Quarterlytics / Healthcare / Biotechnology / NextCure

NextCure

nxtc · NASDAQ Healthcare
Claim this profile
Ticker nxtc
Exchange NASDAQ
Sector Healthcare
Industry Biotechnology
Employees 51-200
← All annual reports
FY2023 Annual Report · NextCure
Sign in to download
Loading PDF…
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

or

For the transition period from          to          .

Commission File Number: 001-38905

NextCure, Inc.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
 incorporation or organization)

9000 Virginia Manor Road, Suite 200
Beltsville, Maryland
(Address of principal executive offices)

47-5231247
(I.R.S. Employer
 Identification No.)

20705
(Zip Code)

Registrant’s telephone number, including area code: (240) 399-4900

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, $0.001 par value per share

Securities registered pursuant to Section 12(g) of the Act: None.

Trading Symbol(s)
NXTC

Name of each exchange on which registered:
Nasdaq Global Select Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or

for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this

chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the

definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐
Non-accelerated filer ☒

Accelerated filer ☐
Smaller reporting company ☒
Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting

standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under

Section 404(b) of the Sarbanes Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an

error to previously issued financial statements. ☐

Indicate  by  check  mark  whether  any  of  those  error  corrections  are  restatements  that  required  a  recovery  analysis  of  incentive-based  compensation  received  by  any  of  the  registrant’s

executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The  aggregate  market  value  of  the  registrant’s  common  stock  held  by  non-affiliates  as  of  June  30,  2023,  the  last  business  day  of  the  registrant’s  most  recently  completed  second  fiscal  quarter,  was
approximately $49.2 million, as computed by reference to the closing price of the common stock on the Nasdaq Global Select Market on that date.

As of March 18, 2024, the registrant had 27,903,027 shares of common stock, par value $0.001 per share, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for its 2024 Annual Meeting of Stockholders, which will be filed with the Commission within 120 days after December 31, 2023, are incorporated
by reference into Part III of this Report.

 
 
 
Table of Contents

NextCure, Inc.
Form 10-K
For the Year Ended December 31, 2023

TABLE OF CONTENTS

Business

PART I
Item 1
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 1C Cybersecurity
Item 2
Item 3
Item 4

Properties
Legal Proceedings
Mine Safety Disclosures

PART II
Item 5

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

Item 6
Item 7
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8
Item 9
Item 9A Controls and Procedures
Item 9B Other Information
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

PART III
Item 10
Item 11
Item 12
Item 13
Item 14

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 Accounting Fees and Services

PART IV
Item 15
Item 16
SIGNATURES

Exhibits, Financial Statement Schedules
Form 10-K Summary

2

Page

6
29
73
73
74
74
74

74

74
75
82
83
105
105
105
105

105
105
106
106
106

106
109
110

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This  Annual  Report  contains  forward-looking  statements,  including  with  respect  to  our  plans,  objectives  and
expectations for our business, operations and financial performance and condition. Any statements contained herein that
are not statements of historical facts may be deemed to be forward-looking statements. The forward-looking statements are
contained principally in the sections entitled “Business,” “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” but are also contained elsewhere in this Annual Report. In some cases, you
can  identify  forward-looking  statements  by  terminology  such  as  “aim,”  “anticipate,”  “assume,”  “believe,”  “continue,”
“could,” “due,” “estimate,” “expect,” “intend,” “may,” “objective,” “plan,” “predict,” “project,” “potential,” “positioned,”
“seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events
and  future  trends,  or  the  negative  of  these  terms  or  similar  language.  Forward-looking  statements  include,  but  are  not
limited to, statements about:

● our  expectations  regarding  the  timing,  progress  and  results  of  preclinical  studies  and  clinical  trials  for  NC410,
 LNCB74 and any other product candidates we develop, including statements regarding the timing of initiation and
completion  of  studies  or  trials  and  related  preparatory  work,  the  period  during  which  the  results  of  the  trials  will
become available and our research and development programs;

● the timing or likelihood of regulatory filings for NC410, LCNB74 and any other product candidates we develop and

our ability to obtain and maintain regulatory approvals for such product candidates for any indication;

● the identification, analysis and use of biomarkers and biomarker data;
● the anticipated benefits of our recently announced prioritization and restructuring plan;
● our drug product sourcing and manufacturing strategy, including the scalability of our methods and processes;
● our expectations regarding the potential benefits, activity, effectiveness and safety of NC410, LNCB74 and any other

product candidates we develop;

● our intentions and ability to successfully commercialize, including through partnering, our product candidates;
● our expectations regarding the nature of the biological pathways we are targeting;
● our expectations regarding our ability to discover and advance product candidates using our technologies;
● the potential benefits of and our ability to maintain our relationship with Yale University, LegoChem Biosciences, Inc.

and other third parties;

● our ability to retain key personnel;
● our estimates regarding our expenses, future revenues, capital requirements, needs for or ability to obtain additional
financing  and  the  period  over  which  we  expect  our  current  cash,  cash  equivalents  and  marketable  securities  to  be
sufficient to fund our operations;

● our intended reliance on and the performance of third parties, including collaborators, contract research organizations

and third-party manufacturers;

● our ability to protect and enforce our intellectual property protection and the scope and duration of such protection;
● developments and projections relating to our competitors and our industry, including competing therapies; and
● the impact of current and future laws and regulations.

These  statements,  and  other  forward-looking  statements,  are  based  on  management’s  current  expectations,
estimates, forecasts and projections about our business and industry, are not guarantees of future performance and involve
known and unknown risks, uncertainties and other factors that are in some cases beyond our control, and that may cause
our actual results, levels of activity, performance or achievements to be materially different from those anticipated by the
forward-looking statements. Forward-looking statements contained in this Annual Report should be considered in light of
these  factors  and  the  factors  set  forth  under  “Risk  Factor  Summary”  below  and  the  factors  described  elsewhere  in  this
Annual Report, including in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” These factors, and the other cautionary statements made in this Annual Report, are
applicable to all related forward-looking statements wherever they appear in this Annual Report. If one or more of these
factors materialize, or if any underlying assumptions prove incorrect, our actual results, levels of activity, performance, or
achievements may vary materially from any future results, activity, performance, or achievements expressed or implied by
these forward-looking statements.

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only
as of the date of this Annual Report. We undertake no obligation to publicly update any forward-looking statements after
the  date  of  this  Annual  Report,  whether  as  a  result  of  new  information,  future  events  or  otherwise,  except  as  required
by law. We qualify all of our forward-looking statements by the foregoing cautionary statements.

3

Table of Contents

RISK FACTOR SUMMARY

The following is a summary of the principal risk factors that make an investment in our common stock speculative
or  risky.  Before  you  invest  in  our  securities,  you  should  read  the  following  summary  together  with  the  more  detailed
description of material risks described under "Risk Factors" in Item 1A of this Annual Report and the other information
contained in this Annual Report.

Risks Related to Our Financial Position and Need for Additional Capital
● We have a limited operating history and no products approved for commercial sale. We have a history of significant
losses,  expect  to  continue  to  incur  significant  losses  for  the  foreseeable  future  and  may  never  achieve  or  maintain
profitability. We have never generated revenue from product sales and may never be profitable.

● We  will  require  substantial  additional  financing  to  pursue  our  business  objectives,  which  may  not  be  available  on

acceptable terms, or at all.

Risks Related to the Discovery and Development of Our Product Candidates
● Our  business  is  dependent  on  our  ability  to  advance  our  current  and  future  product  candidates  through  preclinical

studies and clinical trials, marketing approval and ultimately commercialization, each of which is uncertain.

● Regulatory approval processes are lengthy and inherently unpredictable.
● Clinical development involves a lengthy and expensive process with uncertain outcomes, and as an organization we
have limited experience designing and implementing clinical trials. Failure to adequately design a trial, or incorrect
assumptions about the design of the trial, could result in delays in product development and in additional costs, delays
or the inability to develop, obtain regulatory approval for or commercialize our products.

● Preclinical  development  is  uncertain.  Our  preclinical  programs  may  experience  delays  or  may  never  advance  to
clinical  trials,  which  would  adversely  affect  our  ability  to  obtain  regulatory  approvals  or  commercialize  these
programs on a timely basis or at all.

● Initial  positive  trial  results  and  positive  results  from  preclinical  studies  and  early-stage  clinical  trials  may  not  be

predictive or indicative of results obtained when the trial is completed or in later stage trials.

● We, or our collaborators, could encounter difficulties enrolling patients in our clinical trials due to pandemics or other

factors.

● Because the numbers of subjects in our Phase 1/2 and Phase 1 clinical trials are small, the results from each of these

trials, once completed, may be less reliable than results achieved in larger clinical trials.

● Our current or future product candidates may cause undesirable side effects or have other properties that could halt
their  clinical  development,  delay  or  prevent  their  regulatory  approval,  limit  their  commercial  potential  or  result  in
significant negative consequences.

Risks Related to the Regulatory Approval and Commercialization of Product Candidates and Other Legal
Compliance Matters
● We may be unable to obtain regulatory approval of our product candidates. The denial or delay of any such approval

would prevent or delay commercialization of our product candidates and harm our business.

● Even if a current or future product candidate receives marketing approval, it 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 opportunities for any such product candidate may be limited.

● We  are  studying  and  developing  product  candidates  in  combination  with  other  therapies,  which  exposes  us  to

additional regulatory risks.

● We depend on data and our information technology systems, and any failure of these systems or any related security

breaches, loss of data, or other disruptions could harm our business.

Risks Related to Manufacturing
● Given  our  limited  operating  history,  our  manufacturing  experience,  as  an  organization  and  with  our  manufacturing

facility, is limited.

● We  may  be  unable  to  secure  sufficient  quantities  of  our  product  candidates  economically,  or  at  the  necessary  scale,
whether through use of a third party, by scaling up our paused manufacturing operations, or by otherwise failing to
source adequate supply of  our product candidates which would delay or prevent us from developing and, if approved,
commercializing our product candidates.

● We are subject to multiple manufacturing risks, any of which could substantially increase our costs and limit supply of

our product candidates.

4

Table of Contents

● We depend on third-party suppliers for key materials used in our manufacturing process, and the loss of these third-
party suppliers, their  inability to comply with applicable regulatory requirements, or their inability to supply us with
adequate materials could harm our business.

Risks Related to Intellectual Property
● We  have  filed  patent  applications  for  our  product  candidates,  but  we  have  to-date  obtained  only  a  small  number  of
patents from these applications. If we are unable to obtain and maintain patent protection, or if the scope of the patent
protection  obtained  is  not  sufficiently  robust,  our  competitors  could  develop  and  commercialize  products  similar  or
identical to ours, and our ability to successfully commercialize our product candidates may be adversely affected.
● We  are  party  to  a  license  agreement  with  Yale  University  under  which  we  acquired  rights  to  intellectual  property
related to certain of our product candidates. If we breach our obligations under this agreement, the agreement could be
terminated, which would adversely affect our business and prospects.

● Our intellectual property agreements with third parties may be subject to disagreements over contract interpretation,
which could narrow the scope of our rights to the relevant intellectual property or technology or increase our financial
or other obligations to our licensors.

● We may not be able to protect our intellectual property rights throughout the world.
● We may be subject to claims, or we may become involved in lawsuits to protect or enforce our intellectual property,
which  could  be  expensive,  time-consuming  and  unsuccessful;  our  intellectual  property  could  be  found  invalid  or
unenforceable.

Risks Related to Reliance on Third Parties
● We rely on third parties to help conduct our ongoing and planned preclinical studies and clinical trials. If these third
parties do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected
deadlines, we may not be able to obtain marketing approval for our product candidates.

● We may depend on other third-party collaborators for the discovery, development and commercialization of certain of
our current and future product candidates. If our collaborations are not successful, we may not be able to capitalize on
the market potential of these product candidates.

● We  may  seek  to  establish  additional  collaborations  and,  if  we  are  not  able  to  establish  them  on  commercially

reasonable terms, we may have to alter our development and commercialization plans.

Risks Related to Our Business
● We  are  highly  dependent  on  our  key  personnel,  and  if  we  are  not  successful  in  attracting,  motivating  and  retaining

highly qualified personnel, we may not be able to successfully implement our business strategy.

● We  face  significant  competition  from  other  biotechnology  and  pharmaceutical  companies,  and  our  operating  results

will suffer if we fail to compete effectively.

● In the future, we may need to grow the size of our organization, and we may experience difficulties in managing this

growth.

● If we are unable to establish marketing, sales and distribution capabilities for any product candidate that may receive

regulatory approval, we may not be successful in commercializing those product candidates.

Risks Related to Our Common Stock
● The price of our common stock has been and may in the future be volatile and fluctuate substantially.
● We  have  been  and  may  in  the  future  be  subject  to  securities  litigation,  which  can  be  expensive  and  could  divert

management’s attention.

● If securities analysts do not publish research or reports about our business or if they publish inaccurate or unfavorable

research about our business, the price of our stock could decline.

● Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall,

even if our business is doing well.

5

Table of Contents

Item 1. Business

PART I

Overview

We are a clinical-stage biopharmaceutical company that is focused on advancing innovative medicines that treat
cancer patients that do not respond to, or have disease progression on, current therapies, through the use of differentiated
mechanisms  of  actions  including  Antibody-Drug  Conjugates  (ADCs),  antibodies  and  proteins.  We  focus  on  advancing
therapies that leverage our core strengths in understanding biological pathways and biomarkers, the interactions of cells,
including in the tumor microenvironment, and the role each interaction plays in a biologic response.

We are focusing on our highest-value opportunities:

i) NC410, a LAIR-2 fusion protein that, in combination with pembrolizumab, demonstrated early evidence of

clinical activity in colorectal (CRC) and ovarian cancers. We expect several potential catalysts in 2024.

ii) LNCB74, an ADC that is directed to B7-H4, a clinically validated cancer target. Given our internal expertise
of B7-H4 coupled with LegoChem Biosciences, Inc’s (LegoChem) ADC technology, we plan for an Investigational New
Drug application (IND) in 2024.

In  March  2024,  we  announced  a  prioritization  and  restructuring  of  our  operations  to  align  with  our  focused
pipeline.  We are pausing our internal manufacturing operations and reducing our workforce. In addition, we are seeking to
partner  our  clinical  programs  NC525  and  NC318  and  our  preclinical  non-oncology  programs  NC605,  for  chronic  bone
diseases, and NC181, for Alzheimer’s disease. We project these actions will extend our cash runway into the second half of
2026.  

Our Strategy

The crucial elements of our business strategy include the following:

● Advancing  development  of  NC410  in  combination  with  pembrolizumab  (NC410  Combo)  based  on  early

evidence of clinical activity.  

● Based  on  emerging  Phase  1b  results  in  ovarian  cancer,  where  NC410  Combo  demonstrated  an  overall
response rate (ORR) of 42.8% at the 9-week scan based on 7 evaluable patients, we are in the process of
enrolling  approximately  18  additional  patients  in  this  clinical  trial.    We  plan  to  present  the  data  from
approximately 25 ovarian cancer patients in the second half of 2024.

● Based on initial Phase 1b results in CRC, where Standard of Care (SOC) has historically shown limited
efficacy  and  short  median  progression  free  survival  (mPFS),  we  have  completed  enrollment  of  an
additional 20 patients with the objective of confirming and enhancing the 10.5% ORR seen in the initial
100 mg cohort of 19 evaluable patients. We plan to provide data on CRC in the second quarter of 2024.

● Accelerating  development  of  LNCB74,  a  differentiated  ADC  focused  on  B7-H4,  a  clinically  validated
target.  Building  on  our  strong  know-how  and  previous  clinical  experience  with  B7-H4,  we  have  created  a
new  mAb  intermediate  and  combined  it  with  LegoChem’s  differentiated  ADC  technology  to  create  a
promising B7-H4 ADC for the treatment of B7-H4 expressing cancers.  We plan to file an IND application
by year-end 2024.

● Pursuing  partnering  of  our  clinical  oncology  programs  NC525  and  NC318  and  our  non-oncology
preclinical programs. Based on our focused and prioritized pipeline, we will seek partnering, licensing, or
other  strategic  approaches  for  our  NC525  and  NC318  programs.    We  also  have  two  novel  preclinical
candidates, one in the area of chronic bone diseases and the orphan indication for Osteogenesis Imperfecta
(OI), and one for the neurodegenerative Alzheimer’s disease, both of which could be IND-ready in the first
half of 2025.  We will continue to seek partners or other strategic approaches to advance these programs.

6

Table of Contents

Our Fusion Protein Product Candidate: NC410

NC410 is a fusion protein of LAIR-2, a naturally occurring soluble version of, and decoy protein for, LAIR-1 that
is designed to block immune suppression mediated by LAIR-1.  Early preclinical correlative biomarker work suggests that
NC410 has the potential to overcome tumor resistance by remodeling the tumor’s extracellular matrix (ECM) to remove a
physical barrier surrounding the tumor to enhance T cell tumor killing.  We have exclusive worldwide rights to NC410.

Mechanism of action

              The rationale for moving into a combination trial for NC410 is based on the mechanism of action of NC410, as 
seen in preclinical modeling and also during the NC410 monotherapy Phase 1 dose escalation study readouts. It has been 
shown that elevated collagen levels in the ECM, the tissue matrix surrounding the tumor, are associated with resistance to 
PD-1 and PD-L1 therapies. In non-clinical colorectal models and early-stage monotherapy clinical studies conducted by 
NextCure, we have demonstrated that NC410 can remodel collagen in the ECM, which enhances T cell infiltration into the 
tumor. 

Collagen Buildup and Density Lead to Resistance

     ECM Remodeling Leads to Greater Anti-Tumor Function

  Tumor cells proliferate and become resistant

T cells kill the tumor

              This results in immune activation, enhanced immune function in the TME and enhances anti-PD-1 activity in 
multiple preclinical tumors models. We believe that this may translate to improved responses in patients with immune 
checkpoint naïve solid tumors. 

Our Clinical Development Plan for NC410

We  are  currently  conducting  a  Phase  1b/2  clinical  trial  to  evaluate  NC410  in  combination  with  KEYTRUDA®
(pembrolizumab),  Merck  &  Co.,  Inc.’s  (Merck)  anti-PD-1  therapeutic.    We  entered  into  a  supply  agreement  for
KEYTRUDA with Merck (known as MSD outside the United States and Canada) for the trial. Based on clinical responses
and biomarker observations, we are focused  on  ovarian cancer and CRC patients who are immune checkpoint inhibitor
(ICI)  naïve.    The  combination  has  been  shown  to  be  well  tolerated  up  to  200  mg  of  NC410  with  Grade  3  or  higher
Treatment Related Adverse Events of 3.7%.

7

  
Table of Contents

Ovarian Cancer

In  March  2024,  we  announced  evidence  of  early  clinical  activity  and  biomarker  observations  supporting  the
proposed mechanism of action for NC410 Combo in relapse/refractory ICI naïve ovarian cancer, with/without active liver
metastasis, in 100 mg, and 200 mg cohorts. At data cutoff, there were 7 evaluable patients in these initial cohorts.  Given
that this data set is relatively early and a small number, in March 2024 we commenced enrolling an additional 18  patients
among  the  100  mg  and  200  mg  cohorts.  As  of  February  23,  2024,  the  findings  of  the  initial  7  evaluable  patients  are
summarized based on the FDA’s Response evaluation criteria in solid tumors (RECIST) 1.1 guideline in the table below:

Relapsed/Refractory ICI Naïve Ovarian Cancer, 100 mg & 200 mg cohorts

Evaluable Patients as of February 23, 2024
Overall Response Rate (ORR)
Disease Control Rate (DCR)
Evidence supporting mechanism of action

n=7
42.8%, n=3
42.8%, n=3
Observed in biomarker data

From the NC410 Combo Phase 1b patient data (n=7) set as of the cutoff date:

● 3 partial responses (PR) were observed at the initial 9-week scan.

● 1 confirmed PR observed in the 200 mg cohort continues on study beyond 6 months.

● The 2 PRs at the 100 mg cohort are pending confirmatory scans at week 18.

Biomarker  data  on  blood  samples  drawn  from  patients  in  both  the  NC410  monotherapy  trial  and  the  NC410
combo  trial  support  our  hypothesis  regarding  the  mechanism  of  action  (MOA)  and  activity  in  PR  patients  as
follows:

● Decrease  in  peripheral  Granzyme  B-expressing  CD8+  T  cells,  which  supports  our  belief  of  our  MOA  that
NC410 remodels the ECM and allows activated immune cells to infiltrate into the Tumor Microenvironment
(TME).    Generation  of  Collagen-derived  product  (CDP)  4GZ  fragments  is  mediated  by  Granzyme  B-
expressing T cells and provides direct evidence of ECM remodeling and correlates with responses.

● Decrease  in  peripheral  Myeloid-Derived  Suppressor  Cells  reduces  suppressive  effects  and  enhances

activation of immune cells and anti-tumor activity.

● Decrease in peripheral CCR7+ DC+ T cells consistent with chemokine guided migration of immune cells to

the TME.

Taken  together,  the  data  demonstrate  that  NC410  plays  a  key  role  in  mediating  activation  of  immune  cells  and
migration to TME through remodeling of the ECM.  We believe NC410 Combo results in anti-tumor activity and clinical
responses in patients that are shown to respond poorly to or are resistant to checkpoint inhibitors.

 Response rates using ICI therapy, both in mono and combo, in high-grade serous ovarian cancer (HGSOC) are
historically low at under 10% ORR with a mPFS of approximately 2 months. Given HGSOC is the most common type of
ovarian cancer, we believe an opportunity exists for a clinical path forward in ovarian cancer.

We plan to present the data from the ovarian cancer patients in the second half of 2024.

CRC

In December 2023, we announced that given preliminary anti-tumor activity, additional patients would be added

to the 100 mg cohort of patients with microsatellite stable (MSS)/microsatellite instable-low (MSI-L) immune checkpoint

8

Table of Contents

inhibitor (ICI) naïve CRC without active liver metastasis (LM-).  There are 19 evaluable patients in this initial cohort and
we completed enrollment of an additional 20 patients in January 2024.  As of February 23, 2024, of the initial 19 evaluable
patients, findings are summarized based on RECIST 1.1 guideline in the table below:

MSS/MSI-L ICI Naïve CRC, LM-, 100 mg cohort

Evaluable Patients as of February 23, 2024
Overall Response Rate (ORR)
Disease Control Rate (DCR)
Median Progression Free Survival (mPFS)

n=19
10.5%, n=2
47.3%, n=9
8.1 months

From the NC410 combo Phase 1b 19 patient data set as of the cutoff date:

● All responses were observed at the initial 9-week scan in the 100 mg cohort.

