agreement must be executed and become binding and enforceable within sixty (60) calendar days after the
effective date of your termination of employment (such 60th day, the “Payment Date”); provided however, that if the 60th day
following the date of termination occurs in the next calendar year following the date of termination, then the Payment Date shall
be no earlier than January 1 of such following calendar year and (ii) the severance payments provided for herein shall be reduced
by any payments to which you may be entitled as a result of any applicable laws regarding plant closings or mass layoffs which
require notice prior to termination or pay or benefits following termination, such that the amount of the payments made to you
pursuant to such laws (whether such payments are made to you during any notice period prior to termination (regardless of
whether the Company requires you to work during such notice period) or any period following termination), will reduce the
severance payments otherwise due to you under Section 1(a).
(c) For purposes hereof, “Cause” shall mean that: (i) you failed to attempt in good faith, refused or willfully neglected
to perform and discharge your material duties and responsibilities; (ii) you have been convicted of, or pled nolo contendere to, a
felony or other crime involving fraud or moral turpitude; (iii) you breached your fiduciary duty of loyalty to the Company, or
acted fraudulently or with material dishonesty in discharging your duties to the Company; (iv) you undertook an intentional act or
omission of misconduct that materially harmed or was reasonably likely to materially harm the business, interests, or reputation
of the Company; (v) you materially breached any material provision of this letter or any other agreement with the Company; or
(vi) you materially breached any material provision of any Company code of conduct or ethics policy. Notwithstanding the
foregoing, “Cause” shall not be deemed to have occurred unless: (A) the Company provides you with written notice that it
intends to terminate your employment hereunder for one of the grounds set forth in subsections (i), (v) or (vi) within sixty (60)
days of such reason(s) occurring, (B) if such ground is capable of being cured, you have failed to cure such ground within a
period of thirty (30) days from the date of such written notice, and (C) the Company terminates your employment within six
(6) months from the date that Cause first occurs.
(d) For purposes hereof, “Good Reason” shall mean, without your written consent: (i) any change in your position or
reporting relationship with the Company that diminishes in any material respect your authority, duties or responsibilities; (ii) any
material reduction in your base compensation; (iii) a material change in the primary geographic location at which services are to
be performed by you (unless the new location is closer to your primary residence than the prior location); or (iv) a material
breach of any provision hereof by the Company or any successor or assign. Notwithstanding the foregoing, “Good Reason” shall
not be deemed to have occurred unless: (A) you provide the Company with written notice that you intend to terminate your
employment hereunder for one of the grounds set forth in subsections (i), (ii), (iii) or (iv) of the immediately preceding sentence
within sixty (60) days of such reason(s) occurring, (B) if such ground is capable of being cured, the Company has failed to cure
such ground within a period of thirty (30) days from the date of such written notice, and (C) you terminate your employment
within six (6) months from the date that Good Reason first occurs. For purposes of clarification, the above-listed conditions shall
apply separately to each occurrence of Good Reason and failure to adhere to such conditions in the event of Good Reason shall
not disqualify you from asserting Good Reason for any subsequent occurrence of Good Reason.
2. Equity Acceleration. If your employment with the Company, or its successor, is terminated by the Company or
such successor without Cause or by you for Good Reason within the one (1) year period following a Change in Control Event,
then the then-unvested portion of
any equity awards held by you that vest solely based on the passage of time shall immediately vest in full and become exercisable
or free from forfeiture or repurchase, as applicable, as of the date of such termination.
3. Modified Cutback.
(a) Notwithstanding any other provision of this letter agreement, the letter agreement evidencing your offer of
employment with us, or any other agreements between you and us, except as set forth in Section 3(b) hereof, in the event that the
Company undergoes a “Change in Ownership or Control” (as defined below), the Company shall not be obligated to provide you
a portion of any “Contingent Compensation Payments” (as defined below) that you would otherwise be entitled to receive to the
extent necessary to eliminate any “excess parachute payments” (as defined in Section 280G(b)(l) of the Code) for you. For
purposes of this Section 3(a), the Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated
Payments” and the aggregate amount (determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-30 or any
successor provision) of the Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated Amount.”