● Subjects enrolled had a median of 5 lines of prior treatment.

● The  two  responders  remain  as  PRs,  and  continue  on  study  for  over  10  months  and  5  months,

respectively.

We plan to present the data of the CRC patients in the 100 mg cohort who are MSS/MSI-L ICI Naïve CRC at a

scientific conference in the second quarter of 2024.

               The CRC MSS/MSI-L population is extremely difficult to treat with most agents, including pembrolizumab, 
showing low single-digit response rates along with a limited mPFS.  We believe if we can confirm and enhance the data 
observed in our initial findings of 19 patients, an opportunity exists for a clinical path forward that will improve the current 
standard of care.

Our ADC Product Candidate: LNCB74

LNCB74 is designed as a state-of-the-art B7-H4 targeted ADC to kill tumors.  An ADC consists of a monoclonal
antibody (mAb) conjugated to a cytotoxic drug via a chemical linker. B7-H4, a clinically validated target, is a cell surface
protein expressed on multiple tumor types including breast, ovarian, and endometrial cancers, that we believe represents a
large market opportunity.  LNCB74 will be positioned as a promising B7-H4 ADC with both improved safety and efficacy
based on the following differentiation:

Antibody – B7-H4 mAb with an Fc modification to protect immune cells to improve safety.

Linker  –  Cancer-selective  payload  release  via  a  glucuronidase  cleavage  that  minimizes  toxicity  in  non-tumor

cells.

Payload  –  A  Monomethyl  auristatin  E  (MMAE)  toxin  in  a  drug-to-antibody  ratio  (DAR)  of  4  and  has  the

advantage to diffuse from the target cell and into surrounding tumor cells for bystander killing.

            LNCB74 is being advanced under a November 2022 Research Collaboration and Co-Development Agreement 
(“LegoChem Agreement”) with LegoChem in which both parties equally share the costs of developing and profits.   In 
April 2023, the parties designated LNCB74 as the first of up to three co-development candidate.  To date, we have 
completed i) pre-clinical experiments in vitro and in vivo demonstrating potent tumor killing, ii) pilot toxicology studies, 
iii) received pre-IND feedback from the FDA, and iv) we are conducting ongoing activities associated with GLP 
toxicology studies, GMP manufacturing, and clinical development planning.   We expect to file an IND by year-end 2024.  

9

Table of Contents

Mechanism of Action

              B7-H4 is a cell surface protein expressed on multiple tumor types and shows limited expression in most normal 
tissues. B7-H4 was initially discovered in 2003 in the Mayo Clinic lab of our scientific co-founder Dr. Lieping Chen. It is a 
member of the same family of co-inhibitory checkpoint proteins as B7-H1, known as PD-L1, which was also discovered by 
Dr. Chen's laboratory.  B7-H4 has been shown in published articles to negatively regulate T-cell immune response, inhibit 
cytokine production, suppress antigen-presenting cells, promote immune escape and play a role in tumorigenesis and tumor 
development. Expression of B7-H4 in tumor cells has been shown in preclinical research and published articles to be 
correlated with reduced overall survival, and B7-H4 has generally non-overlapping expression with PD-L1.  

LNCB74 is an anti-B7-H4 ADC that binds to B7-H4 on the cell surface and is internalized, upon which the linker
is cleaved to release the MMAE payload, a well characterized microtubule-disrupting agent, and a commonly used payload
in FDA approved ADCs.  The mechanism of action of LNCB74 is shown in Figure 1 below:

       LNCB74 is comprised of a NextCure generated mAb intermediate, specific for B7-H4 protein, engineered with a 

sequence to facilitate site-specific conjugation of the antibody and linker arm to facilitate generation of an ADC. It is 
conjugated with a proprietary LegoChem developed beta-glucuronide cleavable linker technology known as “ConjuAll” 
that leverages a novel selective payload release of MMAE for tumor killing and also allowing for “bystander” killing of 
neighboring tumor cells while minimizing toxicity in non-tumor cells.  

Assets We Intend To Partner

Based  on  our  focused  and  prioritized  pipeline,  we  are  seeking  to  partner,  license,  or  advance  through  other

strategic approaches NC525 and NC318 and our non-oncology preclinical programs.

        Clinical Oncology Programs   

NC525

NC525  is  a  novel  LAIR-1  antibody  that  selectively  targets  Acute  Myeloid  Leukemia  (AML),  blast  cells  and
leukemic stem cells (LSCs). Preclinical data show that NC525 kills AML blast cells and LSCs while sparing hematopoietic
stem and progenitor cells (HSPCs). Preclinical data also show that NC525 (i) inhibits colony formation of AML LSCs in
vitro, (ii) inhibits AML growth in the MV4-11 derived xenographs (CDX) animal model in vivo  and  (iii)  restricts  AML
progression in patient-derived xenografts (PDX) in vivo. We have exclusive worldwide rights to NC525.

10

Table of Contents

A Phase 1 trial was initiated in February 2023 to evaluate the safety and preliminary efficacy of NC525 in patients
with AML, high-risk myelodyplastic syndrome, and chronic myelomonocytic leukemia (CMML). This open-label trial was
designed  to  evaluate  the  safety  and  tolerability  of  NC525  and  determine  its  pharmacologically  active  and/or  maximum
tolerated dose.  We are currently in the fifth cohort of the dose escalation portion of the trial.  Initial data suggest linear
pharmacokinetics and an acceptable safety profile.  We plan to complete the dose-finding portion of the study to arrive at a
predicted  biologically  active  dose.    Based  upon  our  decision  to  extend  our  cash  runway  and  focus  our  resources  on
advancement of NC410 and LNCB74, we will further assess development plans for NC525 by the fourth quarter of 2024 in
conjunction with our partnering efforts.

NC318

NC318 is a humanized IgG1 mAb against Siglec-15 (S15), that blocks interactions of S15 with myeloid cells and
T  lymphocytes  within  the  tumor  microenvironment,  relieving  immune  inhibitory  signaling.  In  an  earlier  monotherapy
study from NextCure, NC318 demonstrated single-agent activity in a Phase 1/2 dose escalation trial (NCT03665285) for
patients with advanced solid tumors.  We have exclusive worldwide rights to NC318.      

We are providing NC318 for an ongoing Phase 2 IIT with our founding institution, Yale University, to evaluate
NC318 in combination with pembrolizumab in patients with non-small cell lung cancer (NSCLC).    In September 2023,
we  announced  the  presentation  of  Phase  2  clinical  data  by  our  collaborators  at  the  Yale  Cancer  Center  demonstrating
clinical benefit in patients with advanced, PD-1 axis inhibitor refractory non-small cell lung cancer (NSCLC) treated with
a combination regimen of NC318, a S15 mAb, and pembrolizumab, an anti-PD-1 antibody.  Efficacy data demonstrate
that the combination of NC318 and pembrolizumab is active in advanced PD-1 axis inhibitor refractory NSCLC: 28% of
patients (5/18) had durable clinical benefit (partial response or stable disease lasting greater than 6 months by RECIST
and/or irRC) with 3 of these being confirmed responses.  Yale is continuing to enroll patients to gain further evidence of
clinical activity of NC318.

Pre-Clinical Non-Oncology Programs  

        In the second half of 2023, we announced two preclinical candidates that could be IND-ready in the first half of 

2025 in the unmet needs areas of chronic bone diseases, including for an orphan indication for Osteogenesis Imperfecta 
(OI), and Alzheimer’s disease, a neurodegenerative disease.  We will continue to seek global partners or other strategic 
approaches. We have leveraged our internal capabilities to advance these programs.  

NC605

NC605 is an antibody that targets Siglec-15.   Preclinical data reported NC605 treatment reduced bone loss and
enhanced bone quality in mice with OI.  OI is a rare disorder that results in high bone turnover, abnormal bone formation,
bone fragility, and recurrent fractures.  NC605 could also have applications in chronic bone diseases such as osteoarthritis
and non-union fractures.   We are currently conducting toxicology studies.

NC181

NC181  is  a  humanized  antibody  targeting  ApoE4  for  the  treatment  of  Alzheimer’s  disease  (AD).  In  preclinical
AD animal models, NC181 has demonstrated amyloid clearance, prevention of amyloid deposition, plaque clearance, and
reduced  neuroinflammation.  Preclinical  studies  have  demonstrated  that  NC181  reduces  microhemorrhages  and  improves
cerebral vascular function; lowers risk Amyloid Related Imaging Abnormalities (ARIA).  

Alignment of Our Infrastructure to the Focused Pipeline

            In March 2024, we announced a prioritization and restructuring of our operations to align with our focused pipeline
approach and extend our financial cash runway into the second half of 2026. We will focus our internal resources and retain
our  expertise  in,  clinical  operations  biomarker  research,  business  development,  and  manufacturing  tech  transfer.  As  a
result, we will pause our internal manufacturing operations because we believe ample clinical supply has been produced,
including the LNCB74 mAb intermediate, to supply our prioritized programs in the near term.  

11

    
Table of Contents

               In conjunction with the restructuring, we are reducing our workforce from 81 full-time employees to 51
employees. This reduction will primarily occur in our manufacturing operations, but also will impact areas of discovery,
research, development, clinical, and general administrative.

Our Collaboration Agreements

LegoChem Agreement

In November 2022, the Company entered into the LegoChem Agreement to develop up to three ADCs. Under the
terms  of  the  LegoChem  Agreement,  both  parties  equally  share  the  costs  of  developing  the  molecules  and  profits  on
commercialized  products.  The  collaboration  consists  of  up  to  three  research  programs  for  which  a  research  plan  will  be
developed.  With  respect  to  a  research  plan,  each  party  shall  use  reasonable  efforts  to  execute  and  perform  the  activities
assigned  to  it.  Each  party  shall  be  solely  responsible  for  costs  associated  with  its  assigned  activities  as  outlined  in  the
research plan. Upon successful completion of a research plan, or as otherwise agreed, the parties may designate a research
product  as  a  co-development  product.  Upon  designation  of  a  co-development  product,  cost  sharing  on  a  50-50  basis
between the Company and LegoChem would begin. The activities associated with the research plan and co-development
products will be coordinated by a joint steering committee, which is comprised of an equal number of representatives from
the  Company  and  LegoChem.  If  and  when  a  co-development  product  becomes  commercialized,  the  Company  and
LegoChem would equally share in the profits. There are no implied licenses or other rights created under the LegoChem
Agreement after designation of a co-development product.

        Effective April 1, 2023, the parties designated LNCB74 as the first co-development product under the LegoChem 

Agreement. As such, cost sharing on a 50-50 basis commenced for the first co-development product under the LegoChem 
Agreement.

Agreements with Yale University

License Agreement with Yale

We entered into a license agreement with Yale, or the Yale Agreement, in December 2015 pursuant to which we
obtained an exclusive, royalty-bearing, sublicensable worldwide license to products that either incorporate certain licensed
patents used in the discovery of targets or arise out of research and development of Dr. Chen’s laboratory at Yale, including
S15, and subsequently amended the Yale Agreement in January 2020 and October 2021. We are obligated to pay Yale low
single-digit royalties on sales of products that are either covered by the patents licensed to us under the Yale Agreement or
arise  out  of  work  with  Dr.  Chen,  including  with  his  laboratory,  as  a  result  of  research  under  the  corporate  sponsored
research agreement described below, subject to minimum annual royalty payments in the low to mid hundreds of thousands
of dollars. Until we are required to pay royalties under the Yale Agreement, we must pay an annual license maintenance fee
to Yale in the mid to high tens of thousands of dollars. In addition, with respect to each product covered by licenses under
the Yale Agreement, we are obligated to pay Yale milestone payments upon (i) the initiation of each of a Phase 1 clinical
trial,  Phase  2  clinical  trial  and  Phase  3  clinical  trial  or  a  pivotal  trial,  (ii)  first  commercial  sale  in  the  United  States  and
(iii) first commercial sale in China, Japan or a major European country, in an aggregate amount of up to $2,975,000. The
term of the license agreement with Yale runs, on a country-by-country basis, until the later of the expiration of all licensed
patents  or  10  years  from  the  first  commercial  sale  in  such  country,  unless  Yale  has  cause  to  terminate  earlier  for  our
material  breach  of  the  license,  bankruptcy  or  if  we  or  any  sublicensee  bring  a  challenge  against  Yale  in  relation  to  the
licensed patents. We have the right to terminate the Yale Agreement for Yale’s material breach or at any time during the
term with six months’ prior written notice to Yale.

Sponsored Research Agreement with Yale

In  connection  with  the  Yale  Agreement,  we  also  entered  into  a  corporate  sponsored  research  agreement,  or
“SRA”,  with  Yale,  pursuant  to  which  we  had  agreed  to  provide  an  aggregate  of  up  to  $15  million  to  fund  a  research
program  aimed  at  discovering  new  targets  for  therapies.  The  SRA  was  subsequently  amended  in  January  2020,  October
2021 and September 2022 and expired on March 31, 2023.

Manufacturing

We  have  a  purpose-built,  dedicated,  state-of-the-art  cGMP  manufacturing  facility  that  utilizes  single-use
technology to support our pipeline and advance our product candidates into and through clinical development. The facility
has a production capacity of 2,000 liters that has supported our multiple product candidates. The investment in our

12

Table of Contents

manufacturing  facility  has  been  a  critical  element  of  our  ability  to  quickly  identify  whether  a  candidate  is  likely  to  be
successful and to facilitate an efficient development path. In March 2024, we paused our internal manufacturing operations
 as we believe ample clinical supply has been produced, including the LNCB74 mAb intermediate, to supply programs in
the near term.  

Competition

The  biotechnology  and  pharmaceutical  industries,  and  the  oncology  subsector,  are  characterized  by  rapid
evolution  of  technologies,  fierce  competition  and  strong  defense  of  intellectual  property.  We  believe  that  our  programs,
platforms, technology, knowledge, experience and scientific resources provide us with competitive advantages, but we also
face  competition  from  pharmaceutical  and  biotechnology  companies,  academic  institutions,  governmental  agencies  and
public and private research institutions, among others. Our competitors include larger and better funded biopharmaceutical,
biotechnology and therapeutics companies, including companies focused on cancer immunotherapies. Moreover, we may
also compete with smaller or earlier-stage companies, universities and other research institutions that have developed, are
developing or may be developing current and future cancer therapeutics.  These competitors include:

● Development  of  immune-oncology  treatments  in  combination  with  other  commercial  and
investigational therapeutics.  NC410 will compete with a range of therapies that are currently approved
and any new therapies that may become available in the future. Key product features that would affect
our ability to effectively compete with other therapeutics include the efficacy, safety and convenience of
our  products.  Currently  marketed  oncology  drugs  and  therapeutics  range  from  traditional  cancer
therapies,  including  chemotherapy,  to  antibody-drug  conjugates,  such  as  Genentech  Inc.’s  Kadcyla,  to
immune checkpoint inhibitors targeting CTLA-4, such as BMS’ Yervoy, and PD-1/PD-L1, such as BMS’
Opdivo, Merck & Co.’s Keytruda and Genentech’s Tecentriq, to T-cell-engager immunotherapies, such
as  Amgen’s  Blincyto.  In  addition  to  these  marketed  therapies,  numerous  compounds  are  in  clinical
development for the potential treatment of cancer.

● Development of B7-H4 targeted programs.  LNCB74 will compete with a range of product candidates
currently in clinical trials.  These include ADC clinical programs being developed by Pfizer Inc, a GSK
licensed  candidate  from  Hansoh  Pharmaceutical  Group  Limited,  Mersana,  and  AstraZenca  plc,  with
additional B7-H4 ADCs in preclinical development. We are also aware of other companies development
non-ADC approaches targeting B7-H4.  Our ability to compete effectively with other B7-H4 programs
will  depend  on  our  ability  to  differentiate  LNCB74  from  other  therapies  based  on  target  tumor  types,
payload, efficacy and tolerability. Any inability to effectively differentiate LNCB74 from other product
candidates targeting B7-H4 would negatively impact our ability to compete.

The availability of reimbursement from government and other third-party payors will also significantly affect the
pricing and competitiveness of our products. Our competitors may also obtain FDA or other regulatory approval for their
products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong
market position before we are able to enter the market.

Intellectual Property

Our  commercial  success  depends  in  part  on  our  ability  to  obtain  and  maintain  proprietary  protection  for  our
products,  methods  and  manufacturing  processes,  to  operate  without  infringing  on  the  proprietary  rights  of  others  and  to
prevent others from infringing on our proprietary rights. We rely on a combination of patents, patent applications and trade
secrets, as well as contractual protections, to establish and protect our intellectual property rights. We seek to protect our
proprietary position by, among other things, filing patent applications in the United States and internationally. Our patent
estate  includes  patents  and  patent  applications  with  claims  relating  to  our  product  candidates,  methods  of  use  and
manufacturing  processes,  and  claims  for  potential  future  products  and  developments.  As  of  December  31,  2023,  our
intellectual property portfolio includes, on a worldwide basis, 20 pending foreign patent applications relating to NC318,
NC410, NC525 and LNCB74, two pending U.S. patent application relating to NC318, one pending U.S. patent application
relating to NC410, one pending U.S. patent application relating to LNCB74, one U.S. patent application relating to NC525
and  additional  pending  patent  applications  for  other  discovery  and  research  programs.  Patents  resulting  from  our  patent
applications  for  NC318,  NC410  and  NC525,  if  issued,  are  expected  to  expire  beginning  in  2037  absent  any  patent  term
adjustments  or  extensions  and  for  LNCB74,  if  issued,  are  expected  to  expire  beginning  in  2045  absent  any  patent  term
adjustments or extensions.

13

Table of Contents

In addition, as described above, under the Yale Agreement, we have an exclusive, royalty-bearing, sublicensable
worldwide  license  from  Yale  for  an  intellectual  property  portfolio,  including  among  other  things  a  patent  relating  to
methods  of  use  for  S15  that  covers  the  use  of  NC318  and  a  patent  relating  to  our  Functional,  Integrated,  NextCure
Discovery  (FIND)  platform.  These  and  any  other  patents  that  might  issue  from  these  licensed  patent  applications  are
expected to expire no earlier than 2036 absent any patent term adjustments or extensions.

For  all  patent  applications,  we  determine  strategy  for  claim  scope  on  a  case-by-case  basis,  taking  into  account
advice  of  counsel  and  our  business  model  and  needs.  We  file  patents  containing  claims  for  protection  of  all  useful
applications of our proprietary technologies and any products, as well as all new applications and/or uses we discover for
existing technologies and products, based on our assessment of their strategic value. We continuously reassess the number
and  type  of  patent  applications,  as  well  as  the  pending  and  issued  patent  claims  to  ensure  that  maximum  coverage  and
value are obtained for our processes and compositions, given existing patent office rules and regulations. Further, claims
may be modified during patent prosecution to meet our intellectual property and business needs.

We also rely upon trade secrets, know-how and continuing technological innovation to develop and maintain our
competitive  position,  including  with  respect  to  our  FIND  platform.  We  seek  to  protect  our  proprietary  technology  and
processes,  in  part,  by  confidentiality  and  invention  assignment  agreements  with  our  employees,  consultants,  scientific
advisors and other contractors. In addition, in the ordinary course of our business, we enter into agreements with other
third  parties  for  non-exclusive  rights  to  intellectual  property  directed  to  other  technologies  that  are  ancillary  to  our
business,  including  laboratory  information  management  software  and  research  and  development  tools.  In  addition,  we
have trademark registrations with the U.S. Patent and Trademark Office, or the USPTO, for “NextCure” and our logo.

Government Regulation

Government Regulation and Product Approval

The  FDA  and  other  regulatory  authorities  at  federal,  state  and  local  levels,  as  well  as  in  foreign  countries,
extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export,
safety, effectiveness, labeling, packaging, storage, distribution, recordkeeping, approval, advertising, promotion, marketing,
post-approval monitoring and post-approval reporting of biological products. Along with third-party contractors, we will be
required  to  navigate  the  various  preclinical,  clinical  and  commercial  approval  requirements  of  the  governing  regulatory
agencies of the countries in which we intend to conduct studies or seek approval or licensure of our product candidates.
The processes for obtaining regulatory approvals in the United States and in foreign jurisdictions, along with subsequent
compliance  with  applicable  laws  and  regulations  and  other  regulatory  authorities,  require  the  expenditure  of  substantial
time and financial resources.

Government  policies  may  change,  and  additional  government  regulations  may  be  enacted,  that  may  prevent  or
delay further development or regulatory approval of any product candidates, product or manufacturing changes, additional
disease indications or label changes. We cannot predict the likelihood, nature or extent of government regulation that might
arise from future legislative or administrative action.

Review and Approval for Licensing Biologics in the United States

In the United States, the FDA regulates our current product candidates as biological products, or biologics, under
the  Federal  Food,  Drug,  and  Cosmetic  Act,  or  “FDCA”,  the  Public  Health  Service  Act  and  associated  implementing
regulations. Biologics, like other drugs, are used for the treatment, prevention or cure of disease in humans. In contrast to
small  molecular  weight  drugs,  which  have  a  well-defined  structure  and  can  be  thoroughly  characterized,  biologics  are
generally derived from living material (human, animal or microorganism) are complex in structure, and thus are usually not
fully characterized. Biologics include therapies for cancer and other diseases.

Biologics  are  also  subject  to  other  federal,  state  and  local  statutes  and  regulations.  The  failure  to  comply  with
applicable statutory and regulatory requirements at any time during the product development process, approval process or
after  approval  may  subject  a  sponsor  or  applicant  to  administrative  or  judicial  enforcement  actions.  These  actions  could
include the suspension or termination of clinical trials by the FDA, the FDA’s refusal to approve pending applications or
supplemental  applications,  withdrawal  of  an  approval,  Warning  Letters  or  Untitled  Letters,  product  recalls,  product
seizures, total or partial suspension of production or distribution, import detention, injunctions, fines, refusals of

14

Table of Contents

government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by the
FDA, the Department of Justice, or the DOJ, or other governmental entities.

An applicant seeking approval to market and distribute a biologic in the United States must typically undertake

the following:

● completion of non-clinical laboratory tests and animal studies performed in accordance with the FDA’s good

laboratory practice, or “GLP”, regulations;

● manufacture, labeling and distribution of investigational drug in compliance with cGMP;

● submission to the FDA of an IND application, which must become effective before clinical trials may begin

and must be updated annually or when significant changes are made;

● approval  by  an  independent  institutional  review  board,  or  “IRB”,  or  ethics  committee  at  each  clinical  site

before each clinical trial may be initiated;

● performance  of  adequate  and  well-controlled  human  clinical  trials  in  accordance  with  the  FDA’s  current
Good Clinical Practices requirements, or “cGCP”, to establish the safety, purity and potency of the proposed
biological product candidate for its intended purpose;

● preparation of and submission to the FDA of a biologics license application, or “BLA”, after completion of

all pivotal clinical trials requesting marketing approval for one or more proposed indications;

● obtain  satisfactory  completion  of  an  FDA  Advisory  Committee  review,  where  appropriate,  as  may  be

requested by the FDA to assist with its review;

● satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which
the proposed product, or certain components thereof, are produced to assess compliance with cGMP and data
integrity  requirements  to  assure  that  the  facilities,  methods  and  controls  are  adequate  to  preserve  the
biologic’s identity, safety, quality, purity and potency;

● satisfactory completion of FDA audits of selected clinical investigation sites to assure compliance with cGCP

requirements and the integrity of the clinical data;

● payment of user fees under the Prescription Drug User Fee Act for the relevant year;

● obtain  FDA  review  and  approval  of  the  BLA  to  permit  commercial  marketing  of  the  licensed  biologic  for

particular indications for use in the United States; and

● compliance  with  post-approval  requirements,  including  the  potential  requirements  to  implement  a  Risk
Evaluation  and  Mitigation  Strategy,  or  “REMS”,  adverse  event  and  biological  product  deviation  reporting
and to complete any post-approval studies.

From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the
statutory provisions governing the testing, approval, manufacturing and marketing of products regulated by the FDA. In
addition to new legislation, FDA regulations and policies are often revised or interpreted by the agency in ways that may
significantly  affect  our  business  and  our  products.  It  is  impossible  to  predict  whether  further  legislative  changes  will  be
enacted  or  whether  FDA  regulations,  guidance,  policies  or  interpretations  will  be  changed  or  what  the  effect  of  such
changes, if any, may be.

Preclinical and Clinical Development

Before an applicant can begin testing the potential candidate in human subjects, the applicant must first conduct
preclinical studies. Preclinical studies include laboratory evaluations of product chemistry, toxicity and formulation, as well
as in vitro and animal studies to assess the potential safety and activity of the drug for initial testing in humans and to

15

Table of Contents

establish a rationale for therapeutic use. Preclinical studies are subject to federal regulations and requirements, including
GLP regulations. The results of an applicant’s preclinical studies are submitted to the FDA as part of an IND.

An IND is a request for authorization from the FDA to administer an investigational new drug product to humans.
An IND is an exemption from the FDCA that allows an unapproved drug to be shipped in interstate commerce for use in an
investigational  clinical  trial.  Such  authorization  must  be  secured  prior  to  interstate  shipment  and  administration  of  a
biologic that is not the subject of an approved BLA. In support of a request for an IND, applicants must submit a protocol
for each clinical trial. Any subsequent protocol amendments must be submitted to the FDA as part of the IND.

Human clinical trials cannot begin until an IND is effective. The IND automatically becomes effective 30 days
after receipt by the FDA, unless the FDA raises safety concerns or questions about the proposed clinical trial within the 30-
day time period. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve
any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not
result in FDA authorization to begin a clinical trial.

The FDA may also place a clinical hold or partial clinical hold on such trial following commencement of a clinical
trial under an IND. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation
or to suspend an ongoing investigation. A partial clinical hold is a delay or suspension of only part of the clinical work
requested  under  the  IND.  For  example,  a  specific  protocol  or  part  of  a  protocol  is  not  allowed  to  proceed,  while  other
protocols may do so. No more than 30 days after imposition of a clinical hold or partial clinical hold, the FDA will provide
the sponsor a written explanation of the basis for the hold. Following issuance of a clinical hold or partial clinical hold, an
investigation may only resume after the FDA has notified the sponsor that the investigation may proceed. The FDA will
base that determination on information provided by the sponsor correcting the deficiencies previously cited or otherwise
satisfying the FDA that the investigation can proceed.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of
qualified  investigators  in  accordance  with  cGCP  regulations,  which  include  the  requirement  that  all  research  subjects
provide  their  informed  consent  for  their  participation  in  any  clinical  trial.  Clinical  trials  are  conducted  under  protocols
detailing,  among  other  things,  the  objectives  of  the  trial,  the  parameters  to  be  used  in  monitoring  safety  and  the
effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical
trial conducted during product development and for any subsequent protocol amendments.

A  sponsor  may  choose,  but  is  not  required,  to  conduct  a  foreign  clinical  study  under  an  IND.  When  a  foreign
clinical study is conducted under an IND, all FDA IND requirements must be met unless waived. When the foreign clinical
study is not conducted under an IND, the sponsor must ensure that the study complies with cGCP regulations in order to
use the study as support for an IND or application for marketing approval, including cGCP regulations, including review
and approval by an independent ethics committee and informed consent from subjects.

Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the
plan for any clinical trial and its informed consent form before the clinical trial begins at that site and must monitor the trial
until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds,
including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its
stated objectives.

Some  trials  also  include  oversight  by  an  independent  group  of  qualified  experts  organized  by  the  clinical  trial
sponsor,  known  as  a  data  safety  monitoring  board,  or  “DSMB”.  DSMBs  provide  recommendations  for  whether  or  not  a
trial  may  move  forward  at  designated  check  points  based  on  access  to  certain  data  from  the  trial  and  may  recommend
halting the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no
demonstration of efficacy. Other grounds for suspension or termination may be made based on evolving business objectives
and/or competitive climate. There are also requirements governing the reporting of ongoing clinical trials and clinical trial
results to public registries.

16

Table of Contents

Clinical Trials

For purposes of BLA approval, clinical trials are typically conducted in the following sequential phases:

● Phase 1: The investigational product is initially introduced into healthy human subjects or patients with the
target  disease  or  condition.  These  trials  are  designed  to  test  the  safety,  dosage  tolerance,  absorption,
metabolism  and  distribution  of  the  investigational  product  in  humans  and  the  side  effects  associated  with
increasing doses. These trials may also yield early evidence of effectiveness.

● Phase 2: The investigational product is administered to a limited patient population with a specified disease
or  condition  to  evaluate  the  preliminary  efficacy,  optimal  dosages  and  dosing  schedule  and  to  identify
possible  adverse  side  effects  and  safety  risks.  Multiple  Phase  2  clinical  trials  may  be  conducted  to  obtain
information prior to beginning larger and more expensive Phase 3 clinical trials.

● Phase  3:  The  investigational  product  is  administered  to  an  expanded  patient  population  to  further  evaluate
dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally
at multiple geographically dispersed clinical trial sites. These clinical trials are intended to generate sufficient
data  to  statistically  evaluate  the  efficacy  and  safety  of  the  product  for  approval,  to  establish  the  overall
risk/benefit ratio of the investigational product and to provide an adequate basis for product approval by the
FDA.

These phases may overlap or be combined. In some cases, the FDA may require, or companies may voluntarily
pursue,  additional  clinical  trials,  after  a  product  is  approved,  to  gain  more  information  about  the  product,  referred  to  as
Phase  4  trials.  Such  post-approval  trials,  when  applicable,  are  conducted  following  initial  approval,  typically  to  develop
additional  data  and  information  relating  to  the  biological  characteristics  of  the  product  and  treatment  of  patients  in  the
intended therapeutic indication.

Progress reports detailing the 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: suspected serious and unexpected adverse reactions; findings from epidemiological studies, pooled analysis of
multiple studies, animal or in vitro testing, or other clinical studies, whether or not conducted under an IND, and whether
or not conducted by the sponsor, that suggest a significant risk in humans exposed to the drug; and any clinically important
increase in the rate of a serious suspected adverse reaction over such rate listed in the protocol or investigator brochure.

Our ongoing and planned clinical trials may not be completed successfully within any specified period, or at all.
Furthermore, the FDA or the sponsor 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.  Similarly,  an  IRB  can  suspend  or
terminate  approval  of  a  clinical  trial  at  its  institution,  or  an  institution  it  represents,  if  the  clinical  trial  is  not  being
conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to
patients. The FDA will typically inspect one or more clinical sites to assure compliance with cGCP and the integrity of the
clinical data submitted.

During  clinical  development,  the  sponsor  often  refines  the  indication  and  endpoints  on  which  the  BLA  will  be
based.  For  endpoints  based  on  patient-reported  outcomes,  or  “PROs”,  and  outcome  reported  outcomes,  or  “OROs”,  the
process typically is an iterative one. The FDA has issued guidance on the framework it uses to evaluate PRO instruments.
Although the agency may offer advice on optimizing PRO and ORO instruments during the clinical development process,
the FDA usually reserves final judgment until it reviews the BLA.

Concurrent  with  clinical  trials,  companies  often  complete  additional  animal  studies,  and  develop  additional
information  about  the  chemistry  and  physical  characteristics  of  the  drug  and  finalize  a  process  for  manufacturing  the
product in commercial quantities in accordance with cGMP. The manufacturing process must be capable of consistently
producing  quality  batches  of  the  drug  candidate  and,  among  other  things,  must  develop  methods  for  testing  the  identity,
strength, quality, purity and potency of the final drug. Additionally, appropriate packaging must be selected and tested, and
stability  studies  must  be  conducted  to  demonstrate  that  the  drug  candidate  does  not  undergo  unacceptable  deterioration
over its shelf life.

17

Table of Contents

BLA Submission and Review

If  an  applicant  successfully  completes  all  required  clinical  testing  in  accordance  with  all  applicable  regulatory
requirements, an applicant may submit a BLA requesting licensing to market the biologic for one or more indications in the
United States. The BLA must include the results of product development, nonclinical studies and clinical trials; detailed
information  on  the  product’s  chemistry,  manufacture,  controls  and  proposed  labeling.  Under  the  Prescription  Drug  User
Fee Amendments, a BLA submission is subject to an application user fee, unless a waiver or exemption applies. The cost
of preparing and submitting a BLA is substantial. These fees are typically increased annually.

The  FDA  will  initially  review  the  BLA  for  completeness  before  accepting  it  for  filing.  Under  the  FDA’s
procedures, the agency has 60 days from its receipt of a BLA to determine whether the application will be accepted for
filing and substantive review. If the agency determines that the application does not meet this initial threshold standard, the
FDA  may  refuse  to  file  the  application  and  request  additional  information,  in  which  case  the  application  must  be
resubmitted with the requested information and review of the application delayed.

With certain exceptions, BLAs must include a pediatric assessment, generally based on clinical trial data, of the
safety and effectiveness of the biologic in relevant pediatric populations. Under certain circumstances, the FDA may waive
or defer the requirement for a pediatric assessment, either at the sponsor’s request or by the agency’s initiative.

After  the  BLA  is  accepted  for  filing,  the  FDA  reviews  the  BLA  to  determine,  among  other  things,  whether  a
product is safe, pure and potent and if the facility in which it is manufactured, processed, packed or held meets standards
designed to assure the product’s continued identity, strength, quality, safety, purity and potency. The FDA may convene an
advisory  committee  to  provide  clinical  insight  on  application  review  questions.  Before  approving  a  BLA,  the  FDA  will
typically  inspect  the  facility  or  facilities  where  the  product  is  manufactured.  The  FDA  will  not  approve  an  application
unless  it  determines  that  the  manufacturing  processes  and  facilities  comply  with  cGMP  and  are  adequate  to  assure
consistent production of the product within required specifications. In addition, the FDA expects that all data be reliable
and accurate and requires sponsors to implement meaningful and effective strategies to manage data integrity risks. Data
integrity is an important component of the sponsor’s responsibility to ensure the safety, efficacy and quality of its product
or products.

The  FDA  will  typically  inspect  one  or  more  clinical  sites  to  assure  compliance  with  cGCP  regulations  before
approving a BLA. If the FDA determines that the application, manufacturing process or manufacturing facilities are not
acceptable,  it  will  outline  the  deficiencies  in  the  submission  and  often  will  request  additional  testing  or  information.
Notwithstanding  the  submission  of  any  requested  additional  information,  the  FDA  ultimately  may  decide  that  the
application does not satisfy the regulatory criteria for approval.

FDA performance goals generally provide for action on a BLA within 10 months of filing, which (as discussed
above) typically occurs within 60 days of submission, but that deadline is extended in certain circumstances. Furthermore,
the review process is often significantly extended by the FDA’s requests for additional information or clarification.

The  FDA  may  refer  applications  for  novel  products  or  products  that  present  difficult  questions  of  safety  or
efficacy to an advisory committee. Typically, an advisory committee consists of a panel that includes clinicians and other
experts who will review, evaluate and provide a recommendation as to whether the application should be approved and, if
so, under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such
recommendations carefully when making decisions and usually has followed such recommendations.

After  the  FDA  evaluates  a  BLA  and  conducts  inspections  of  manufacturing  facilities  where  the  investigational
product and/or its components will be produced, the FDA may issue an approval letter or a Complete Response Letter, or
“CRL”.  An  approval  letter  authorizes  commercial  marketing  of  the  biologic  with  specific  prescribing  information  for
specific indications. A CRL will describe all of the deficiencies that the FDA has identified in the BLA, except that where
the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the
CRL without first conducting required inspections, testing submitted product lots and/or reviewing proposed labeling. If
the  deficiencies  have  been  addressed  to  the  FDA’s  satisfaction  in  a  resubmission  of  the  BLA,  the  FDA  will  issue  an
approval letter. In issuing the CRL, the FDA may recommend actions that the applicant might take to place the BLA in
condition for approval, including requests for additional data, information or clarification. The FDA may delay or refuse
approval of a BLA if applicable regulatory criteria are not satisfied and may require additional testing or information

18

Table of Contents

and/or  require  post-marketing  studies  and  clinical  trials.  Even  with  submission  of  this  additional  information,  the  FDA
ultimately may decide that the application does not satisfy the regulatory criteria for approval.

During the approval process, the FDA will determine whether a REMS is necessary to assure the safe use of the
biologic. A REMS is a safety strategy to manage a known or potential serious risk associated with a product and to enable
patients  to  have  continued  access  to  such  medicines  by  managing  their  safe  use,  and  could  include  medication  guides,
physician communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and
other  risk  minimization  tools.  If  the  FDA  concludes  that  a  REMS  is  needed,  the  BLA  sponsor  must  submit  a  proposed
REMS and the FDA will not approve the BLA without a REMS that the agency has determined is acceptable.

If  the  FDA  approves  a  product,  it  may  limit  the  approved  indications  for  use  for  the  product,  or  require  that
contraindications,  warnings  or  precautions  be  included  in  the  product  labeling.  The  FDA  may  also  require  that  post-
approval studies, including Phase 4 clinical trials, be conducted to further assess the drug’s safety after approval. The FDA
may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs.

The FDA may also require testing and surveillance programs to monitor the product after commercialization. For
biologics, such testing may include official lot release, which requires the manufacturer to perform certain tests on each lot
of  the  product  before  it  is  released  for  distribution.  The  manufacturer  then  typically  must  submit  samples  of  each  lot  of
product to the FDA, together with a release protocol showing a summary of the history of manufacture of the lot and the
results of all of the manufacturer’s tests performed on the lot. The FDA may also perform certain confirmatory tests on lots
of some products itself, before releasing the lots for distribution by the manufacturer.

After approval, many types of changes to the approved product, such as adding new indications, manufacturing
changes  and  additional  labeling  claims,  are  often  subject  to  further  testing  requirements  and  FDA  review  and  approval,
depending on the nature of the post-approval change. The FDA may withdraw the product approval if compliance with pre-
and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace.

Post-Approval Requirements

Any  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, reporting
of  certain  deviations  and  adverse  experiences,  product  sampling  and  distribution  and  advertising  and  promotion  of  the
product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are
subject to FDA review and approval. Biologic manufacturers and their third-party contractors are required to register their
facilities  with  the  FDA  and  certain  state  agencies.  These  facilities  are  subject  to  routine  and  periodic  unannounced
inspections  by  the  FDA  and  certain  state  agencies  for  compliance  with  cGMP,  post-marketing  safety  reporting  and  data
integrity  requirements,  which  impose  certain  procedural  and  documentation  requirements  to  assure  quality  of
manufacturing  and  product.  FDA  has  increasingly  observed  cGMP  violations  involving  data  integrity  during  site
inspections  and  is  a  significant  focus  of  its  oversight.  Requirements  with  respect  to  data  integrity  include,  among  other
things,  controls  to  ensure  data  are  complete  and  secure;  activities  documented  at  the  time  of  performance;  audit  trail
functionality;  authorized  access  and  limitations;  validated  computer  systems;  and  review  of  records  for  accuracy,
completeness and compliance with established standards.

Post-approval changes to the manufacturing process are strictly regulated, and, depending on the significance of
the  change,  may  require  FDA  approval  before  being  implemented.  FDA  regulations  also  require  investigation  and
correction of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that
we  may  decide  to  use.  Accordingly,  manufacturers  must  continue  to  expend  time,  money  and  effort  in  the  area  of
production and quality control to maintain compliance with cGMP, data integrity, pharmacovigilance and other aspects of
regulatory compliance.

19

Table of Contents

The FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained
or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product,
including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with
regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-
approval  studies  or  clinical  trials  to  assess  new  safety  risks;  or  imposition  of  distribution  or  other  restrictions  under  a
REMS. Other potential consequences include, among other things:

● restrictions  on  the  marketing  or  manufacturing  of  a  product,  complete  withdrawal  of  the  product  from  the

market or product recalls;

● fines, Warning Letters, Untitled Letters or holds on post-approval clinical studies;

● refusal of the FDA to approve pending applications or supplements to approved applications, or suspension

or revocation of existing product approvals;

● product seizure or detention, or refusal of the FDA to permit the import or export of products or Import Alert;

or

● permanent injunctions and consent decrees, including the imposition of civil or criminal penalties.

The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug and biological
products placed on the market. A company can make only those claims relating to safety and efficacy, purity and potency
that are approved by the FDA and in accordance with the provisions of the approved label. The FDA’s regulation includes,
among other things, standards and regulations for direct-to-consumer advertising, communications regarding unapproved
uses,  industry-sponsored  scientific  and  educational  activities  and  promotional  activities  involving  the  Internet  and  social
media. Promotional claims relating to a product’s safety or effectiveness are prohibited before the drug is approved. After
approval, a product generally may not be promoted for uses that are not approved by the FDA, as reflected in the product’s
prescribing information. In the United States, healthcare professionals are generally permitted to prescribe drugs for such
uses  not  described  in  the  drug’s  labeling,  known  as  off-label  uses,  because  the  FDA  does  not  regulate  the  practice  of
medicine.  However,  FDA  regulations  impose  rigorous  restrictions  on  manufacturers’  communications,  prohibiting  the
promotion of off-label uses. It may be permissible, under very specific, narrow conditions, for a manufacturer to engage in
non-promotional, non-misleading communication regarding off-label information, such as distributing scientific or medical
journal information.

If  a  company  is  found  to  have  promoted  off-label  uses,  it  may  become  subject  to  adverse  public  relations  and
administrative and judicial enforcement by the FDA, the DOJ or the Office of the Inspector General of the Department of
Health and Human Services, or “HHS”, as well as other federal and state authorities. This could subject a company to a
range  of  penalties  that  could  have  a  significant  commercial  impact,  including  civil,  administrative,  and  criminal  fines,
penalties,  and  agreements  that  materially  restrict  the  manner  in  which  a  company  promotes  or  distributes  products.  The
federal government has levied large civil, administrative, and criminal fines and penalties against companies for alleged
improper  promotion  and  has  also  requested  that  companies  enter  into  consent  decrees  and  permanent  injunctions  under
which specified promotional conduct is changed or curtailed.

The distribution of prescription drug and biological products are subject to the Drug Supply Chain Security Act,
or  “DSCSA”,  which  requires  manufacturers  and  other  stakeholders  to  comply  with  product  identification,  tracing,
verification, detection and response, notification and licensing requirements. In addition, the Prescription Drug Marketing
Act and its implementing regulations and state laws limit the distribution of prescription pharmaceutical product samples,
and the DSCSA imposes requirements to ensure accountability in distribution and to identify and remove prescription drug
and biological products that may be counterfeit, stolen, contaminated, or otherwise harmful from the market.

Patent Term Restoration

After  approval,  owners  of  relevant  drug  or  biological  product  patents  may  apply  for  up  to  a  five-year  patent
extension to restore a portion of patent term lost during product development and FDA review of a BLA under the Drug
Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. The allowable patent
term  extension  is  calculated  as  one-half  of  the  product’s  testing  phase,  which  is  the  time  between  IND  and  BLA
submission, and all of the review phase, which is the time between BLA submission and approval, up to a maximum of

20

Table of Contents

five years. The time can be shortened if the FDA determines that the applicant did not pursue approval with due diligence.
The total patent term after the extension may not exceed more than 14 years from the date of FDA approval of the product.
Only one patent claiming each approved product is eligible for restoration and the patent holder must apply for restoration
within 60 days of approval. The USPTO, in consultation with the FDA, reviews and approves the application for patent
term restoration.

For  patents  that  might  expire  during  the  application  phase,  the  patent  owner  may  request  an  interim  patent
extension. An interim patent extension increases the patent term by one year and may be renewed up to four times. For
each  interim  patent  extension  granted,  the  post-approval  patent  extension  is  reduced  by  one  year.  The  director  of  the
USPTO must determine that approval of the product candidate covered by the patent for which a patent extension is being
sought  is  likely.  Interim  patent  extensions  are  not  available  for  a  product  candidate  for  which  a  BLA  has  not  been
submitted.

Biosimilars and Marketing Exclusivities

The Biologics Price Competition and Innovation Act, or “BPCIA,” created an abbreviated approval pathway for
biological product candidates shown to be highly similar to or interchangeable with an FDA licensed biological product. A
biological  product  on  which  another  biological  product  candidate’s  BLA  relies  to  establish  biosimilarity  is  known  as  a
reference product. Biosimilarity sufficient to reference a prior FDA-approved product requires that the biological product
candidate be highly similar to the reference product not withstanding minor differences in clinically inactive components,
and  there  be  no  clinically  meaningful  differences  between  the  biological  product  candidate  and  the  reference  product  in
terms  of  safety,  purity  and  potency.  Biosimilarity  must  be  shown  through  analytical  trials,  animal  trials  and  at  least  one
clinical trial, unless the FDA waives a required element. A biosimilar product candidate may be deemed interchangeable
with a prior approved product if it meets the higher hurdle of demonstrating that it can be expected to produce the same
clinical  results  as  the  reference  product  and,  for  products  administered  multiple  times,  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.  Complexities  associated  with  the  larger,  and  often  more
complex, structures of biologics, as well as the process by which such products are manufactured, pose significant hurdles
to implementation of the abbreviated approval pathway that are still being worked out by the FDA.