(b) Notwithstanding the provisions of Section 3(a), no such reduction in Contingent Compensation Payments shall be
made if (1) the Eliminated Amount (computed without regard to this sentence) exceeds (2) 100% of the aggregate present value
(determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-31 and Q/A-32 or any successor provisions) of the
amount of any additional taxes that would be incurred by you if the Eliminated Payments (determined without regard to this
sentence) were paid to you (including, state and federal income taxes on the Eliminated Payments, the excise tax imposed by
Section 4999 of the Code payable with respect to all of the Contingent Compensation Payments in excess of your “base amount”
(as defined in Section 280G(b)(3) of the Code), and any withholding taxes). The override of such reduction in Contingent
Compensation Payments pursuant to this Section 3(b) shall be referred to as a “Section 3(b) Override.” For purpose of this
paragraph, if any federal or state income taxes would be attributable to the receipt of any Eliminated Payment, the amount of
such taxes shall be computed by multiplying the amount of the Eliminated Payment by the maximum combined federal and state
income tax rate provided by law.
(c) For purposes of this Section 3 the following terms shall have the following respective meanings:
(i) “Change in Ownership or Control” shall mean a change in the ownership or effective control of the
Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with
Section 280G(b)(2) of the Code.
(ii) “Contingent Compensation Payment” shall mean any payment (or benefit) in the nature of compensation that
is made or made available (under this Agreement or otherwise) to a “disqualified individual” (as defined in
Section 280G(c) of the Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the Code) on a
Change in Ownership or Control of the Company.
(d) Any payments or other benefits otherwise due to you following a Change in Ownership or Control that could
reasonably be characterized (as determined by the Company) as Contingent Compensation Payments (the “Potential Payments”)
shall not be made until the dates provided for in this Section 3(d). Within 30 days after each date on which you first become
entitled to receive (whether or not then due) a Contingent Compensation Payment relating to such Change in Ownership or
Control, the Company shall determine and notify you (with reasonable detail regarding the basis for its determinations) (1) which
Potential Payments
constitute Contingent Compensation Payments, (2) the Eliminated Amount and (3) whether the Section 3(b) Override is
applicable. Within 30 days after delivery of such notice to you, you shall deliver a response to the Company (the “Executive
Response”) stating either (A) that you agree with the Company’s determination pursuant to the preceding sentence or (B) that you
disagree with such determination, in which case you shall set forth (x) which Potential Payments should be characterized as
Contingent Compensation Payments, (y) the Eliminated Amount, and (z) whether the Section 3(b) Override is applicable. In the
event that you fail to deliver an Executive Response on or before the required date, the Company’s initial determination shall be
final. If you state in the Executive Response that you agree with the Company’s determination, the Company shall make the
Potential Payments to you within three business days following delivery to the Company of the Executive Response (except for
any Potential Payments which are not due to be made until after such date, which Potential Payments shall be made on the date
on which they are due). If you state in the Executive Response that you disagree with the Company’s determination, then, for a
period of 60 days following delivery of the Executive Response, you and the Company shall use good faith efforts to resolve such
dispute. If such dispute is not resolved within such 60-day period, such dispute shall be settled exclusively by arbitration in New
York, New York, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered
on the arbitrator’s award in any court having jurisdiction. The Company shall, within three business days following delivery to
the Company of the Executive Response, make to you those Potential Payments as to which there is no dispute between the
Company and you regarding whether they should be made (except for any such Potential Payments which are not due to be made
until after such date, which Potential Payments shall be made on the date on which they are due). The balance of the Potential
Payments shall be made within three business days following the resolution of such dispute.
(e) The Contingent Compensation Payments to be treated as Eliminated Payments shall be determined by the
Company by determining the “Contingent Compensation Payment Ratio” (as defined below) for each Contingent Compensation
Payment and then reducing the Contingent Compensation Payments in order beginning with the Contingent Compensation
Payment with the highest Contingent Compensation Payment Ratio. For Contingent Compensation Payments with the same
Contingent Compensation Payment Ratio, such Contingent Compensation Payment shall be reduced based on the time of
payment of such Contingent Compensation Payments with amounts having later payment dates being reduced first. For
Contingent Compensation Payments with the same Contingent Compensation Payment Ratio and the same time of payment, such
Contingent Compensation Payments shall be reduced on a pro rata basis (but not below zero) prior to reducing Contingent
Compensation Payment with a lower Contingent Compensation Payment Ratio. The term “Contingent Compensation Payment
Ratio” shall mean a fraction the numerator of which is the value of the applicable Contingent Compensation Payment that must
be taken into account by you for purposes of Section 4999(a) of the Code, and the denominator of which is the actual amount to
be received by you in respect of the applicable Contingent Compensation Payment. For example, in the case of an equity grant
that is treated as contingent on the Change in Ownership or Control because the time at which the payment is made or the
payment vests is accelerated, the denominator shall be determined by reference to the fair market value of the equity at the
acceleration date, and not in accordance with the methodology for determining the value of accelerated payments set forth in
Treasury Regulation Section 1.280G-1Q/A-24(b) or (c)).