A reference biologic is granted 12 years of exclusivity from the time of first licensure of the reference product,
and no application for a biosimilar can be submitted for four years from the date of licensure of the reference product. The
first interchangeable biosimilar biological product has exclusivity against a finding of interchangeability for other biologics
for the lesser of (i) one year after first commercial marketing of the first interchangeable biosimilar, (ii) 18 months after the
first interchangeable biosimilar is approved if there is no patent challenge, (iii) 18 months after resolution of a lawsuit over
the patents of the reference biologic in favor of the first interchangeable biosimilar applicant, or (iv) 42 months after the
first interchangeable biosimilar’s application has been approved if a patent lawsuit is ongoing within the 42 month period.
State  pharmacy  laws  and  regulations  govern  whether  products  deemed  “interchangeable”  by  the  FDA  will,  in  fact,  be
readily  substituted  by  pharmacies,  and  may  impose  additional  requirements  such  as  notification  of  prescriber  and/or
patient, documentation and recordkeeping.

If a biologic is designated and approved for an orphan indication, it will be granted seven years of orphan drug
exclusivity. An orphan indication is granted to biological products and drugs designated and approved to treat diseases or
conditions affecting fewer than 200,000 individuals in the United States, or if there is no reasonable expectation that the
sponsor will be able to recover the costs of developing and marketing the drug or biological product in the United States.
During  the  seven-year  exclusivity  period,  the  FDA  may  not  approve  any  other  applications  to  market  the  same  drug  or
biological product for the same disease, except in limited circumstances, such as a showing of clinical superiority to the
product with orphan drug exclusivity. A biosimilar may not be licensed by FDA for the protected orphan indication until
after  the  expiration  of  the  seven-year  orphan  drug  exclusivity  period  or  the  12-year  reference  product  exclusivity,
whichever is later.

Pediatric  exclusivity  adds  an  additional  six-month  exclusivity  period  to  any  marketing  exclusivities  and  patents
that  a  biological  product  has  obtained.  In  order  to  obtain  pediatric  exclusivity,  a  BLA  sponsor  must  conduct  pediatric
studies  as  requested  by  the  FDA  in  a  Written  Request.  The  data  do  not  need  to  show  the  product  to  be  effective  in  the
pediatric  population  studied;  rather,  if  the  clinical  trial  is  deemed  to  fairly  respond  to  the  FDA’s  request,  the  additional
protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory
time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by

21

Table of Contents

six  months.  While  pediatric  exclusivity  is  not  an  actual  extension  on  a  patent  term,  it  effectively  extends  the  preclusive
effect of the patent on FDA’s authority to approve another application that relies on the product with pediatric exclusivity.

The  BPCIA  is  complex  and  continues  to  be  interpreted  and  implemented  by  the  FDA.  On  December  20,  2019,
President  Trump  signed  into  law  H.R.  1865,  the  Further  Consolidated  Appropriations  Act  of  2020.  The  law  includes
significant provisions concerning the FDA’s implementation of the BPCIA, such as clarifying that “chemically synthesized
polypeptides”  are  no  longer  excluded  from  being  regulated  as  biologics,  while  “peptides”  (polymers  composed  of  40  or
fewer amino acids) will continue to be regulated as drugs unless they otherwise meet the statutory definition of biological
products.  In  addition,  the  Further  Consolidated  Appropriations  Act  of  2020  clarifies  exclusivity  and  procedural  issues
related  to  certain  biologics  approved  as  drugs  pursuant  to  new  drug  applications,  or  “NDAs”,  to  be  the  subject  of  an
approved  BLA,  or  transition  biological  products.  The  law  also  incorporates  provisions  intended  to  reduce  price  and
increase  competitiveness  in  the  pharmaceutical  industry.  The  law  amends  the  FDCA  to  create  a  private  right  of  action
against NDA or BLA holders that refuse to provide sufficient quantities of samples of an approved reference product to
generic and biosimilar developers. In July 2018, the FDA released its Biosimilars Action Plan to improve the efficiency of
the biosimilar and interchangeable product development and approval process. The Further Consolidated Appropriations
Act  of  2020  is  consistent  with  FDA  guidance  documents  issued  in  December  2018  that  were  intended  to  advance  the
agency’s biosimilars policy framework. The implementation of the Further Consolidated Appropriations Act of 2020 and
the ultimate impact of the agency’s Biosimilars Action Plan are uncertain and may evolve over time through future laws
and  regulations  and  guidance  provided  by  regulatory  and  governing  bodies.  In  addition,  there  has  been  discussion  of
whether Congress should reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of
which may impact the BPCIA exclusivity provisions, have been the subject of recent litigation. As a result, the ultimate
implementation of the BPCIA is subject to significant uncertainty.

Regulation of Companion Diagnostics and Laboratory Developed Tests

A  companion  diagnostic  is  an  in  vitro  diagnostic  that  can:  identify  the  patients  most  likely  to  benefit  from  a
particular therapeutic product; identify those likely to be at an increased risk for serious side effects; or monitor responses
to  treatment  with  a  particular  therapeutic  product  for  the  purpose  of  adjusting  treatment  to  achieve  improved  safety  or
effectiveness. Under the FDCA, in vitro companion diagnostics are generally regulated as medical devices. The FDA has
generally  classified  in  vitro  companion  diagnostics  as  high-risk,  Class  III  devices,  which  require  FDA  approval  of  a
premarket  approval  application,  or  “PMA”,  but  recognizes  the  possibility  of  a  moderate-risk  IVD  companion  diagnostic
(i.e.,  Class  II  device),  which  would  require  clearance  of  a  510(k)  premarket  notification  or  grant  of  a  de  novo  request.
Approval  or  clearance  of  the  in  vitro  companion  diagnostic  device  will  ensure  that  the  device  has  been  adequately
evaluated and has adequate performance characteristics in the intended population.

For  those  in  vitro  companion  diagnostics  that  require  PMA  approval,  the  process  involves  gathering  and
submitting  clinical  and  preclinical  data  on  the  device  for  review  by  the  FDA.  It  involves  a  rigorous  premarket  review,
during which the applicant must provide the FDA with reasonable assurance of the device’s safety and effectiveness, as
well as information regarding the device’s design, manufacturing and labeling. In addition, the FDA will typically inspect
the  device  manufacturer’s  facilities  for  compliance  with  the  Quality  System  Regulation,  which  imposes  testing,  control,
documentation and other quality assurance requirements.

The FDA has issued guidance on the approval of therapeutic products and in vitro companion diagnostic devices.
According  to  the  FDA’s  guidance,  for  novel  therapeutic  products  including  biologics,  an  in vitro  companion  diagnostic
device  and  its  corresponding  therapeutic  should  be  approved  or  cleared  contemporaneously  by  the  FDA  for  the  use
indicated in the therapeutic product’s labeling.

In some cases, information from a diagnostic test may be useful to a prescriber, but not necessary for the safe and
effective administration of the therapeutic product. In those cases, health care providers may employ information derived
from  a  complementary  diagnostic  test  such  as  a  laboratory  developed  test,  or  “LDT”,  when  administering  a  therapeutic
product. An LDT is a type of in vitro diagnostic test that is designed, manufactured and used within a single laboratory.
LDTs can be used to measure or detect a wide variety of analytes (substances such as proteins, chemical compounds like
glucose or cholesterol, or DNA), in a sample taken from a human body.

The  Centers  for  Medicare  and  Medicaid  Services,  or  “CMS”,  regulates  LDTs  and  the  laboratories  that  develop
them,  and  enforces  the  Clinical  Laboratories  Improvement  Amendments,  or  “CLIA”.  CMS  evaluates  whether  there  is
clinical utility for each specific test, and also performs post-market oversight of laboratory operational processes. CMS’s

22

Table of Contents

oversight  through  the  CLIA  program  is  designed  to  confirm  that  a  lab  assesses  analytical  validity  but  does  not  confirm
whether it had results from an analytical validity assessment that were sufficient to support the claimed intended use of the
test.

Historically, the FDA has generally not enforced premarket review and other FDA requirements on LDTs because
LDTs were relatively simple lab tests and generally available on a limited basis. Due to advances in technology, however,
some LDTs are now much more complex, have a nationwide reach and present higher risks, such as detection of risk for
breast  cancer  and  Alzheimer’s  disease,  which  are  similar  to  those  of  other  IV  in vitro  diagnostics  that  have  undergone
premarket review.

In 2023,  FDA announced  a proposed rule that would explicitly assert that in vitro diagnostic products (IVDs) are
devices under the FDCA, including when the manufacturer of the IVD is a laboratory.  Along with this amendment, the
FDA proposed a policy under which the FDA would provide greater oversight of LDTs through a phaseout of its general
enforcement discretion approach for most LDTs.  Future language in the final rule may further alter the regulation of IVDs.

New  laws,  regulations  or  changes  to  existing  laws,  regulations  and  policies  may  result  in  changes  to  the

requirements for LDTs or in vitro diagnostic devices and to the FDA’s compliance and enforcement policies.

Healthcare Regulation

Pharmaceutical Coverage and Reimbursement

Our  ability  to  successfully  commercialize  any  of  our  product  candidates  for  which  we  may  receive  regulatory
approval  will  depend  in  significant  part  on  the  availability  of  coverage  and  reimbursement  from  third-party  payors,
including  governmental  healthcare  programs,  such  as  the  Medicare  and  Medicaid  programs  in  the  U.S.,  private  health
insurers, managed care organizations, and other entities. Third-party payors may limit coverage to specific products on an
approved list, or formulary, which might not include one or more of our product candidates. Third-party payors, together
with  regulators  and  others,  are  increasingly  challenging  the  prices  charged  for  pharmaceutical  products  and  related
services, in addition to their cost-effectiveness, safety and efficacy.

No  uniform  policy  for  coverage  and  reimbursement  exists  in  the  United  States.  Though  we  expect  our  initial
product offering to be covered under Medicare Part B, and third-party payors often rely upon Medicare coverage policy
and  payment  limitations  in  setting  their  own  coverage  and  reimbursement  policies,  payors  have  their  own  methods  and
approval  processes  apart  from  Medicare  determinations.  Therefore,  the  availability  and  scope  of  coverage,  as  well  as
reimbursement  rates  can  vary  significantly  from  payor  to  payor.    The  marketability  of  any  products  for  which  we  may
receive regulatory approval for commercial sale depends on these payors’ coverage policies and reimbursement rates.

Moreover, obtaining coverage and adequate reimbursement is a time-consuming and costly process. We may be
required to provide scientific and clinical support for the use of any product to each third-party payor separately with no
assurance  that  approval  will  be  obtained,  and  we  may  need  to  conduct  expensive  pharmacoeconomic  studies  in  order  to
demonstrate  the  cost-effectiveness  of  our  products.  We  cannot  be  certain  that  our  product  candidates  will  be  considered
cost-effective by third-party payors. This process could delay the market acceptance of any product candidates for which
we may receive approval and could have a negative effect on our future revenues and operating results.

Other U.S. Healthcare Laws and Compliance Requirements

In the United States, our business is subject to healthcare fraud and abuse regulation and enforcement by both the
federal government and the states in which we conduct our business, particularly once third-party reimbursement becomes
available for one or more of our products. The healthcare fraud and abuse laws and regulations that may affect our ability
to operate include but are not limited to:

● The  federal  Anti-Kickback  Statute  is  a  criminal  law  that  prohibits  any  person  or  entity  from,  among  other
things,  knowingly  and  willfully  soliciting,  receiving,  offering,  providing,  or  paying  any  remuneration
(including any kickback or bribe), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or
in return for, either the referral of an individual, or the purchase, lease, order, arranging for or recommending
the  purchase,  lease,  or  order  of  any  item  or  service  for  which  payment  may  be  made,  in  whole  or  in  part,
under federal healthcare programs, like Medicare or Medicaid. A person or entity can be found guilty of

23

Table of Contents

violating the statute without actual knowledge of the statute or specific intent to violate it. The federal Anti-
Kickback  Statute  has  been  interpreted  to  apply,  for  example,  to  arrangements  between  pharmaceutical
manufacturers on the one hand and prescribers, purchasers, and formulary managers on the other, including,
for example, consulting/speaking arrangements, discount and rebate offers, grants, charitable contributions,
and patient support offerings, among others. A conviction for violation of the federal Anti-Kickback Statute
can  result  in  criminal  fines  and/or  imprisonment  and  requires  mandatory  exclusion  from  participation  in
federal health care programs. Exclusion may also be imposed if the government determines that an entity has
committed  acts  that  are  prohibited  by  the  federal  Anti-Kickback  Statute.  Although  there  are  a  number  of
statutory  exceptions  and  regulatory  safe  harbors  to  the  federal  Anti-Kickback  Statute  protecting  certain
common business arrangements and activities from prosecution or regulatory sanctions, the exceptions and
safe  harbors  are  drawn  narrowly.  Practices  that  involve  remuneration  to  those  who  prescribe,  purchase,  or
recommend pharmaceutical and biological products that are not designed to fit squarely within an exception
or  safe  harbor  are  evaluated  based  on  the  specific  facts  and  circumstances  and  are  typically  subject  to
increased scrutiny. Our practices may not in all cases meet all of the criteria for safe harbor protection from
Anti-Kickback Statute liability.

● The  federal  civil  and  criminal  false  claims  laws  and  civil  monetary  penalty  laws,  including  the  civil  False
Claims  Act,  or  “FCA”,  which  prohibits  anyone  from,  among  other  things:  (i)  knowingly  presenting,  or
causing to be presented, claims for payment of government funds that are false or fraudulent; (ii) knowingly
making, or using or causing to be made or used, a false record or statement material to a false or fraudulent
claim; (iii) knowingly making, using or causing to made or used a false record or statement material to an
obligation  to  pay  money  to  the  government;  or  (iv)  knowingly  concealing  or  knowingly  and  improperly
avoiding,  decreasing,  or  concealing  an  obligation  to  pay  money  to  the  federal  government.  Private
individuals,  commonly  known  as  “whistleblowers,”  can  bring  FCA  qui  tam  actions,  on  behalf  of  the
government and may share in amounts paid by the defendant to the government in recovery or settlement.
Pharmaceutical  companies  have  been  investigated  and/or  subject  to  government  enforcement  actions
asserting liability under the FCA in connection with their alleged off-label promotion of drugs, purportedly
concealing price concessions in the pricing information submitted to the government for government price
reporting purposes, and allegedly providing free product to customers with the expectation that the customers
would  bill  federal  healthcare  programs  for  the  product,  among  other  things.  In  addition,  a  claim  including
items  or  services  resulting  from  a  violation  of  the  federal  Anti-Kickback  Statute  constitutes  a  false  or
fraudulent claim for purposes of the FCA. Moreover, manufacturers can be held liable under the FCA even
though they, in most cases, do not submit claims directly to government payors if they are deemed to “cause”
the submission of false or fraudulent claims. FCA liability is potentially significant in the healthcare industry
because the statute provides for treble damages and significant mandatory penalties per false or fraudulent
claim or statement for violations. Such per-claim penalties are currently set at $13,946 to $27,894 per false
claim  for  penalties  assessed  after  January  15,  2024  with  respect  to  violations  occurring  after  November  2,
2015.  Criminal  penalties,  including  imprisonment  and  criminal  fines,  are  also  possible  for  making  or
presenting a false, fictitious or fraudulent claim 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,  including  private  third-party  payors,  and  prohibits  (i)  knowingly  and  willfully
falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent
statement  or  representation  and  (ii)  making  or  using  any  false  writing  or  document  knowing  the  same  to
contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or
payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or
entity can be found guilty of violating the HIPAA fraud provisions without actual knowledge of the statute or
specific intent to violate it;

● HIPAA, the Health Information Technology for Economic and Clinical Health Act, or “HITECH Act”, and
HIPPAA’s  implementing  regulations,  and  certain  state  and  local  laws  impose  requirements  relating  to  the
privacy,  security  and  transmission  of  individually  identifiable  health  information  held  by  covered  entities,
including  health  plans,  healthcare  clearinghouses  and  certain  healthcare  providers,  and  their  business
associates, individuals or entities that perform certain services on behalf of a covered entity that involve the
use  or  disclosure  of  individually  identifiable  health  information.  HIPAA  includes  several  tiers  of  civil
monetary penalties as well as criminal penalties. In addition, state attorneys general have authority to file

24

Table of Contents

civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorneys’ fees and costs
associated with pursuing federal civil actions. Research institutions that we collaborate with and healthcare
providers  who  may  prescribe  our  products,  once  commercialized,  are  subject  to  privacy  and  security
requirements under HIPAA. The Department of Health and Human Services Office for Civil Rights (OCR)
has recently increased its enforcement efforts on compliance with HIPAA, including the security regulations
(Security Rule), bringing actions against entities which have failed to implement security measures sufficient
to  reduce  risks  to  electronic  protected  health  information  or  to  conduct  an  accurate  and  thorough  risk
analysis, among other violations. Although we are not directly subject to HIPAA other than with respect to
providing certain employee benefits, we could potentially be subject to criminal penalties if we, our affiliates
or  our  agents  knowingly  obtain  or  disclose  individually  identifiable  health  information  maintained  by  a
HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA;

● Numerous  other  federal  and  state  laws  and  regulations  that  also  govern  the  privacy  and  security  of
individually  identifiable  health  information,  including  state  data  breach  notification  laws,  state  health
information or genetic privacy laws, and federal and state consumer protection laws such as Section 5 of the
Federal Trade Commission, or “FTC”, Act and the California Consumer Privacy Act, or “CCPA”. The CCPA
gives California residents expanded rights to access and delete their personal information, opt out of certain
personal information sharing and receive detailed information about how their personal information is used
by requiring covered companies to provide new disclosures to California consumers (as that term is broadly
defined)  and  provide  such  consumers  new  ways  to  opt-out  of  certain  sales  of  personal  information.  The
CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is
expected to increase data breach litigation. Although there are certain exemptions for personal information
subject to HIPAA and personal data collected in a clinical trial context, the CCPA’s implementation standards
and  enforcement  practices  may  increase  our  compliance  costs  and  potential  liability.  Additionally,  a
California  ballot  initiative,  the  California  Privacy  Rights  Act,  or  “CPRA”,  passed  in  November  2020,  and
went  into  effect  on  January  1,  2023.  The  CPRA  will  impose  additional  data  protection  obligations  on
companies doing business in California, including additional consumer rights processes, limitations on data
uses,  new  audit  requirements  for  higher  risk  data,  and  opt  outs  for  certain  uses  of  sensitive  data.  It  also
created a new California data protection agency authorized to issue substantive regulations and could result
in increased privacy and information security enforcement. Additional compliance investment and potential
business process changes may be required. Laws similar to the California laws have passed in states such as
Virginia and Colorado, and comparable laws have been proposed in other states and at the federal level that
may ultimately have conflicting requirements that would further complicate compliance and adversely affect
our business.

● The  FTC  and  many  state  attorneys  general  are  interpreting  existing  federal  and  state  consumer  protection
laws  to  impose  evolving  standards  for  the  collection,  use,  dissemination  and  security  of  health-related  and
other personal information. For instance, the FTC has promulgated standards for fair information practices,
which  concern  consumer  notice,  choice,  security  and  access,  and  also  require  notice  of  certain  health
information breaches outside the HIPAA context. Consumer protection laws require us to publish statements
that  describe  how  we  handle  personal  information  and  choices  individuals  may  have  about  the  way  we
handle their personal information. Violating consumers’ privacy rights, publishing untrue information about
security practices, or failing to take appropriate steps to keep consumers’ personal information secure may
constitute  unfair  or  deceptive  acts  or  practices  in  violation  of  Section  5  of  the  FTC  Act.  Additionally,  the
FTC  recently  published  an  advance  notice  of  proposed  rulemaking  on  commercial  surveillance  and  data
security  and  is  seeking  comment  on  whether  it  should  implement  new  trade  regulation  rules  or  other
regulatory alternatives concerning the ways in which companies (1) collect, aggregate, protect, use, analyze,
and retain consumer data, as well as (2) transfer, share, sell, or otherwise monetize that data in ways that are
unfair  or  deceptive.  Federal  regulators,  state  attorneys  general  and  plaintiffs’  attorneys  have  been  and  will
likely continue to be active in this space, and if we do not comply with existing or new laws and regulations
related to patient health information, we could be subject to criminal or civil sanctions.

● In  addition,  some  countries  are  considering  or  have  passed  legislation  implementing  data  protection
requirements or requiring local storage and processing of data or similar requirements that could increase the
cost  and  complexity  of  research  activities.  These  laws  and  regulations,  as  well  as  any  associated  claims,
inquiries,  investigations  or  any  other  government  actions  may  lead  to  unfavorable  outcomes  including
increased compliance costs, delays or impediments in the development of new products, negative publicity,

25

Table of Contents

increased operating costs, diversion of management time and attention and remedies that harm our business,
including fines or demands or orders that we modify or cease existing business practices.

● The federal Physician Payments Sunshine Act, implemented as the Open Payments Program, which requires
manufacturers  of  drugs,  devices,  biologics  and  medical  supplies  for  which  payment  is  available  under
Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions), among others, to
track  and  report  annually  to  CMS  information  related  to  direct  or  indirect  payments  and  other  transfers  of
value  they  make  to  U.S.-licensed  physicians  (defined  to  include  doctors,  dentists,  optometrists,  podiatrists
and  licensed  chiropractors),  physician  assistants,  nurse  practitioners,  clinical  nurse  specialists,  certified
registered nurse anesthetists, anesthesiology assistants, certified nurse-midwives, and U.S. teaching hospitals,
as well as tracking and reporting of ownership and investment interests held in a company by U.S.-licensed
physicians and their immediate family members.

● Analogous U.S. state and local laws and regulations, such as state anti-kickback and false claims laws, which
may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed
by  non-governmental  third-party  payors,  including  private  insurers;  state  laws  that  require  pharmaceutical
companies  to  comply  with  the  pharmaceutical  industry’s  voluntary  compliance  guidelines  and  the  relevant
compliance  guidance  promulgated  by  the  federal  government  or  otherwise  restrict  payments  that  may  be
made to healthcare providers; state laws that restrict the ability of manufacturers to offer co-pay support to
patients  for  certain  prescription  drugs,  including  information  pertaining  to  and  justifying  price  increases;
prohibit  prescription  drug  price  gouging;  or  impose  payment  caps  on  certain  pharmaceutical  products
deemed by the state to be “high cost”; state laws that require drug manufacturers to report information related
to  clinical  trials,  or  information  related  to  payments  and  other  transfers  of  value  to  physicians  and  other
healthcare  providers  or  marketing  expenditures;  state  laws  that  require  drug  manufacturers  to  report
information  on  the  pricing  of  certain  drugs;  state  laws  and  local  ordinances  that  require  identification  or
licensing of sales representatives; and state laws governing the privacy and security of health information in
certain circumstances, many of which differ from each other in significant ways and often are not preempted
by HIPAA, thus complicating compliance efforts.

We  will  be  required  to  spend  substantial  time  and  money  to  ensure  that  our  business  arrangements  with  third
parties comply with applicable healthcare laws and regulations. Even then, governmental authorities may conclude that our
business  practices  do  not  comply  with  current  or  future  statutes,  regulations  or  case  law  involving  applicable  fraud  and
abuse  or  other  healthcare  laws  and  regulations.  If  governmental  authorities  find  that  our  operations  violate  any  of  these
laws  or  any  other  governmental  regulations  that  may  apply  to  us,  we  may  be  subject  to  significant  civil,  criminal  and
administrative  penalties,  damages,  fines,  disgorgement,  individual  imprisonment,  exclusion  from  government  funded
healthcare  programs,  such  as  Medicare  and  Medicaid,  and  additional  reporting  obligations  and  oversight  if  we  become
subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and
we may be required to curtail or restructure our operations. Moreover, we expect that there will continue to be federal and
state  laws  and  regulations,  proposed  and  implemented,  that  could  impact  our  operations  and  business.  In  addition,  the
approval and commercialization of any product candidate we develop outside the United States will also likely subject us
to  foreign  equivalents  of  the  healthcare  laws  mentioned  above,  among  other  foreign  laws.  The  extent  to  which  future
legislation or regulations, if any, relating to health care fraud and abuse laws or enforcement, may be enacted or what effect
such legislation or regulation would have on our business remains uncertain.

Healthcare Reform

There  have  been  and  continue  to  be  a  number  of  healthcare-related  legislative  and  regulatory  initiatives  and
reforms in the United States that significantly affect the pharmaceutical industry. For example, the Patient Protection and
Affordable  Care  Act,  as  amended  by  the  Health  Care  and  Education  Reconciliation  Act  of  2010,  or  collectively,  the
“ACA,” was passed in March 2010, and substantially changed the way healthcare is financed by both governmental and
private  insurers  and  significantly  impacted  the  U.S.  pharmaceutical  industry.  Among  other  things,  the  ACA:  subjects
biologics  to  potential  competition  by  lower-cost  biosimilars;  addresses  a  methodology  through  which  rebates  owed  by
manufacturers under the Medicaid Drug Rebate Program, or “MDRP,” are calculated for covered outpatient drugs that are
inhaled, infused, instilled, implanted or injected; increases the minimum Medicaid rebates owed by manufacturers under
the MDRP and extends the rebate program to individuals enrolled in Medicaid managed care organizations; and establishes
annual fees and taxes on manufacturers of certain branded prescription drugs.

26

Table of Contents

The  ACA  and  certain  of  its  provisions  have  been  subject  to  judicial  challenges  as  well  as  legislative  and
regulatory efforts to repeal or replace them or to alter their interpretation or implementation. For example, Congress has
considered  legislation  that  would  repeal  or  repeal  and  replace  all  or  part  of  the  ACA.  While  Congress  has  not  passed
comprehensive repeal legislation, bills affecting the implementation of certain taxes under the ACA have been signed into
law.  The  Tax  Cuts  and  Jobs  Act  of  2017,  or  the  “Tax  Act,”  includes  a  provision  that  repealed  the  tax-based  shared
responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all
or part of a year, commonly referred to as the “individual mandate.” CMS rules issued in 2018 permit further collections
and payments to and from certain ACA-qualified health plans and health insurance issuers under the ACA risk adjustment
program. The Further Consolidated Appropriations Act of 2020 fully repealed the ACA’s “Cadillac Tax” on certain high-
cost  employer-sponsored  insurance  plans  and,  effective  in  2021,  the  annual  fee  imposed  on  certain  health  insurance
providers  based  on  market  share.  On  March  11,  2021,  Congress  enacted  the  American  Rescue  Plan  Act  of  2021,  which
included  among  its  provisions  a  sunset  of  the  ACA’s  cap  on  pharmaceutical  manufacturers’  rebate  liability  under  the
Medicaid  Drug  Rebate  Program.  Under  the  ACA,  manufacturers’  rebate  liability  was  capped  at  100%  of  the  average
manufacturer price for a covered outpatient drug. Effective January 1, 2024, manufacturers’ MDRP rebate liability will no
longer  be  capped,  potentially  resulting  in  a  manufacturer  paying  more  in  MDRP  rebates  than  it  receives  on  the  sale  of
certain covered outpatient drugs. The American Rescue Plan Act also temporarily increased premium tax credit assistance
for individuals eligible for subsidies under the ACA for 2021 and 2022 and removed the 400% federal poverty level limit
that  otherwise  applies  for  purposes  of  eligibility  to  receive  premium  tax  credits.  In  the  future,  there  may  be  additional
challenges and/or amendments to the ACA.

On  June  17,  2021,  the  U.S.  Supreme  Court  dismissed  a  legal  challenge  to  the  ACA  brought  by  several  states
arguing  that,  without  the  individual  mandate,  the  entire  ACA  was  unconstitutional.  The  Supreme  Court  dismissed  the
lawsuit without ruling on the merits of the states’ constitutionality arguments. It is unclear how future litigation and the
healthcare reform measures of the Biden administration will impact the ACA and our business.

Additionally,  there  has  been  increasing  legislative  and  enforcement  interest  in  the  United  States  with  respect  to
specialty  drug  pricing  practices.  Specifically,  several  U.S.  Congressional  inquiries  and  proposed  and  enacted  pieces  of
federal and state legislation have been designed to, among other things: bring more transparency to drug pricing; reduce the
cost  of  prescription  drugs  under  government  payor  programs;  review  the  relationship  between  pricing  and  manufacturer
patient  programs;  and  reform  government  program  reimbursement  methodologies  for  drugs.  Policymakers  have  also
indicated  that  they  will  continue  to  seek  legislative  and  administrative  measures  to  control  drug  costs.  For  example,  in
August 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA”), which implements substantial
changes  to  the  Medicare  program,  including  drug  pricing  reforms  and  the  creation  of  new  Medicare  inflation  rebates.
 Namely, the IRA imposes inflation rebates on drug manufacturers for products reimbursed under Medicare Parts B and D
if  the  prices  of  those  products  increase  faster  than  inflation;  implements  changes  to  the  Medicare  Part  D  benefit  that,
beginning in 2025, will cap  beneficiary annual out-of-pocket spending at $2,000, while imposing new discount obligations
for pharmaceutical manufacturers; and, beginning in 2026, establishes a “maximum fair price” for a fixed number of high
expenditure pharmaceutical and biological products covered under Medicare Parts B and D following a price negotiation
process  with  CMS.  CMS  has  also  taken  steps  to  implement  the  IRA,  including:  on  June  30,  2023,  issuing  guidance
detailing the requirements and parameters of the first round of price negotiations, to take place during 2023 and 2024, for
products  subject  to  the  “maximum  fair  price”  provision  that  would  become  effective  in  2026;  on  August  29,  2023,
releasing the initial list of ten drugs subject to price negotiations; on November 17, 2023, releasing guidance outlining the
methodology  for  identifying  certain  manufacturers  eligible  to  participate  in  a  phase-in  period  where  discounts  on
applicable  products  will  be  lower  than  those  required  by  the  Medicare  Part  D  Manufacturer  Discount  Program;  and  on
December  14,  2023,  releasing  a  list  of  48  Medicare  Part  B  products  that  had  an  adjusted  coinsurance  rate  based  on  the
inflationary rebate provisions of the IRA for the time period of January 1, 2024 to March 31, 2024. While it remains to be
seen  how  the  drug  pricing  provisions  imposed  by  the  IRA  will  affect  the  broader  pharmaceutical  industry,  several
pharmaceutical manufacturers and other industry stakeholders have challenged the law, including through lawsuits brought
against the U.S. Department of Health and Human Services, the Secretary of the U.S. Department of Health and Human
Services,  CMS,  and  the  CMS  Administrator  challenging  the  constitutionality  and  administrative  implementation  of  the
IRA’s drug price negotiation provisions.

There have also been administrative developments in the U.S. related to drug pricing. On February 2, 2022, the
Biden administration signaled its continued commitment to the Cancer Moonshot initiative, which was initially launched in
2016. In its announcement, the administration noted that its new goals under the initiative include addressing inequities in
order to ensure broader access to cutting-edge cancer therapeutics and investing in a robust pipeline for new treatments. In
alignment with President Biden’s Cancer Moonshot initiative, on June 27, 2023, the Center for Medicare Innovation at

27

Table of Contents

CMS  announced  a  new  model,  the  Enhancing  Oncology  Model,  that  is  designed  to  make  high-quality  cancer  care  more
affordable to both patients and Medicare. In addition, on October 14, 2022, President Biden issued an Executive Order on
Lowering Prescription Drug Costs for Americans, which instructed the Secretary of the Department of Health and Human
Services  to  consider  whether  to  select  for  testing  by  the  CMS  Innovation  Center  new  health  care  payment  and  delivery
models  that  would  lower  drug  costs  and  promote  access  to  innovative  drug  therapies  for  beneficiaries  enrolled  in  the
Medicare and Medicaid programs. On February 14, 2023, the Department of Health and Human Services issued a report in
response to the October 14, 2022, Executive Order, which, among other things, selects three potential drug affordability
and accessibility models to be tested by the CMS Innovation Center.  Specifically, the report addresses: (1) a model that
would  allow  Part  D  Sponsors  to  establish  a  “high-value  drug  list”  setting  the  maximum  out-of-pocket  costs  for  certain
common generic drugs at $2 per month per drug; (2) a Medicaid-focused model that would establish a partnership between
CMS, manufacturers, and state Medicaid agencies that would result in multi-state outcomes-based agreements for certain
cell  and  gene  therapy  drugs;  and  (3)  a  model  that  would  adjust  Medicare  Part  B  payment  amounts  for  Accelerated
Approval Program drugs to advance the developments of novel treatments.  It remains to be seen how these drug pricing
initiatives will affect the broader pharmaceutical industry.

Individual  states  in  the  United  States  have  also  increasingly  passed  legislation  and  implemented  regulations
designed  to  control  pharmaceutical  and  biological  product  pricing,  including  price  or  patient  reimbursement  limitations,
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
authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products
and which suppliers will be included in their prescription drug and other healthcare programs.

Moreover, in May 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn and Matthew Bellina Right to Try
Act of 2017, or the Right to Try Act, was signed into law. The law, among other things, 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  obtaining  FDA  permission  under  the  FDA  expanded  access  program.  There  is  no
obligation for a pharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right
to Try Act.

Human Capital Resources

As  of  December  31,  2023,  we  had  82  full-time  employees.  Based  on  the  announced  restructuring  of  our
operations,  we  plan  to  have  51  full-time  employees  as  of  March  21,  2024.  This  reduction  will  primarily  occur  in  our
manufacturing  operations,  but  also  will  impact  areas  of  discovery,  research,  development,  clinical,  and  general
administrative.

Our success depends upon our ability to retain and attract highly qualified management and technical personnel.
We  consider  the  intellectual  capital  of  our  employees  to  be  an  essential  driver  of  our  business  and  key  to  our  future
prospects. Recruiting and retaining qualified employees, consultants and advisors for our business, including scientific and
technical personnel, is critical to our success. Competition for skilled personnel is intense and the turnover rate can be high
in our industry and we continue to monitor our turnover rate and the overall supply of skilled labor in the market. We also
monitor our compensation programs closely and provide what we consider to be a competitive mix of compensation and
benefits  for  our  employees,  as  well  as  participation  in  our  equity  programs.  None  of  our  employees  are  subject  to  a
collective bargaining agreement or represented by a trade or labor union.

Corporate Information and Access to SEC Reports

We were incorporated in Delaware in September 2015. Our primary executive offices are located at 9000 Virginia
Manor Road, Suite 200, Beltsville, Maryland 20705 and our telephone number is (240) 399-4900. We make available, free
of charge, on our website at www.nextcure.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports  on  Form  8-K  and  any  amendments  to  such  reports  as  soon  as  reasonably  practicable  after  such  reports  are
electronically  filed  with,  or  furnished  to,  the  SEC.  The  contents  of  our  website  are  not  incorporated  into  this  Annual
Report.

28

Table of Contents

Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described
below together with all of the other information in this Annual Report, including our financial statements and the related
notes and the information described in the section entitled “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” before deciding whether to invest in our common stock. If any of the events described below
actually occurs, our business, results of operations, financial conditions, cash flows or prospects could be harmed. If that
were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment.
Additional  risks  and  uncertainties  not  presently  known  to  us  or  that  we  currently  deem  immaterial  may  also  impair  our
business operations.

Risks Related to Our Financial Position and Need for Additional Capital

We have a limited operating history and no products approved for commercial sale. We have a history of significant
losses, expect to continue to incur significant losses for the foreseeable future and may never achieve or maintain
profitability.

We are a clinical-stage biopharmaceutical company with a limited operating history. Since our founding in 2015,
we have incurred significant net losses. Our net losses were $62.7 million and $74.7 million for the years ended December
31,  2023  and  2022,  respectively.  As  of  December  31,  2023,  we  had  an  accumulated  deficit  of  $324.5  million.  We  have
funded our operations to date primarily with proceeds from public offerings of our common stock, private placements of
our  preferred  stock  and  upfront  fees  received  under  the  Lilly  Agreement,  which  was  terminated  effective  March  2020.
Since commencing operations, we have devoted substantially all of our efforts and financial resources to organizing and
staffing our company, identifying business development opportunities, raising capital, securing intellectual property rights
related  to  our  product  candidates,  building  and  optimizing  our  manufacturing  capabilities  and  conducting  discovery,
research and development activities for our product candidates.

We expect that it will be several years, if ever, before we have a commercialized product. We expect to continue to
incur  significant  expenses  and  operating  losses  for  the  foreseeable  future.  The  net  losses  we  incur  may  fluctuate
significantly from year to year. We anticipate that our expenses will increase substantially if, and as, we:

● continue  to  advance  the  preclinical  and  clinical  development  of  our  existing  product  candidates  and  our

research programs;

● seek regulatory approvals for any product candidates that successfully complete clinical trials;

● source cGMP manufacture of drug supply necessary for any future, including late stage, clinical trials;

● hire additional clinical, quality control, regulatory, scientific and administrative personnel;

● expand our operational, financial and management systems and increase personnel, including to support our

clinical development, manufacturing and commercialization efforts and our operations as a public company;

● maintain, expand and protect our intellectual property portfolio;

● establish a marketing, sales, distribution and medical affairs infrastructure to commercialize any products for
which we may obtain marketing approval and commercialize, whether on our own or jointly with a partner;

● acquire or in-license other technologies or engage in strategic partnerships; and

● incur additional legal, accounting or other expenses in operating our business.

To become and remain profitable, we, whether on our own or jointly with any potential future collaborator, must
develop and eventually commercialize products with significant market potential. We will need to be successful in a range
of  challenging  activities,  including  completing  preclinical  studies  and  clinical  trials,  obtaining  marketing  approval  for
product candidates, manufacturing, marketing and selling products and satisfying any post-marketing requirements. We

29

Table of Contents

may never succeed in any or all of these activities and, even if we do, we may never generate revenue that is significant or
large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability
on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and
could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue
our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

We have never generated revenue from product sales and may never be profitable.

Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with
collaboration  partners,  to  successfully  complete  the  development  of,  and  obtain  the  regulatory  approvals  necessary  to
commercialize,  our  product  candidates.  We  do  not  anticipate  generating  revenue  from  product  sales  for  the  next  several
years,  if  ever.  Our  ability  to  generate  future  revenue  from  product  sales  depends  heavily  on  our,  or  our  potential  future
collaborators’, success in:

● completing preclinical studies and clinical trials of our product candidates, including our ongoing Phase 1/2

clinical trial for NC410;

● seeking and obtaining marketing approvals for any product candidates that we or our collaborators develop;

● receiving acceptance of INDs for future product candidates;

● identifying and developing new product candidates;

● launching and commercializing product candidates for which we obtain marketing approval by establishing a
marketing,  sales,  distribution  and  medical  affairs  infrastructure  or,  alternatively,  collaborating  with  a
commercialization partner;

● achieving coverage and adequate reimbursement by hospitals and third-party payors, including governmental
authorities,  such  as  Medicare  and  Medicaid,  private  insurers  and  managed  care  organizations,  for  product
candidates, if approved, that we or our collaborators develop;

● manufacturing cGMP supply of our product candidates for clinical trials and, if approved, commercial sales;

● obtaining market acceptance of product candidates, if approved, that we develop as viable treatment options;

● addressing any competing technological and market developments;

● negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter

and performing our obligations under such arrangements;

● maintaining,  protecting  and  expanding  our  portfolio  of  intellectual  property  rights,  including  patents,  trade

secrets and know-how;

● defending against third-party interference or infringement claims, if any; and

● attracting, hiring and retaining qualified personnel.

We anticipate incurring significant costs associated with commercializing any product candidate that is approved
for commercial sale. Our expenses could increase beyond expectations if we are required by the FDA or other regulatory
agencies to perform clinical trials or studies in addition to those that we currently anticipate. Even if we are able to generate
revenue from the sale of any approved products, we may not become profitable and may need to obtain additional funding
to continue operations.

30

Table of Contents

We will require substantial additional financing to pursue our business objectives, which may not be available on
acceptable terms, or at all. A failure to obtain this necessary capital when needed could force us to delay, limit, reduce
or terminate our product development, commercialization efforts or other operations.

Our  operations  have  consumed  substantial  amounts  of  cash  since  inception.  We  expect  to  continue  to  spend
substantial amounts to continue the preclinical and clinical development of our current and future programs. If we receive
marketing  approval  for  any  product  candidates,  including  NC410,  or  LNCB74  we  will  require  significant  additional
amounts of cash in order to launch and commercialize such product candidates. In addition, other unanticipated costs may
arise.  Because  the  designs  and  outcomes  of  our  planned  and  anticipated  clinical  trials  are  highly  uncertain,  we  cannot
reasonably  estimate  the  actual  amounts  necessary  to  successfully  complete  the  development  of  and  commercialize  any
product candidate we develop.

Our future capital requirements depend on many factors, including:

● the scope, progress, timing, results and costs of researching and developing NC410,  LNCB74 and our other

product candidates,  and of conducting preclinical studies and clinical trials;

● the timing of, and the costs involved in, obtaining marketing approval for NC410, LNCB74 and any future

product candidates we develop, if clinical trials are successful;

● the  costs  of  manufacturing  NC410,  LNCB74  and  any  future  product  candidates  for  preclinical  studies  and

clinical trials and in preparation for marketing approval and commercialization;

● the  costs  of  commercialization  activities,  including  marketing,  sales  and  distribution  costs,  for  NC410,
LNCB74 and any future product candidates we develop, whether alone or with a collaborator, if any of these
product candidates are approved for sale;

● our ability to establish and maintain additional strategic collaborations, licensing or other arrangements on

favorable terms, if at all;

● the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent

claims, including litigation costs and the outcome of any such litigation;

● our current collaboration and license agreements remaining in effect and our achievement of milestones and
the timing and amount of milestone payments we are required to make, or that we may be eligible to receive,
under those agreements;

● the timing, receipt and amount of sales of, or royalties on, our future products, if any; and

● the emergence of competing therapies and other developments in the oncology market.

Unless and until we generate sufficient product and royalty revenue to finance our cash requirements, we expect
to finance our future cash needs through a combination of public or private equity offerings, debt financings, marketing and
distribution arrangements, other collaborations, strategic alliances and licensing arrangements. As of December 31, 2023,
we had $108.3 million in cash, cash equivalents and marketable securities. Based on our research and development plans,
we expect that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses
and capital expenditure requirements into the second half of 2026. This estimate is based on assumptions that may prove to
be wrong, and we could use our available capital resources sooner than we expect. Changes may occur within or beyond
our control that would cause us to consume our available capital before that time, including changes in and progress of our
development activities, acquisitions of additional product candidates and changes in regulation.

If  we  raise  additional  capital  through  marketing,  sales  and  distribution  arrangements  or  other  collaborations,
strategic  alliances  or  licensing  arrangements  with  third  parties,  we  may  have  to  relinquish  certain  valuable  rights  to  our
product candidates, future revenue streams, research programs or technologies or grant licenses on terms that may not be
favorable to us. If we raise additional capital through public or private equity offerings, the terms of these securities may
include liquidation or other preferences that adversely affect our stockholders’ rights. Further, to the extent that we raise

31

Table of Contents

additional  capital  through  the  sale  of  common  stock  or  securities  convertible  or  exchangeable  into  common  stock,  your
ownership  interest  will  be  diluted.  If  we  raise  additional  capital  through  debt  financing,  we  would  be  subject  to  fixed
payment  obligations  and  may  be  subject  to  covenants  limiting  or  restricting  our  ability  to  take  specific  actions,  such  as
incurring additional debt, making capital expenditures or declaring dividends.

Adequate additional financing may not be available to us on acceptable terms, or at all. If we are unable to obtain
additional financing on favorable terms when needed, we may be required to delay, limit, reduce or terminate preclinical
studies, clinical trials, or other research and development activities or one or more of our development programs.

Risks Related to the Discovery and Development of Our Product Candidates

As an organization, we have limited experience designing and implementing clinical trials, and we have never
conducted pivotal clinical trials. Failure to adequately design a trial, or incorrect assumptions about the design of the
trial, could adversely affect the ability to initiate the trial, enroll patients, complete the trial, or obtain regulatory
approval on the basis of the trial results, as well as lead to increased or unexpected costs and in delayed timelines.

The design and implementation of clinical trials is a complex process. We have limited experience designing and
implementing  clinical  trials,  and  we  may  not  successfully  or  cost-effectively  design  and  implement  clinical  trials  that
achieve our desired clinical endpoints efficiently, or at all. A clinical trial that is not well designed may delay or prevent
initiation  or  completion  of  the  trial,  can  lead  to  increased  difficulty  in  enrolling  patients,  may  make  it  more  difficult  to
obtain  regulatory  approval  for  the  product  candidate  on  the  basis  of  the  study  results,  or,  even  if  a  product  candidate  is
approved, could make it more difficult to commercialize the product successfully or obtain reimbursement from third-party
payors. Additionally, a trial that is not well-designed could be inefficient or more expensive than it otherwise would have
been, or we may incorrectly estimate the costs to implement the clinical trial, which could lead to a shortfall in funding. If
we select an incorrect dose or dose administration schedule, that could negatively impact the results of the trial, including if
we  select  doses  that  are  too  low  to  be  effective  or  administer  doses  too  infrequently  based  on  the  half-life  of  the  active
ingredient. We also expect to continue to rely on third parties to conduct our pivotal clinical trials (see “Risks Related to
Reliance  on  Third  Parties”).  We  rely,  or  will  rely,  on  third  parties  to  help  conduct  our  ongoing  and  planned  preclinical
studies and clinical trials for NC410, NC525, LNCB74 and any future product candidates we develop. If these third parties
do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we
may  not  be  able  to  obtain  marketing  approval  for  or  commercialize  NC410,  NC525,  LNCB74  and  any  future  product
candidates we develop, and our business could be materially harmed. Consequently, we may be unable to successfully and
efficiently execute and complete clinical trials that are required for BLA submission and FDA approval of NC410, NC525,
LNCB74 or future product candidates. We may require more time and incur greater costs than our competitors and may not
succeed in obtaining regulatory approvals of product candidates that we develop.