(f) The provisions of this Section 3 are intended to apply to any and all payments or benefits available to you under
this letter agreement or any other agreement or plan of the Company under which you receive Contingent Compensation
Payments.
4. Miscellaneous.
(a) Code Section 409A. The intent of the parties is that payments and benefits under this letter comply with, or be
exempt from, Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code
Section 409A”). Accordingly, if any provision of this letter is ambiguous, such that one interpretation would subject a payment or
benefit to the excise tax imposed by Code Section 409A and an alternative interpretation would not so subject the payment or
benefit, the parties intend the interpretation that would not so subject the payment or benefit to apply. With regard to any
provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code
Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another
benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not
affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that this
clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(a) of the Code
solely because such expenses are subject to a limit related to the period the arrangement is in effect, and (iii) such payments shall
be made on or before the last day of your taxable year following the taxable year in which the expense occurred, provided that
any tax gross-ups may be reimbursed by the end of the calendar year following the calendar year in which such taxes are remitted
to the taxing authorities. For purposes of Code Section 409A, each payment hereunder shall be treated as a separate payment and
your right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate
and distinct payments. In no event may you, directly or indirectly, designate the calendar year of any payment to be made under
this letter that is considered nonqualified deferred compensation. Termination of employment as used herein shall mean
separation from service within the meaning of Code Section 409A. In the event at the time of any separation from service you are
a “specified employee” within the meaning of Code Section 409A, any deferred compensation subject to Code Section 409A
payable as a result of such termination shall not be paid prior to the earlier of six (6) months after such termination and your
death and shall be paid immediately thereafter.
(b) Governing Law. This letter shall be governed by and construed in accordance with the laws of the State of New
York (without reference to the conflicts of laws provisions thereof). Any action, suit, or other legal proceeding which is
commenced to resolve any matter arising under or relating to any provision of this letter shall be commenced only in a court of
the State of New York (or, if appropriate, a federal court located within New York), and the Company and you each consents to
the jurisdiction of such a court. The Company and you each hereby irrevocably waive any right to a trial by jury in any action,
suit or other legal proceeding arising under or relating to any provision hereof.
(c) Conflict; Amendment: Counterparts. This letter agreement sets forth the Company’s sole obligation, subject to the
terms and conditions set forth herein, to provide severance benefits to you. The severance benefits set forth in this letter
agreement are therefore in lieu of, and not in addition to, any severance benefits that may be described in the letter agreement
evidencing your offer of employment with us, or any other agreement or arrangement between you and us. Except as modified
hereby, the terms of the letter agreement evidencing your offer of employment with us remain in full force and effect. This
agreement may only be modified in a document signed by both the Company and you. This agreement may be executed in
counterparts, each of which will be deemed an original, but all of which will be deemed one and the same instrument.
[Remainder of page intentionally left blank]
If the provisions of this agreement are acceptable to you, please sign and date this agreement below and return the signed
and dated agreement to me no later than Thursday, November 18, 2021.
Sincerely,
IVERIC bio, Inc.
By: /s/ Amy R. Sheehan
Amy R. Sheehan
Senior Vice President & Chief HR Officer
ACCEPTED AND AGREED:
/s/ Anthony Gibney
Anthony Gibney
Date:
Amendment No. 4 to 2019 Inducement Stock Incentive Plan
AMENDMENT NO. 4 TO
2019 INDUCEMENT STOCK INCENTIVE PLAN
OF
IVERIC BIO, INC.
The 2019 Inducement Stock Incentive Plan (the “Plan”) of IVERIC bio, Inc. (the “Company”) is hereby amended as follows
(all capitalized terms used and not defined herein shall have the respective meanings ascribed to such terms in the Plan):
1. Section 4(a)(1) of the Plan be and hereby is deleted in its entirety and the following is inserted in lieu thereof:
(1) Authorized Number of Shares. Subject to adjustment under Section 9, Awards may be made under the Plan
for up to 4,600,000 shares of common stock, $0.001 par value per share, of the Company (the “Common Stock”).
Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.
3. Except as set forth herein, the Plan shall remain in full force and effect.
* * *
Approved by the Board of Directors on December 2, 2021.
Exhibit 21.1
Subsidiaries of IVERIC bio, Inc.