Our business is dependent on our ability to advance our current and future product candidates through clinical trials,
obtain marketing approval and ultimately commercialize them.

We are early in our development efforts. We initiated our first clinical trial for NC410 in June 2020, and plan to
file our LNCB74 IND by year end 2024. Our ability to generate product revenues, which we do not expect will occur for
several  years,  if  ever,  will  depend  heavily  on  the  successful  development  and  eventual  commercialization  of  NC410,
LNCB74 and any future product candidates we develop, which may never occur. Our current product candidates and any
future product candidates we develop will require additional preclinical or clinical development, management of clinical,
preclinical and manufacturing activities, marketing approval in the United States and other jurisdictions, demonstration of
effectiveness  to  pricing  and  reimbursement  authorities,  sufficient  cGMP  manufacturing  supply  for  both  preclinical  and
clinical  development  and  commercial  production,  building  of  a  commercial  organization  and  substantial  investment  and
significant marketing efforts before we generate any revenues from product sales.

The clinical and commercial success of our current and future product candidates will depend on several factors,

including the following:

● timely and successful completion of preclinical studies and our clinical trials;

● sufficiency  of  our  financial  and  other  resources  to  complete  the  necessary  preclinical  studies  and  clinical

trials;

32

Table of Contents

● acceptance of INDs for any future product candidates;

● successful enrollment in and completion of clinical trials;

● successful  data  from  our  clinical  program  that  supports  an  acceptable  risk-benefit  profile  of  our  product

candidates in the intended patient populations;

● our ability to consistently manufacture our product candidates on a timely basis or to establish agreements

with third-party manufacturers, if needed;

● whether  we  are  required  by  the  FDA  or  comparable  foreign  regulatory  authorities  to  conduct  additional
clinical  trials  or  other  studies  beyond  those  planned  or  anticipated  to  support  approval  of  our  product
candidates;

● acceptance of our proposed indications and the primary endpoint assessments evaluated in the clinical trials

of our product candidates by the FDA and comparable foreign regulatory authorities;

● receipt and maintenance of timely marketing approvals from applicable regulatory authorities;

● successfully launching commercial sales of our product candidates, if approved;

● the  prevalence,  duration  and  severity  of  potential  side  effects  or  other  safety  issues  experienced  with  our

product candidates, if approved;

● entry into collaborations to further the development of our product candidates;

● obtaining  and  maintaining  patent  and  trade  secret  protection  or  regulatory  exclusivity  for  our  product

candidates;

● acceptance  of  the  benefits  and  uses  of  our  product  candidates,  if  approved,  by  patients,  the  medical

community and third-party payors;

● maintaining  a  continued  acceptable  safety,  tolerability  and  efficacy  profile  of  the  product  candidates

following approval;

● our  compliance  with  any  post-approval  requirements  imposed  on  our  products,  such  as  post-marketing
studies, a REMS or additional requirements that might limit the promotion, advertising, distribution or sales
of our products or make the products cost-prohibitive;

● competing effectively with other therapies;

● obtaining and maintaining healthcare coverage and adequate reimbursement from third-party payors;

● our ability to identify targets and therapies, through our collaborative relationships, or otherwise; and

● enforcing and defending intellectual property rights and claims.

These  factors,  many  of  which  are  beyond  our  control,  could  cause  us  to  experience  significant  delays  or  an
inability  to  obtain  regulatory  approvals  or  commercialize  our  current  or  future  product  candidates,  and  could  otherwise
materially harm our business. Successful completion of preclinical studies and clinical trials does not mean that NC410,
LNCB74 or any future product candidates we develop will receive regulatory approval. Even if regulatory approvals are
obtained, we could experience significant delays or an inability to successfully commercialize our current and any future
product candidates we develop, which would materially harm our business. If we are not able to generate sufficient revenue
through  the  sale  of  any  current  or  future  product  candidate,  we  may  not  be  able  to  continue  our  business  operations  or
achieve profitability.

33

Table of Contents

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time-consuming and
inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our
business will be materially harmed.

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically
takes  many  years  following  the  commencement  of  clinical  trials  and  depends  upon  numerous  factors,  including  the
substantial  discretion  of  the  regulatory  authorities.  In  addition,  approval  policies,  regulations  or  the  type  and  amount  of
clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and
may vary among jurisdictions. We have not obtained regulatory approval for any product candidate. Neither we nor any
future collaborator is permitted to market any biological product in the United States until we or the future collaborator
receives regulatory approval of a BLA from the FDA. It is possible that none of our current or future product candidates
will ever obtain regulatory approval from the FDA or comparable foreign regulatory authorities.

Our current and future product candidates could fail to receive regulatory approval for many reasons, including

the following:

● the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our

clinical trials;

● we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities

that a product candidate is safe, pure and potent for its proposed indication;

● the  results  of  clinical  trials  may  not  meet  the  level  of  statistical  significance  required  by  the  FDA  or

comparable foreign regulatory authorities for approval;

● we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety

risks;

● the  FDA  or  comparable  foreign  regulatory  authorities  may  disagree  with  our  interpretation  of  data  from

clinical trials or preclinical studies;

● the  data  collected  from  clinical  trials  of  our  product  candidates  may  not  be  sufficient  to  support  the
submission of a BLA to the FDA or regulatory submissions to comparable regulatory authorities to obtain
regulatory approval in such jurisdiction; and

● the  FDA  or  comparable  foreign  regulatory  authorities  may  find  deficiencies  with  or  fail  to  approve  our
manufacturing processes or facility or the manufacturing processes or facilities of third-party manufacturers
with which we contract for clinical and commercial supplies.

This lengthy approval process as well as the unpredictability of clinical trial results may result in our failing to
obtain  regulatory  approval  to  market  any  product  candidate  we  develop,  which  would  significantly  harm  our  business,
results of operations and prospects. The FDA and other comparable foreign authorities have substantial discretion in the
approval process and in determining when or whether regulatory approval will be granted for any product candidate that
we  develop.  Even  if  we  believe  the  data  collected  from  current  or  future  clinical  trials  of  our  product  candidates  are
promising, such data may not be sufficient to support approval by the FDA or any other regulatory authority.

In addition, even if we were to obtain approval, the FDA may approve any of our product candidates for fewer or
more  limited  indications,  or  a  more  limited  patient  population,  than  we  request,  may  grant  approval  contingent  on  the
performance  of  costly  clinical  trials,  development  of  an  in  vitro  companion  diagnostic,  or  other  post-marketing
requirements,  or  may  approve  a  product  candidate  with  a  label  that  does  not  include  the  labeling  claims  we  believe  are
necessary or desirable for the successful commercialization of such product candidates.

The  FDA  or  comparable  foreign  regulatory  authorities  may  change  their  policies,  promulgate  additional
regulations,  revise  existing  regulations  or  take  other  actions  that  may  prevent  or  delay  approval  of  our  future  products
under development on a timely basis. Such policy or regulatory changes could impose additional requirements upon us that
could delay our ability to obtain approvals, increase the costs of compliance or restrict our ability to maintain any

34

Table of Contents

marketing  authorizations  we  may  have  obtained.  Any  of  the  foregoing  scenarios  could  materially  harm  the  commercial
prospects for our product candidates.

Clinical development involves a lengthy and expensive process with uncertain outcomes. We may incur additional costs
and experience delays in developing and commercializing or be unable to develop or commercialize our current and
future product candidates.

To obtain the requisite regulatory approvals to commercialize any of our product candidates, we must demonstrate
through  extensive  preclinical  studies  and  clinical  trials  that  our  product  candidates  are  safe,  pure  and  potent  in  humans.
Clinical testing is expensive and can take many years to complete, and its outcome is highly uncertain. Failure can occur at
any time during the clinical trial process, and our future clinical trial results may not be successful. We may experience
delays  in  completing  our  clinical  trials  or  preclinical  studies  and  initiating  or  completing  our  planned  clinical  trials  and
development  efforts.  Additionally,  we  cannot  be  certain  the  ongoing  and  planned  preclinical  studies  or  clinical  trials  for
NC410, LNCB74 or any future product candidates will begin on time, not require redesign, enroll an adequate number of
subjects  on  time  or  be  completed  on  schedule,  if  at  all.  For  example,  we  announced  in  December  2023  that  based  on
current efficacy data and prioritization, we had decided to discontinue our monotherapy Phase 2 clinical trial for NC762.
We  may  also  experience  numerous  unforeseen  events  during  our  clinical  trials  that  could  delay  or  prevent  our  ability  to
receive marketing approval or commercialize the product candidates we develop, including:

● results from preclinical studies or clinical trials may not be predictive of results from later clinical trials of

any product candidate;

● the FDA or other regulatory authorities, IRBs or independent ethics committees may not authorize us or our

investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

● the  FDA  or  other  regulatory  authorities  may  require  us  to  submit  additional  data  such  as  long-term

toxicology studies, or impose other requirements on us, before permitting us to initiate a clinical trial;

● we may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective trial
sites  and  prospective  contract  research  organizations,  or  “CROs”,  as  the  terms  of  these  agreements  can  be
subject to extensive negotiation and vary significantly among different CROs and trial sites;

● clinical trials of any product candidate may fail to show safety, purity or potency, or may produce negative or
inconclusive  results,  which  may  cause  us  to  decide,  or  regulators  to  require  us,  to  conduct  additional
nonclinical  studies  or  clinical  trials  or  which  may  cause  us  to  decide  to  abandon  product  candidate
development programs;

● the number of patients required for clinical trials may be larger than we anticipate or we may have difficulty
in recruiting and enrolling patients to participate in clinical trials, including as a result of the size and nature
of  the  patient  population,  the  proximity  of  patients  to  clinical  trial  sites,  eligibility  criteria  for  the  clinical
trial, the nature of the clinical trial protocol, the availability of approved effective treatments for the relevant
disease, competition from other clinical trial programs for similar indications and clinical trial subjects and
the impact of public health emergencies, such as the COVID-19 pandemic;

● it may be difficult to enroll a sufficient number of patients, enrollment in these clinical trials may be slower
than we anticipate, or participants may drop out of these clinical trials or may fail to return for post-treatment
follow-up at a higher rate than we anticipate;

● our  CROs  and  other  third-party  contractors  may  fail  to  comply  with  regulatory  requirements  or  meet  their
contractual obligations to us in a timely manner, or at all, or may deviate from the clinical trial protocol or
drop out of the trial, which may require that we add new clinical trial sites or investigators;

● we may elect to, or regulators, IRBs or ethics committees may require that we or our investigators, suspend
or  terminate  clinical  research  or  trials  for  various  reasons,  including  noncompliance  with  regulatory
requirements or a finding that participants are being exposed to unacceptable health risks;

35

Table of Contents

● any  of  our  product  candidates  could  cause  undesirable  side  effects  that  could  result  in  significant  negative

consequences, including the inability to enter clinical development or receive regulatory approval;

● the cost of preclinical or nonclinical testing and studies and clinical trials of any product candidates may be

greater than we anticipate;

● we may face hurdles in addressing subject safety concerns that arise during the course of a trial, causing us or
our investigators, regulators, IRBs or ethics committees to suspend or terminate trials, or reports may arise
from nonclinical or clinical testing of other cancer therapies that raise safety or efficacy concerns about our
product candidates;

● the supply, quality or timeliness of delivery of materials for product candidates we develop or other materials

necessary to conduct clinical trials may be insufficient or inadequate; and

● we, or third parties on whom we are dependent, may suffer business interruptions resulting from geo-political
actions, including war and terrorism, or natural disasters and public health emergencies, such as the COVID-
19 pandemic.

We may encounter delays if a clinical trial is suspended or terminated by us, the IRBs of the institutions in which
such trials are being conducted or ethics committees, or the DSMB recommends suspension or termination for such trial or
by the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number
of  factors,  including  failure  to  conduct  the  clinical  trial  in  accordance  with  regulatory  requirements  or  our  clinical
protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the
imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a
product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue
the clinical trial. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials
may  also  ultimately  lead  to  the  denial  of  marketing  approval  of  our  product  candidates.  The  FDA  or  other  regulatory
authorities may disagree with our clinical trial design and our interpretation of data from clinical trials or may change the
requirements for approval even after they have reviewed and commented on the design for our clinical trials. In addition,
factors  outside  our  control,  such  as  government  shutdowns,  natural  disasters  and  public  health  emergencies  such  as  the
COVID-19  pandemic,  could  disrupt  business  at  the  FDA  or  other  regulatory  authorities,  which  could  result  in  delays  of
reviews, approvals and communications with regulatory authorities related to our clinical trials and product candidates.

Principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time
and  may  receive  cash  or  equity  compensation  in  connection  with  such  services.  If  these  relationships  and  any  related
compensation  result  in  perceived  or  actual  conflicts  of  interest,  or  a  regulatory  authority  concludes  that  the  financial
relationship may have affected the interpretation of the trial, the integrity of the data generated at the applicable clinical
trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or
rejection  of  the  marketing  application  we  submit.  Any  such  delay  or  rejection  could  prevent  or  delay  us  from
commercializing our current or future product candidates.

If  we  experience  delays  in  the  completion,  or  termination,  of  any  clinical  trial  of  our  product  candidates,  the
commercial prospects of our product candidates will be harmed and our ability to generate product revenues from any of
these product candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs,
slow  down  the  development  and  approval  process  for  our  product  candidates  and  jeopardize  our  ability  to  commence
product sales and generate revenues. Significant clinical trial delays could also allow our competitors to bring products to
market  before  we  do  or  shorten  any  periods  during  which  we  have  the  exclusive  right  to  commercialize  our  product
candidates. Any such events would impair our ability to successfully commercialize our product candidates and may harm
our business and results of operations.

Any  of  these  occurrences  may  significantly  harm  our  business,  financial  condition  and  prospects.  In  addition,
many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately
lead to the denial of regulatory approval of our product candidates or result in the development of our product candidates
stopping early.

36

Table of Contents

Preclinical development is uncertain. Our preclinical programs may experience delays or may never advance to clinical
trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a
timely basis or at all.

With the exception of NC410, NC525 and NC318, all of our product candidates are still in the preclinical stage,
and the risk of failure for such product candidates is high. In order to obtain FDA approval to market a new biologic we
must demonstrate proof of safety, purity and potency, including efficacy, in humans. To meet these requirements, we will
have  to  conduct  adequate  and  well-controlled  clinical  trials.  Before  we  can  commence  clinical  trials  for  a  product
candidate, we must complete extensive preclinical testing and studies that support our planned clinical trials in humans. We
cannot be certain of the timely completion or outcome of our preclinical testing and studies and cannot predict if the FDA
will accept our proposed clinical programs or if the outcome of our preclinical testing and studies will ultimately support
the further development of our current or future product candidates. As a result, we cannot be sure that we will be able to
submit INDs or similar applications for our preclinical programs on the timelines we expect, if at all, and we cannot be sure
that submission of INDs or similar applications will result in the FDA or other regulatory authorities allowing clinical trials
to begin.

Conducting  preclinical  testing  is  a  lengthy,  time-consuming  and  expensive  process.  The  length  of  time  of  such
testing may vary substantially according to the type, complexity and novelty of the program, and often can be several years
or  more  per  program.  Delays  associated  with  programs  for  which  we  are  conducting  preclinical  testing  and  studies  may
cause us to incur additional operating expenses. Moreover, we may be affected by delays associated with the preclinical
testing and studies of certain programs that are the responsibility of our potential future collaborators over which we have
no control. The commencement and rate of completion of preclinical studies and clinical trials for a product candidate may
be delayed by many factors, including but not limited to:

● an  inability  to  generate  sufficient  preclinical  or  other  in  vivo  or  in  vitro  data  to  support  the  initiation  of

clinical studies;

● delays in reaching a consensus with regulatory agencies on study design; and

● the FDA not permitting the reliance on preclinical or other data from published scientific literature.

Interim and preliminary results from our clinical trials that we announce or publish from time to time may change as
more patient data become available and are subject to audit, validation and verification procedures that could result in
material changes in the final data.

From time to time, we may publish interim data, including interim top-line results or preliminary results from our
clinical  trials.  Interim  data  and  results  from  our  clinical  trials  are  subject  to  the  risk  that  one  or  more  of  the  clinical
outcomes  may  materially  change  as  patient  enrollment  continues  and  more  patient  data  become  available.  For  example,
notwithstanding the durable responses initially observed in our ongoing Phase 1/2 clinical trial of NC318 in NSCLC, we
announced in November 2022 that based upon then-current efficacy data we decided to discontinue our Phase 2 clinical
trial  for  NC318  monotherapy.  Preliminary  or  top-line  results  also  remain  subject  to  audit,  validation  and  verification
procedures that may result in the final data being materially different from the interim and preliminary data we previously
published.  As  a  result,  interim  and  preliminary  data  may  not  be  predictive  of  final  results  and  should  be  viewed  with
caution until the final data are available. Differences between preliminary or interim data and final data could significantly
harm our business prospects and may cause the trading price of our common stock to fluctuate significantly.

Initial positive trial results and results from preclinical studies and early-stage clinical trials may not be predictive or
indicative of results when the trial is completed or in later stage trials.

The  results  of  preclinical  studies  may  not  be  predictive  of  the  results  of  clinical  trials.  Preclinical  studies  and
early-stage  clinical  trials  are  primarily  designed  to  test  safety,  to  study  pharmacokinetics  and  pharmacodynamics  and  to
understand the side effects of product candidates at various doses and schedules, and the results of any early-stage clinical
trials  may  not  be  predictive  of  the  results  of  later-stage,  large-scale  efficacy  clinical  trials.  In  addition,  initial  success  in
clinical trials may not be indicative of results obtained when such trials are completed. There can be no assurance that any
of our current or future clinical trials will ultimately be successful or support further clinical development of any of our
product  candidates.  There  is  a  high  failure  rate  for  drugs  and  biologics  proceeding  through  clinical  trials.  A  number  of
companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development

37

Table of Contents

even after achieving promising results in earlier studies, and any such setbacks in our clinical development could have a
material adverse effect on our business and operating results.

Even  if  our  clinical  trials  are  completed,  the  results  may  not  be  sufficient  to  obtain  regulatory  approval  for  our
product candidates. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may
delay, limit or prevent regulatory approval. In addition, the results of our preclinical studies may not be predictive of the
results  of  outcomes  in  human  clinical  trials.  For  example,  our  current  or  future  product  candidates  may  demonstrate
different chemical, biological and pharmacological properties in patients than they do in laboratory studies or may interact
with human biological systems in unforeseen or harmful ways. Product candidates in later stages of clinical trials may fail
to show desired pharmacological properties or produce the necessary safety and efficacy results despite having progressed
through preclinical studies and initial clinical trials. Even if we are able to initiate and complete clinical trials, the results
may not be sufficient to obtain regulatory approval for our product candidates. In addition, we may experience regulatory
delays  or  rejections  as  a  result  of  many  factors,  including  changes  in  regulatory  policy  during  the  period  of  our  product
candidate  development.  Any  such  delays  could  negatively  impact  our  business,  financial  condition,  results  of  operations
and prospects.

Because the numbers of subjects in our Phase 1/2 and Phase 1 clinical trials are small, the results from each of these
trials, once completed, may be less reliable than results achieved in larger clinical trials.

A  study  design  that  is  considered  appropriate  includes  a  sufficiently  large  sample  size  with  appropriate  statistical
power,  as  well  as  proper  control  of  bias,  to  allow  a  meaningful  interpretation  of  the  results.  The  preliminary  results  of
studies  with  smaller  sample  sizes,  such  as  our  Phase  1/2  clinical  trial  of  NC410  Combo,  can  be  disproportionately
influenced by the impact the treatment had on a few individuals, which limits the ability to generalize the results across a
broader community, thus making the study results less reliable than studies with a larger number of subjects and making it
difficult  to  predict  final  results  from  preliminary  results.  As  a  result,  there  may  be  less  certainty  that  the  respective
investigational drug product would achieve a statistically significant effect in any future clinical trials. If we conduct any
future clinical trials of NC410 Combo, or LNCB74 we may not achieve a statistically significant result or the same level of
statistical  significance  seen,  if  any,  in  our  Phase  1/2  clinical  trial.  Similarly,  if  we  conduct  a  clinical  trial  of  any  other
product  candidate  we  develop  with  a  small  sample  size,  the  results  of  any  such  trial  may  be  less  reliable  than  results
achieved in larger clinical trials and may provide less certainty of achieving statistically significant effects in any future
clinical trials.

Our approach to the discovery and development of product candidates using our FIND platform is unproven and may
not result in marketable products.

The success of our business depends in part upon our ability to identify targets based on our proprietary FIND
platform  and  to  develop  and  commercialize  medicines.  Our  approach  to  the  discovery  of  targets  and  development  of
products using the FIND platform is novel. We have not yet initiated or completed a clinical trial of any product candidate
developed for a target identified from the FIND platform. The platform may fail to accurately identify targets that modulate
the immune system and are appropriate for therapies. Even if we are able to identify targets from the FIND platform and to
develop corresponding product candidates, we cannot assure that such product candidates will achieve marketing approval
to safely and effectively treat cancer or other disease states.

If  we  uncover  any  previously  unknown  risks  related  to  our  FIND  platform,  or  if  we  experience  unanticipated
problems or delays in developing our FIND product candidates, we may be unable to achieve our strategy of building an
oncology pipeline of novel targets for new therapies focused on non-responders.

Our current or future product candidates may cause undesirable side effects or have other properties when used alone
or in combination with other approved products or investigational new drugs that could halt their clinical development,
delay or prevent their regulatory approval, limit their commercial potential or result in significant negative
consequences.

Before  obtaining  regulatory  approvals  for  the  commercial  sale  of  our  product  candidates,  we  must  demonstrate
through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are safe, pure and
potent for use in each target indication, and failures can occur at any stage of testing. As with most biologics, use of our
current or future product candidates could be associated with side effects or adverse events which can vary in severity

38

Table of Contents

from minor reactions to death and in frequency from infrequent to prevalent. There have been serious adverse side effects
reported in response to immunotherapies in oncology.

Possible adverse side effects that could occur with treatment with therapies include an immunologic reaction early
after administration that, while not necessarily adverse to the patient’s health, could substantially limit the effectiveness of
the  treatment.  In  addition  to  any  potential  side  effects  caused  by  the  product  or  product  candidate,  the  administration
process or related procedures also can cause adverse side effects. If unacceptable adverse events occur, our clinical trials or
any future marketing authorization could be suspended or terminated.

If unacceptable side effects arise in the development of our product candidates, the DSMB may recommend or,
we,  the  FDA,  or  the  IRBs  at  the  institutions  in  which  our  studies  are  conducted  could  suspend  or  terminate  our  clinical
trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of our
product candidates for any or all targeted indications. Treatment-related side effects could also affect patient recruitment or
the  ability  of  enrolled  patients  to  complete  any  of  our  clinical  trials  or  result  in  potential  product  liability  claims.  In
addition,  these  side  effects  may  not  be  appropriately  recognized  or  managed  by  the  treating  medical  staff.  We  expect  to
have to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials and
upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential
side effects of our product candidates could result in patient injury or death. Any of these occurrences may significantly
harm our business, financial condition and prospects.

Although our current and future product candidates have undergone and will undergo safety testing to the extent
possible and, where applicable, under such conditions discussed with regulatory authorities, not all adverse effects of drugs
can be predicted or anticipated. Our current and future product candidates could lead to serious side effects that we only
discover  in  clinical  trials  or  during  commercial  marketing.  Unforeseen  side  effects  could  arise  either  during  clinical
development or after our product candidates have been approved by regulatory authorities and the approved product has
been marketed, resulting in the exposure of additional patients. So far, we have not demonstrated that NC410, LNCB74 or
any other product candidate is safe in humans, and we cannot predict if ongoing or future clinical trials will do so. If any of
our current or future product candidates fail to demonstrate safety and efficacy in clinical trials or do not gain marketing
approval, we will not be able to generate revenue and our business will be harmed.

In  addition,  we  are  ourself  studying  NC410  in  combination  with  other  therapies,  supporting  Yale’s  study  of
NC318 in combination with other therapies, and may develop LNCB74 and future product candidates in combination with
other therapies, which exposes us to additional risks relating to undesirable side effects or other properties. For example,
the other therapies may lead to toxicities that are improperly attributed to our product candidates or the combination of our
product candidates with other therapies may result in toxicities that the product candidate or other therapy does not produce
when used alone. The other therapies we are using in combination may be removed from the market, or we may not be able
to secure adequate quantities of such materials for which we have no guaranteed supply contract, and thus be unavailable
for testing or commercial use with any of our approved products. The other therapies we may use in combination with our
product candidates may also be supplanted in the market by newer, safer or more efficacious products or combinations of
products.

Even if we successfully advance one of our product candidates through clinical trials, such trials will likely only
include a limited number of subjects and limited duration of exposure to our product candidates. As a result, we cannot be
assured that adverse effects of our product candidates will not be uncovered when a significantly larger number of patients
are  exposed  to  the  product  candidate.  Further,  any  clinical  trial  may  not  be  sufficient  to  determine  the  effect  and  safety
consequences of taking our product candidates over a multi-year period.

If  any  of  our  product  candidates  receives  marketing  approval,  and  we  or  others  later  identify  undesirable  side

effects caused by such products, a number of potentially significant negative consequences could result, including:

● regulatory authorities may withdraw their approval of the product;

● we may be required to recall a product or change the way such product is administered to patients;

● additional  restrictions  may  be  imposed  on  the  marketing  of  the  particular  product  or  the  manufacturing

processes for the product or any component thereof;

39

Table of Contents

● regulatory  authorities  may  require  the  addition  of  labeling  statements,  such  as  a  “black  box”  warning  or  a

contraindication;

● we  may  be  required  to  implement  a  REMS  or  create  a  Medication  Guide  outlining  the  risks  of  such  side

effects for distribution to patients;

● we could be sued and held liable for harm caused to patients;

● we may be subject to fines, warning letters, or other regulatory enforcement action;

● we may be subject to injunctions or the imposition of civil or criminal penalties;

● we may be required to conduct additional post-market clinical trials to assess the safety of the product;

● we may be subject to product seizure or detention, or refusal to permit the import or export of products;

● FDA may refuse to approve pending applications or supplements to approved applications filed by us;

● the product may become less competitive; and

● our reputation may suffer.

Any of the foregoing events could prevent us from achieving or maintaining market acceptance of the particular
product candidate, if approved, and result in the loss of significant revenues, which would materially harm our business. In
addition, if one or more of our product candidates or our immunotherapeutic development approach generally prove to be
unsafe, our entire technology platform and pipeline could be affected, which would also materially harm our business.

If there are difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or
otherwise be adversely affected.

The successful and timely completion of clinical trials in accordance with their protocols depends on, among other
things, our ability to enroll a sufficient number of patients who remain in the trial until the trial’s conclusion, including any
follow-up period. We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons. For
example,  we  experienced  a  slowdown  of  enrollment  in  our  clinical  trials  as  a  result  of  the  COVID-19  pandemic.  The
enrollment of patients depends on many factors, including:

● the patient eligibility criteria defined in the protocol;

● the nature and size of the patient population required for analysis of the trial’s primary endpoints and the process

for identifying patients;

● the number and location of participating clinical sites or patients;

● the design of the trial;

● our ability to recruit clinical trial investigators with the appropriate competencies and experience;

● clinicians’  and  patients’  perceptions  as  to  the  potential  advantages  and  risks  of  the  product  candidate  being
studied  in  relation  to  other  available  therapies,  including  any  new  products  that  may  be  approved  for  the
indications we are investigating;

● the  availability  of  competing  commercially  available  therapies  and  other  competing  drug  candidates’  clinical

trials;

● our ability to obtain and maintain patient informed consents for participation in our clinical trials;

40

Table of Contents

● the risk that patients enrolled in clinical trials will drop out of the trials before completion or, because they may

be late-stage cancer patients, will not survive the full terms of the clinical trials; and

● factors outside of our control, including as a result of business interruptions resulting from natural disasters, geo-

political developments, and public health emergencies, such as the COVID-19 pandemic.

In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same
therapeutic areas as our current and potential future product candidates. This competition will reduce the number and types
of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a
trial conducted by one of our competitors. Because the number of qualified clinical investigators is limited, we expect to
conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the
number of patients who are available for our clinical trials at such sites. Moreover, because our current and potential future
product candidates may represent a departure from more commonly used methods for cancer treatment, potential patients
and their doctors may be inclined to use conventional therapies, such as chemotherapy, rather than enroll patients in our
ongoing or any future clinical trial.

Delays from difficulties in patient enrollment in a clinical trial may result in increased costs or affect the timing,
outcome  or  completion  of  the  trial,  which  could  delay  or  prevent  our  receipt  of  regulatory  approval  of  the  applicable
product candidate or to abandon the trial altogether.

We may be required to suspend, repeat or terminate our clinical trials if they are not conducted in accordance with
regulatory requirements, the results are negative or inconclusive or the trials are not well designed.

Clinical  trials  must  be  conducted  in  accordance  with  the  FDA’s  current  cGCP  or  analogous  requirements  of
applicable foreign regulatory authorities. Clinical trials are subject to oversight by the FDA, other foreign governmental
agencies and IRBs or ethical committees at the study sites where the clinical trials are conducted. In addition, clinical trials
must  be  conducted  with  product  candidates  manufactured  in  accordance  with  applicable  cGMP.  Clinical  trials  may  be
suspended  by  the  FDA,  other  foreign  regulatory  authorities,  us,  or  by  an  IRB  or  ethics  committee  with  respect  to  a
particular clinical trial site, for various reasons, including:

● deficiencies in the conduct of the clinical trials, including failure to conduct the clinical trial in accordance

with regulatory requirements or study protocols;

● deficiencies in the clinical trial operations or trial sites;

● unforeseen adverse side effects or the emergence of undue risks to study subjects;

● deficiencies in the trial design necessary to demonstrate efficacy;

● the product candidate may not appear to offer benefits over current therapies; or

● the quality or stability of the product candidate may fall below acceptable standards.

We have chosen to prioritize development of NC410 and LNCB74. We may expend our limited resources on product
candidates or indications that do not yield a successful product and fail to capitalize on other candidates or indications
for which there may be a greater likelihood of success or may be more profitable.

Because  we  have  limited  resources,  we  have  strategically  determined  to  prioritize  development  of  NC410  and
LNCB74  rather  than  other  product  candidates  based,  in  part,  on  the  significant  resources  required  for  developing  and
manufacturing therapies. To date, no regulatory authority has granted approval for a therapy targeting the LAIR pathway or
B7-H4. As a result, we may be foregoing other potentially more profitable therapies or therapies or those with a greater
likelihood of success. Our decisions concerning the allocation of research, development, collaboration, management and
financial resources toward particular product candidates or therapeutic areas may not lead to the development of any viable
commercial product and may divert resources away from better opportunities. Similarly, our potential decisions to delay,
terminate or collaborate with third parties with respect to, certain programs may subsequently also prove to be suboptimal
and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the viability or market

41

Table of Contents

potential  of  any  of  our  current  or  future  product  candidates  or  misread  trends  in  the  oncology  or  biopharmaceutical
industry, our business, financial condition and results of operations could be materially adversely affected. As a result, we
may  fail  to  capitalize  on  viable  commercial  products  or  profitable  market  opportunities,  be  required  to  forego  or  delay
pursuit of opportunities with other product candidates or other diseases and disease pathways that may later prove to have
greater  commercial  potential  than  those  we  choose  to  pursue,  or  relinquish  valuable  rights  to  such  product  candidates
through collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to
invest additional resources to retain development and commercialization rights.

We may need to develop, or enter into a collaboration or partnership to develop, complementary or companion
diagnostics for our current or future product candidates. If we, or our future collaborators, are unable to successfully
develop complementary or companion diagnostics, or experience significant delays in doing so, we may not realize the
full commercial potential of our current or future product candidates.

One of the key elements of our product development strategy is to identify cancer patient populations that may
derive meaningful benefit from our current or future product candidates. Because predictive biomarkers are being and may
be used to identify the right patients for current or future product candidates, we believe that our success may depend, in
part, on our ability to develop complementary or companion diagnostics in collaboration with partners.

We  have  limited  experience  in  the  development  of  diagnostics  and,  as  such,  we  may  rely  in  part  on  future
collaborators in developing appropriate diagnostics to pair with our current or future product candidates. We have not yet
begun substantial discussions with any potential partners with respect to the development of complementary or companion
diagnostics and may be unsuccessful in entering into collaborations for the development of any such diagnostics for our
current or future product candidates.

Companion diagnostics are subject to regulation by the FDA and similar comparable foreign regulatory authorities
as  medical  devices  and  require  separate  regulatory  approval  or  clearance  prior  to  commercialization.  Complementary
diagnostics may be subject to regulation by CMS or the FDA and similar comparable foreign regulatory authorities and
may  require  separate  regulatory  approval  or  clearance  prior  to  commercialization.  Gaining  regulatory  approval  could  be
time consuming and costly and could delay regulatory approval of the related product candidate.

We  and  our  collaborators  may  encounter  difficulties  in  developing  such  tests,  including  issues  relating  to  the
selectivity  or  specificity  of  the  diagnostic,  analytical  validation,  reproducibility  or  clinical  validation.  If  we,  our
collaborators,  or  any  third  parties  that  we  engage  to  assist  us,  are  unable  to  successfully  develop  complementary  or
companion diagnostics for our current or future product candidates or experience delays in doing so:

● development  of  our  current  or  future  product  candidates  may  be  adversely  affected  if  we  are  unable  to

appropriately select patients for enrollment in our clinical trials; and

● we may not realize the commercial potential of our current or future product candidates if, among other reasons,
we are unable to appropriately identify, or it takes us longer to identify, patients who are likely to benefit from
therapy with our products, if approved.

If any of these events were to occur, our business could be materially harmed.

Risks Related to the Regulatory Approval and Commercialization of Product Candidates and Other Legal
Compliance Matters

We may be unable to obtain FDA approval of our product candidates under applicable regulatory requirements. The
denial or delay of any such approval would prevent or delay commercialization of our product candidates and adversely
impact our potential to generate revenue, our business and our results of operations.

To gain approval to market our product candidates in the United States, we must provide the FDA with clinical
data  that  adequately  demonstrate  the  safety,  purity  and  potency,  including  efficacy,  of  the  product  candidate  for  the
proposed indication or indications in a BLA submission. Product development is a long, expensive and uncertain process,
and delay or failure can occur at any stage of any of our clinical development programs. A number of companies in the
biotechnology  and  pharmaceutical  industries  have  suffered  significant  setbacks  in  clinical  trials,  even  after  promising
results in earlier preclinical studies or clinical trials. These setbacks have been caused by, among other things, preclinical

42

Table of Contents

findings  made  while  clinical  trials  were  underway  and  safety  or  efficacy  observations  made  in  clinical  trials,  including
previously  unreported  adverse  events.  Success  in  preclinical  testing  and  early  clinical  trials  does  not  ensure  that  later
clinical trials will be successful, and the results of clinical trials by other parties may not be indicative of the results in trials
we may conduct.

We  have  not  previously  submitted  a  BLA  or  any  other  marketing  application  to  the  FDA  or  similar  filings  to
comparable  foreign  regulatory  authorities.  A  BLA  or  other  similar  regulatory  filing  requesting  approval  to  market  a
product  candidate  must  include  extensive  preclinical  and  clinical  data  and  supporting  information  to  establish  that  the
product candidate is safe, pure and potent for each desired indication. The BLA or other similar regulatory filing must also
include significant information regarding the chemistry, manufacturing and controls for the product.

The  research,  testing,  manufacturing,  labeling,  approval,  marketing,  sale  and  distribution  of  biological  products
are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, and
such regulations differ from country to country. We are not permitted to market our product candidates in the United States
or  in  any  foreign  countries  until  they  receive  the  requisite  approval  from  the  applicable  regulatory  authorities  of  such
jurisdictions.

The FDA or comparable foreign regulatory authorities can delay, limit or deny approval of our product candidates

for many reasons, including:

● our inability to demonstrate to the satisfaction of the FDA or a comparable foreign regulatory authority that

our product candidates are safe and effective for the requested indication;

● the  FDA  or  a  comparable  foreign  regulatory  authority’s  disagreement  with  our  trial  protocol  or  the

interpretation of data from preclinical studies or clinical trials;

● our inability to demonstrate that the clinical and other benefits of our product candidates outweigh any safety

or other perceived risks;

● the  FDA  or  a  comparable  foreign  regulatory  authority’s  requirement  for  additional  preclinical  studies  or

clinical trials;

● the  FDA  or  a  comparable  foreign  regulatory  authority’s  non-approval  of  the  formulation,  labeling,  or

specifications of our product candidates;

● the FDA or a comparable regulatory authority’s failure to approve our manufacturing processes and facilities

or the manufacturing processes and facilities of third-party manufacturers upon which we rely; or

● potential  for  approval  policies  or  regulations  of  the  FDA  or  a  comparable  foreign  regulatory  authority  to

significantly change in a manner rendering our clinical data insufficient for approval.

Even  if  we  eventually  complete  clinical  testing  and  receive  approval  from  the  FDA  or  comparable  foreign
regulatory authorities for any of our product candidates, the FDA or comparable foreign regulatory authorities may grant
approval contingent on the performance of costly additional clinical trials which may be required after approval. The FDA
or comparable foreign regulatory authorities also may approve any of our product candidates for a more limited indication
or a narrower patient population than we originally requested, and the FDA or comparable foreign regulatory authorities
may not approve any of our product candidates with the labeling that we believe is necessary or desirable for the successful
commercialization of any such product candidates.

Of  the  large  number  of  biopharmaceutical  products  in  development,  only  a  small  percentage  successfully
complete  the  FDA  or  other  regulatory  bodies’  approval  processes  and  are  commercialized.  Any  delay  in  obtaining,  or
inability to obtain, applicable regulatory approval would delay or prevent commercialization of our product candidates and
would materially harm our business.

43

Table of Contents

Even if a current or future product candidate receives marketing approval, it 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.

If any current or future product candidate we develop receives marketing approval, whether as a single agent or in
combination with other therapies, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-
party  payors,  and  others  in  the  medical  community.  For  example,  current  approved  immunotherapies,  and  other  cancer
treatments  like  chemotherapy  and  radiation  therapy,  are  well  established  in  the  medical  community,  and  doctors  may
continue to rely on these therapies. Our approach to targeting different components of the TME is novel and unproven. In
addition,  adverse  events  in  clinical  trials  testing  our  product  candidates  or  in  clinical  trials  of  others  developing  similar
product candidates and the resulting publicity, as well as any other adverse events in the field of immuno-oncology that
may  occur  in  the  future,  could  result  in  a  decrease  in  demand  for  our  current  or  future  product  candidates.  If  public
perception is influenced by claims that the use of cancer immunotherapies is unsafe, whether related to our therapies or our
competitors’ products, our products may not be accepted by the general public or the medical community. Future adverse
events in immuno-oncology or the biopharmaceutical industry could also result in greater governmental regulation, stricter
labeling requirements and potential regulatory delays in the testing or approvals of our products.

If our current and any future product candidates we develop do not achieve an adequate level of acceptance, we
may not generate significant product revenues and we may not become profitable. The degree of market acceptance of our
current and any future product candidates, if approved for commercial sale, will depend on a number of factors, including:

● efficacy  and  potential  advantages  compared  to  alternative  treatments,  including  those  that  are  not  yet

approved;

● the ability to offer our products, if approved, for sale at competitive prices;

● convenience and ease of administration compared to alternative treatments;

● the  willingness  of  the  target  patient  population  to  try  new  therapies  and  of  physicians  to  prescribe  these

therapies;

● the strength of marketing, sales and distribution support;

● the ability to obtain sufficient third-party coverage and adequate reimbursement, including with respect to the

use of the approved product as a combination therapy;

● the regulatory approval and adoption of a companion or complementary diagnostic, if needed or advisable;

and

● the prevalence and severity of any side effects.

The market opportunities for any current or future product candidate we develop, if approved, may be limited to those
patients who are ineligible for established therapies or for whom prior therapies have failed, and may be small.

Any revenue we are able to generate in the future from product sales will be dependent, in part, upon the size of
the  market  in  the  United  States  and  any  other  jurisdiction  for  which  we  gain  regulatory  approval  and  have  commercial
rights. If the markets or patient subsets that we are targeting are not as significant as we estimate, we may not generate
significant revenues from sales of such products, even if approved.

Cancer therapies are sometimes characterized as first-line, second-line or third-line, and the FDA often approves
new  therapies  initially  only  for  third-line  use.  When  cancer  is  detected  early  enough,  first-line  therapy,  usually
chemotherapy, hormone therapy, surgery, radiation therapy or a combination of these, is sometimes adequate to cure the
cancer or prolong life without a cure. Second- and third-line therapies are administered to patients when prior therapy is not
effective. We may initially seek approval for NC410, LNCB74 and any other product candidates we develop as second or
third-line  therapies.  If  we  do  so,  for  those  products  that  prove  to  be  sufficiently  beneficial,  if  any,  we  would  expect
potentially to seek approval as a first-line therapy, but there is no guarantee that any product candidate we develop, even

44

Table of Contents

if approved, would be approved for first-line therapy, and, prior to any such approvals, we may have to conduct additional
clinical trials.

The number of patients who have the types of cancer we are targeting may turn out to be lower than expected.
Additionally, the potentially addressable patient population for our current or future product candidates may be limited, if
and  when  approved.  Even  if  we  obtain  significant  market  share  for  any  product  candidate,  if  and  when  approved,  if  the
potential  target  populations  are  small,  we  may  never  achieve  profitability  without  obtaining  marketing  approval  for
additional indications, including to be used as first- or second-line therapy.

We are studying NC410 in combination with other therapies and may develop  LNCB74 and future product candidates 
in combination with other therapies, which exposes us to additional regulatory risks.

We  are  studying  NC410  in  combination  with  pembrolizumab  and  may  develop  LNCB74  and  future  product
candidates  in  combination  with  one  or  more  currently  approved  cancer  therapies.  In  addition,  we  are  supplying  NC318
drug product to Yale in support of Yale’s IIT study of NC318 in combination with pembrolizumab. These combinations
have  not  been  tested  before  and  may,  among  other  things,  fail  to  demonstrate  synergistic  activity,  may  fail  to  achieve
superior outcomes relative to the use of single agents or other combination therapies, or may fail to demonstrate sufficient
safety or efficacy traits in clinical trials to enable us to complete those clinical trials or obtain marketing approval for the
combination therapy.

In addition, we did not develop or obtain regulatory approval for, and we do not manufacture or sell, any of these
approved  therapeutics.  Therefore,  even  if  any  product  candidate  we  develop  were  to  receive  marketing  approval  or  be
commercialized for use in combination with other existing therapies, we would continue to be subject to the risk that the
FDA  or  comparable  foreign  regulatory  authorities  could  revoke  approval  of  the  therapy  used  in  combination  with  our
product  candidate  or  that  safety,  efficacy,  manufacturing  or  supply  issues  could  arise  with  these  existing  therapies.  This
could  result  in  our  own  products  being  removed  from  the  market  or  being  less  successful  commercially.  Combination
therapies are commonly used for the treatment of cancer, and we would be subject to similar risks if we develop any of our
product candidates for use in combination with other drugs or for indications other than cancer.

We may also evaluate NC410, LNCB74 or any future product candidate in combination with one or more other
cancer therapies that have not yet been approved for marketing by the FDA or comparable foreign regulatory authorities.
We  will  not  be  able  to  market  and  sell  NC410,  LNCB74  or  any  product  candidate  we  develop  in  combination  with  any
such unapproved cancer therapies that do not ultimately obtain marketing approval.

If the FDA or comparable foreign regulatory authorities do not approve these other biological products or revoke
their approval of, or if safety, efficacy, manufacturing or supply issues arise with, the biologics we choose to evaluate in
combination  with  NC410,  LNCB74  or  any  product  candidate  we  develop,  we  may  be  unable  to  obtain  approval  of  or
market any such product candidate.

Even if we receive marketing approval of a product candidate, we will be subject to ongoing regulatory obligations and
continued regulatory review, which may result in significant additional expense. If we fail to comply or experience
unanticipated problems with our products, we may be subject to administrative and judicial enforcement, including
monetary penalties, for non-compliance and our approved products, if any, could be deemed misbranded or adulterated
and prohibited from continued distribution.