IVERIC bio Gene Therapy LLC, a Delaware limited liability company
Orion Ophthalmology LLC, a Delaware limited liability company
We consent to the incorporation by reference in the following Registration Statements:
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
(1) Registration Statement (Form S-8 No. 333-2560917) pertaining to the 2019 Inducement Stock Incentive Plan of IVERIC bio, Inc. effective November 9, 2021,
(2) Registration Statement (Form S-3ASR No. 333-260406) of IVERIC bio, Inc. effective October 21, 2021,
(3) Registration Statement (Form S-3 and S-3/A No. 333-253897) of IVERIC bio, Inc. effective April 9, 2021,
(4) Registration Statement (Form S-8 No. 333-253896) pertaining to the 2013 Stock Incentive Plan and the 2019 Inducement Stock Incentive Plan of IVERIC bio,
Inc. effective March 5, 2021,
(5) Registration Statement (Form S-3MEF No. 333-239247) of IVERIC bio, Inc. effective June 17, 2020,
(6) Registration Statement (Form S-8 No. 333-238065) pertaining to the 2019 Inducement Stock Incentive Plan of IVERIC bio, Inc. effective May 7, 2020,
(7) Registration Statement (Form S-8 No. 333-236720) pertaining to the 2013 Stock Incentive Plan of IVERIC bio, Inc. effective February 27, 2020,
(8) Registration Statement (Form S-8 No. 333-234404) pertaining to the 2019 Inducement Stock Incentive Plan of IVERIC bio, Inc. effective October 31, 2019,
(9) Registration Statement (Form S-8 No. 333-229982) pertaining to the 2013 Stock Incentive Plan of IVERIC bio, Inc. effective March 1, 2019,
(10)Registration Statement (Form S-3 and S-3/A No. 333-229978) of IVERIC bio, Inc. effective April 25, 2019,
(11) Registration Statement (Form S-3 No. 333-226497) of IVERIC bio, Inc. effective August 15, 2018,
(12) Registration Statement (Form S-8 No. 333-223537) pertaining to the 2013 Stock Incentive Plan of IVERIC bio, Inc. effective March 9, 2018,
(13) Registration Statement (Form S-8 No. 333-219656) pertaining to the 2013 Stock Incentive Plan of IVERIC bio, Inc. effective August 3, 2017,
(14) Registration Statement (Form S-8 No. 333-211916) pertaining to the 2016 Employee Stock Purchase Plan of IVERIC bio, Inc. effective June 8, 2016,
(15) Registration Statement (Form S-8 No. 333-208893) pertaining to the 2013 Stock Incentive Plan and inducement stock option grants of IVERIC bio, Inc., effective
January 6, 2016,
(16) Registration Statement (Form S-8 No. 333-202438) pertaining to the 2013 Stock Incentive Plan and inducement stock option grants of IVERIC bio, Inc., effective
March 2, 2015,
(17) Registration Statement (Form S-8 No. 333-193694) pertaining to the 2013 Stock Incentive Plan of IVERIC bio, Inc., effective January 31, 2014,
(18) Registration Statement (Form S-8 No. 333-191767) pertaining to the 2013 Stock Incentive Plan and Amended and Restated 2007 Stock Incentive Plan, as
amended, of IVERIC bio, Inc., effective October 16, 2013,
of our reports dated February 24, 2022, with respect to the consolidated financial statements of IVERIC bio, Inc., and the effectiveness of internal control over
financial reporting of IVERIC bio, Inc. included in this Annual Report (Form 10-K) of IVERIC bio, Inc. for the year ended December 31, 2021.
/s/ Ernst & Young LLP
Iselin, New Jersey
February 24, 2022
CERTIFICATIONS
Exhibit 31.2
I, David F. Carroll, certify that:
1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2021 of IVERIC bio, 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 report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter
(the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial
reporting.
Date: February 24, 2022
By:
/s/ David F. Carroll
David F. Carroll
Chief Financial Officer
(Principal Financial Officer)
I, Glenn P. Sblendorio, certify that:
CERTIFICATIONS
1.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2021 of IVERIC bio, Inc.;
Exhibit 31.1
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 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;
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
c.
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Date: February 24, 2022
By:
/s/ Glenn P. Sblendorio
Glenn P. Sblendorio
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of IVERIC bio, Inc. (the "Company") for the fiscal year ended December 31, 2021 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), the undersigned, Glenn P. Sblendorio, Chief Executive Officer of the Company, hereby certifies, pursuant to
Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 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.
Date: February 24, 2022
By:
/s/ Glenn P. Sblendorio
Glenn P. Sblendorio
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report on Form 10-K of IVERIC bio, Inc. (the "Company") for the fiscal year ended December 31, 2021 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), the undersigned, David F. Carroll, Chief Financial Officer of the Company, hereby certifies, pursuant to Rule 13a-
14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 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.
Date: February 24, 2022
By:
/s/ David F. Carroll
David F. Carroll
Chief Financial Officer
(Principal Financial Officer)