Any marketing approvals that we receive for any current or future product candidate may be subject to limitations
on  the  approved  indicated  uses  for  which  the  product  may  be  marketed  or  the  conditions  of  approval  or  contain
requirements for potentially costly post-market testing and surveillance to monitor the safety and efficacy of the product
candidate.  The  FDA  may  also  require  implementation  of  a  REMS  as  a  condition  of  approval  of  any  product  candidate,
which could include requirements for a medication guide, physician communication plans or additional elements to ensure
safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA
or  a  comparable  foreign  regulatory  authority  approves  a  product  candidate,  the  manufacturing  processes,  labeling,
packaging,  distribution,  adverse  event  and  deviation  reporting,  storage,  advertising,  promotion,  import  and  export  and
record  keeping  for  the  product  candidate  will  be  subject  to  extensive  and  ongoing  regulatory  requirements.  These
requirements  include  submissions  of  safety  and  other  post-marketing  information  and  reports,  registration,  as  well  as
continued compliance with cGMP and cGCP, for any clinical trials that we may conduct post-approval. Later discovery of
previously unknown problems with any approved candidate, including adverse events of unanticipated severity or

45

Table of Contents

frequency,  or  with  our  or  our  third-party  manufacturers’  manufacturing  processes  or  facilities,  or  failure  to  comply  with
regulatory requirements, may result in, among other things:

● suspension of, or imposition of restrictions on, the marketing or manufacturing of the product, withdrawal of

the product from the market, or product recalls;

● Warning Letters or Untitled Letters, or holds on clinical trials;

● refusal  by  the  FDA  to  approve  pending  applications  or  supplements  to  approved  applications  we  file,  or

suspension or revocation of approved biologics licenses;

● product  seizure  or  detention,  monetary  penalties,  refusal  to  permit  the  import  or  export  of  the  product,  or

placement on Import Alert; and

● permanent injunctions and consent decrees including the imposition of civil or criminal penalties.

Given the nature of biologics manufacturing, there is a risk of contamination. Any contamination could materially
adversely affect our ability to produce product candidates on schedule and could, therefore, harm our results of operations
and cause reputational damage. Some of the raw materials and other components required in our manufacturing process are
derived from biologic sources. Such raw materials are difficult to procure and may be subject to contamination or recall. A
material shortage, contamination, recall or restriction on the use of biologically derived substances in manufacturing our
product or product candidates could adversely impact or disrupt the commercial manufacturing or the production of clinical
material, which could materially and adversely affect our development and commercialization timelines and our business,
financial  condition,  results  of  operations  and  prospects  and  could  adversely  affect  our  ability  to  meet  our  supply
obligations.

Moreover,  the  FDA  strictly  regulates  the  promotional  claims  that  may  be  made  about  drug  and  biological
products.  An  approved  product  may  not  be  promoted  for  uses  that  are  not  approved  by  the  FDA  as  reflected  in  the
product’s  approved  labeling,  or  off-label  uses.  The  FDA  and  other  agencies  actively  enforce  the  laws  and  regulations
prohibiting the promotion of off-label uses. The FDA has issued guidance on the factors that it will consider in determining
whether a firm’s product communication is consistent with the FDA-required labeling for that product, and those factors
contain complexity and potential for overlap and misinterpretation. A company that is found to have improperly promoted
off-label uses of their products may be subject to significant civil, criminal and administrative penalties.

The  FDA  and  other  regulatory  authorities’  policies  may  change,  and  additional  government  regulations  may  be
enacted,  that  could  prevent,  limit  or  delay  marketing  approval  of  a  product.  We  cannot  predict  the  likelihood,  nature  or
extent of government regulation that may arise from future legislation or administrative action, either in the United States
or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or
policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have
obtained, and we may not achieve or sustain profitability.

Any  government  investigation  of  alleged  violations  of  law  could  require  us  to  expend  significant  time  and
resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements
may significantly and adversely affect our ability to commercialize and generate revenue from our products. If regulatory
sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be
adversely affected.

In  addition,  if  we  are  slow  or  unable  to  adapt  to  changes  in  existing  requirements  or  the  adoption  of  new
requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that
we may have obtained, and we may not achieve or sustain profitability.

Obtaining and maintaining marketing approval of our current and future product candidates in one jurisdiction does
not mean that we will be successful in obtaining and maintaining marketing approval of our current and future product
candidates in other jurisdictions.

Obtaining  and  maintaining  marketing  approval  of  our  current  and  future  product  candidates  in  one  jurisdiction

does not guarantee that we will be able to obtain or maintain marketing approval in any other jurisdiction, while a failure

46

Table of Contents

or delay in obtaining marketing approval in one jurisdiction may have a negative effect on the marketing approval process
in  others.  For  example,  even  if  the  FDA  grants  marketing  approval  of  a  product  candidate,  comparable  regulatory
authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate
in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review
periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials
conducted  in  one  jurisdiction  may  not  be  accepted  by  regulatory  authorities  in  other  jurisdictions.  In  many  jurisdictions
outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in
that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

We may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of
the United States have requirements for approval of product candidates with which we must comply prior to marketing in
those  jurisdictions.  Obtaining  foreign  marketing  approvals  and  compliance  with  foreign  regulatory  requirements  could
result  in  significant  delays,  difficulties  and  costs  for  us  and  could  delay  or  prevent  the  introduction  of  our  products  in
certain countries. If we fail to comply with the regulatory requirements in international markets or fail to receive applicable
marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product
candidates will be harmed.

We depend on data and our information technology systems, and any failure of these systems could harm our business.
Security breaches, loss of data, and other disruptions could compromise sensitive information related to our business or
prevent us from accessing critical information and expose us to liability, which could adversely affect our business,
results of operations and financial condition.

We  collect  and  maintain  information  in  digital  form  that  is  necessary  to  conduct  our  business,  and  we  are
dependent on our information technology systems and those of third parties to operate our business. In the ordinary course
of our business, we collect, store and transmit large amounts of confidential information, including intellectual property,
proprietary business information, personal information, protected health information and data to comply with cGMP and
data integrity requirements. It is critical that we do so in a secure manner to maintain data security and data integrity of
such  information.  We  have  established  physical,  electronic  and  organizational  measures  to  safeguard  and  secure  our
systems to prevent a data compromise. We have also outsourced elements of our information technology infrastructure, and
as a result a number of third-party vendors may or could have access to our confidential information. If we or our vendors
fail to comply with applicable data privacy laws, or if the legal mechanisms we or our vendors rely upon for the transfer of
personal  data  are  ever  deemed  inadequate,  or  if  we  or  our  vendors  experience  a  data  breach  resulting  in  exposure  of
personal  data  subject  to  the  applicable  laws,  we  could  be  subject  to  government  enforcement  actions  and  significant
penalties against us, criminal and civil liability for us and our officers and directors, private litigation or adverse publicity.
The  OCR,  pursuant  to  legislation  passed  in  2021,  recently  issued  guidance  on  recognized  security  practices  for  covered
entities and business associates, the OCR indicated that recognized security practices will not be an aggravating factor in
OCR  investigations,  but  that  implementation  of  recognized  security  practices  strengthen  an  organization’s  cybersecurity
and regulatory posture, as well as possibly lessening enforcement penalties in a potential regulatory enforcement.

Our  internal  information  technology  systems  and  infrastructure,  and  those  of  our  current  and  any  future
collaborators,  contractors  and  consultants  and  other  third  parties  on  which  we  rely,  are  vulnerable  to  damage  from
computer  viruses,  malware,  natural  disasters,  terrorism,  war,  telecommunication  and  electrical  failures,  cyber-attacks  or
cyber-intrusions, phishing, persons inside our organization or persons with access to systems inside our organization. We
and our third party service providers regularly defend against, respond to and mitigate risks from data security incidents.
The  risk  of  a  security  breach  or  disruption  or  data  loss,  including  by  computer  hackers,  foreign  governments  and  cyber
terrorists,  has  generally  increased  as  the  number,  intensity  and  sophistication  of  attempted  attacks  and  intrusions  from
around  the  world  have  increased.  In  addition,  the  prevalent  use  of  mobile  devices  that  access  confidential  information
increases the risk of data security breaches, which could lead to the loss of confidential information or other intellectual
property.  The  costs  to  us  to  mitigate  network  security  problems,  bugs,  viruses,  worms,  malicious  software  programs,
ransomware and security vulnerabilities could be significant, and while we have implemented security measures to protect
our  data  security  and  information  technology  systems,  our  efforts  to  address  these  problems  may  not  be  successful,  and
these problems could result in unexpected interruptions, delays, cessation of service and other harm to our business and our
competitive position. If such an event were to occur and cause interruptions in our operations, it could result in a material
disruption of our product development programs. For example, the loss of clinical trial data from completed or ongoing or
planned  clinical  trials  could  result  in  delays  in  our  regulatory  approval  efforts  and  significantly  increase  our  costs  to
recover or reproduce the data. Likewise, we rely on third parties to conduct clinical trials, and similar events relating to
their computer systems could also have a material adverse effect on our business. Moreover, if a computer

47

Table of Contents

security  breach  affects  our  systems  or  results  in  the  unauthorized  release  of  personally  identifiable  information,  our
reputation could be materially damaged. In addition, such a breach may require notification to governmental agencies, the
media or individuals pursuant to various federal and state privacy and security laws, if applicable, including HIPAA and its
implementing  regulations,  as  well  as  regulations  promulgated  by  the  Federal  Trade  Commission  and  state  breach
notification laws. We would also be exposed to a risk of loss or litigation and potential liability, which could materially
adversely affect our business, results of operations and financial condition. We may need to expend significant resources
and make significant capital investment to protect against security breaches or to mitigate the impact of any such breaches.

The successful commercialization of our product candidates will depend in part on the extent to which third-party
payors, including governmental authorities and private health insurers, provide coverage and adequate reimbursement
levels, as well as implement pricing policies favorable for our product candidates. Failure to obtain or maintain
coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those
products and decrease our ability to generate revenue.

The availability of coverage and adequacy of reimbursement by third-party payors, including managed care plans,
governmental healthcare programs, such as Medicare and Medicaid and private health insurers is essential for most patients
to  be  able  to  afford  medical  services  and  pharmaceutical  products  such  as  our  product  candidates  that  receive  FDA
approval. Our ability to achieve acceptable levels of coverage and reimbursement for our products or procedures using our
products  by  third-party  payors  will  have  an  effect  on  our  ability  to  successfully  commercialize  our  product  candidates.
Obtaining coverage and 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.  Separate  reimbursement  for  the  product
itself or the treatment or procedure in which our product is used may not be available. A decision by a third-party payor not
to cover or not to separately reimburse for our products or procedures using our products could reduce physician utilization
of our products once approved. Assuming there is coverage for our product candidates, or procedures using our product
candidates  by  a  third-party  payor,  the  resulting  reimbursement  payment  rates  may  not  be  adequate  or  may  require  co-
payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States,
the European Union or elsewhere will be available for our current or future product candidates, or for any procedures using
such product candidates, and any reimbursement that may become available may not be adequate or may be decreased or
eliminated in the future.

Our  ability  to  successfully  commercialize  any  product  candidate,  whether  as  a  single  agent  or  combination
therapy,  will  also  depend  in  part  on  the  extent  to  which  coverage  and  reimbursement  for  these  product  candidates  and
related treatments will be available from third-party payors. Third-party payors decide which medications they will pay for
and establish reimbursement levels. It is difficult to predict at this time what government authorities and third-party payors
will decide with respect to coverage and reimbursement for our current and future product candidates.

In  addition,  third-party  payors  are  increasingly  challenging  prices  charged  for  pharmaceutical  and  biological
products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs
or biologics when an equivalent generic drug, biosimilar or a less expensive therapy is available. It is possible that a third-
party payor may consider our product candidates as substitutable and only offer to reimburse patients for the less expensive
product.  Even  if  we  show  improved  efficacy  or  improved  convenience  of  administration  with  our  product  candidates,
pricing  of  existing  third-party  therapeutics  may  limit  the  amount  we  will  be  able  to  charge  for  our  product  candidates.
These third-party payors may deny or revoke the reimbursement status of our product candidates, if approved, or establish
prices for our product candidates at levels that are too low to enable us to realize an appropriate return on our investment. If
reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our
product candidates and may not be able to obtain a satisfactory financial return on our product candidates.

There is significant uncertainty related to the insurance coverage and reimbursement of newly-approved products,
especially novel products like our therapies. To date, no regulatory authority has granted approval for an immunomedicine
targeting the LAIR pathway or an ADC targeting B7-H4. The Medicare and Medicaid programs are increasingly used as
models in the United States for how private third-party payors and other governmental payors develop their coverage and
reimbursement policies for drugs and biologics. Some third-party payors may require pre-approval of coverage for new or
innovative  devices  or  drug  therapies  before  they  will  reimburse  healthcare  providers  who  use  such  therapies.  Moreover,
eligibility for reimbursement does not imply that any drug will be reimbursed in all cases or at a rate that covers our costs,
including  research,  development,  manufacture,  sale  and  distribution.  Interim  reimbursement  levels  for  new  drugs,  if
applicable, may also not be sufficient to cover our costs and may not be made permanent. We cannot predict at this time
what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.

48

Table of Contents

No  uniform  policy  for  coverage  and  reimbursement  for  products  exist  among  third-party  payors  in  the  United
States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the
coverage determination process is often a time-consuming and costly process that may require us to provide scientific and
clinical  support  for  the  use  of  our  product  candidates  to  each  payor  separately,  with  no  assurance  that  coverage  and
adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations
regarding  reimbursement  can  change,  in  some  cases  on  short  notice,  and  we  believe  that  changes  in  these  rules  and
regulations are likely.

Additionally, if we or our collaborators develop companion diagnostic tests for use with our product candidates,
we, or our collaborators, will be required to obtain coverage and reimbursement for these tests separate and apart from the
coverage and reimbursement we seek for our product candidates, once approved. While we and our collaborators have not
yet developed any companion diagnostic test for our product candidates, if we or our collaborators do, there is significant
uncertainty  regarding  the  ability  to  obtain  coverage  and  adequate  reimbursement  for  the  same  reasons  applicable  to  our
product candidates.

Moreover,  a  primary  trend  in  the  healthcare  industry  in  the  United  States  and  elsewhere  is  cost  containment.
Government  authorities  and  third-party  payors  have  attempted  to  control  costs  by  limiting  coverage  and  the  amount  of
reimbursement  for  particular  medications.  Increasingly,  the  third-party  payors  who  reimburse  patients  or  healthcare
providers,  such  as  government  and  private  insurance  plans,  are  requiring  that  drug  companies  provide  them  with
predetermined  discounts  from  list  prices  and  are  seeking  to  reduce  the  prices  charged  or  the  amounts  reimbursed  for
medical  products.  We  cannot  be  sure  that  coverage  and  reimbursement  will  be  available  for  any  drug  that  we
commercialize  and,  if  coverage  and  reimbursement  are  available,  we  cannot  be  sure  as  to  the  level  of  reimbursement.
Reimbursement  may  impact  the  demand  for,  or  the  price  of,  any  product  candidate  for  which  we  obtain  marketing
approval.  If  reimbursement  is  not  available  or  is  available  only  to  limited  levels,  we  may  not  be  able  to  successfully
commercialize any product candidate for which we obtain marketing approval. We expect to experience pricing pressures
in connection with the sale of our product candidates due to the trend toward managed health care, the increasing influence
of  health  maintenance  organizations  and  additional  legislative  changes.  The  downward  pressure  on  healthcare  costs  in
general, particularly prescription drugs and biologics and surgical procedures and other treatments, has become intense. As
a result, increasingly high barriers are being erected to the entry of new products.

Enacted healthcare legislation, changes in healthcare law and implementation of regulations, as well as changes in
healthcare policy, may increase the difficulty and cost for us to commercialize our product candidates, may impact our
business in ways that we cannot currently predict, could affect the prices we may set, and could have a material adverse
effect on our business and financial condition.

In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare
costs. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek
to  reduce  healthcare  costs  and  improve  the  quality  of  healthcare.  For  example,  the  ACA  substantially  changed  the  way
healthcare  is  financed  by  both  governmental  and  private  insurers,  and  significantly  impacted  the  U.S.  pharmaceutical
industry. The ACA, among other things, subjects biologics to potential competition by lower-cost biosimilars, addresses a
methodology by which rebates owed by manufacturers under the MDRP are calculated for drugs that are inhaled, infused,
instilled,  implanted  or  injected,  increases  the  minimum  Medicaid  rebates  owed  by  manufacturers  under  the  MDRP  and
extends  the  rebate  program  to  individuals  enrolled  in  Medicaid  managed  care  organizations,  and  establishes  annual  fees
and taxes on manufacturers of certain branded prescription drugs.

The  ACA  and  certain  of  its  provisions  have  been  subject  to  judicial  challenges  as  well  as  legislative  and
regulatory efforts to repeal or replace them or to alter their interpretation or implementation. For example, Congress has
considered  legislation  that  would  repeal  or  repeal  and  replace  all  or  part  of  the  ACA.  While  Congress  has  not  passed
comprehensive repeal legislation, bills affecting the implementation of certain taxes under the ACA have been signed into
law. The Tax Act included a provision that repealed the tax-based shared responsibility payment imposed by the ACA on
certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as
the “individual mandate.” Also, in 2018, CMS issued final rules permitting further collections and payments to and from
certain ACA qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the
outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. The Further
Consolidated Appropriations Act of 2020 fully repealed the ACA’s “Cadillac Tax” on certain high cost employer-sponsored
insurance plans and, effective in 2021, the annual fee imposed on certain health insurance providers based on market share.
On March 11, 2021, Congress enacted the American Rescue Plan Act of 2021, which included among its

49

Table of Contents

provisions a sunset of the ACA’s cap on pharmaceutical manufacturers’ rebate liability under the Medicaid Drug Rebate
Program.  Under  the  ACA,  manufacturers’  rebate  liability  was  capped  at  100%  of  the  average  manufacturer  price  for  a
covered  outpatient  drug.  Effective  January  1,  2024,  manufacturers’  MDRP  rebate  liability  will  no  longer  be  capped,
potentially  resulting  in  a  manufacturer  paying  more  in  MDRP  rebates  than  it  receives  on  the  sale  of  certain  covered
outpatient drugs. The American Rescue Plan Act also temporarily increased premium tax credit assistance for individuals
eligible for subsidies under the ACA for 2021 and 2022 and removed the 400% federal poverty level limit that otherwise
applies for purposes of eligibility to receive premium tax credits. In the future, there may be additional challenges and/or
amendments  to  the  ACA.  It  remains  to  be  seen  precisely  what  any  new  legislation  will  provide,  when  or  if  it  will  be
enacted, and what impact it will have on the availability and cost of healthcare items and services, including drug products.

On June 17, 2021, the U.S Supreme Court dismissed a legal challenge to the law brought by several states arguing
that,  without  the  individual  mandate,  the  entire  ACA  was  unconstitutional.  The  Supreme  Court  dismissed  the  lawsuit
without ruling on the merits of the states’ constitutionality arguments. It is unclear how future litigation and the healthcare
reform measures of the Biden administration will impact the ACA and our business.

Other healthcare-related legislative and regulatory initiatives and reforms have been proposed and adopted in the
United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created
measures for automatic spending reductions under certain circumstances. In conjunction with the operation of subsequently
enacted law, this has resulted in aggregate reductions of Medicare payments to providers of, on average, 2% per fiscal year,
which  will  remain  in  effect  through  the  first  seven  months  of  the  FY  2032  sequestration  order,  with  the  exception  of  a
temporary suspension from May 1, 2020 through March 31, 2022 and a subsequent reduction to 1% from April 1, 2022
until  June  30,  2022  due  to  the  COVID-19  pandemic,  unless  Congress  takes  additional  action.  The  American  Taxpayer
Relief Act of 2012, which was signed into law in January 2013, among other things, further 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.

Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives.
For example, beginning in 2018, CMS has maintained a reduced rate of payment under the Medicare outpatient prospective
payment system and ambulatory surgical center payment system for certain separately payable drugs or biologics acquired
under  the  340B  Drug  Pricing  Program.  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 any product candidate we develop or complementary or
companion diagnostics or additional pricing pressures.

CMS  may  develop  new  payment  and  delivery  models,  such  as  bundled  payment  models.  In  addition,  there  has
been  heightened  governmental  scrutiny  over  the  manner  in  which  manufacturers  set  prices  for  their  marketed  products,
which has resulted in several U.S. Congressional inquiries and proposed and enacted federal and state legislation designed
to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under government
payor programs, and review the relationship between pricing and manufacturer patient programs; and reform government
program  reimbursement  methodologies  for  drugs.  For  example,  included  in  the  Consolidated  Appropriations  Act,  2021
were  several  drug  price  reporting  and  transparency  measures,  such  as  a  new  requirement  for  certain  Medicare  plans  to
develop  tools  to  display  Medicare  Part  D  prescription  drug  benefit  information  in  real  time  and  for  group  and  health
insurance issuers to report information on pharmacy benefit and drug costs to the Secretaries of the Departments of Health
and Human Services, Labor and the Treasury. Additionally, in August 2022, President Biden signed into law the Inflation
Reduction  Act  of  2022  (the  “IRA”),  which  implements  substantial  changes  to  the  Medicare  program,  including  drug
pricing reforms and the creation of new Medicare inflation rebates.  Namely, the IRA imposes inflation rebates on drug
manufacturers for products reimbursed under Medicare Parts B and D if the prices of those products increase faster than
inflation; implements changes to the Medicare Part D benefit that, beginning in 2025, will cap beneficiary annual out-of-
pocket spending at $2,000, while imposing new discount obligations for pharmaceutical manufacturers; and, beginning in
2026, establishes a “maximum fair price” for a fixed number of high expenditure pharmaceutical and biological products
covered  under  Medicare  Parts  B  and  D  following  a  price  negotiation  process  with  CMS.  CMS  has  also  taken  steps  to
implement the IRA, including:  on June 30, 2023, issuing guidance detailing the requirements and parameters of the first
round of price negotiations, to take place during 2023 and 2024, for products subject to the “maximum fair price” provision
that would become effective in 2026; on August 29, 2023, releasing the initial list of ten drugs subject to price negotiations;
on  November  17,  2023,  releasing  guidance  outlining  the  methodology  for  identifying  certain  manufacturers  eligible  to
participate in a phase-in period where discounts on applicable products will be lower than those required by the Medicare
Part D Manufacturer Discount Program; and on December 14, 2023, releasing a list of 48 Medicare Part B products that

50

Table of Contents

had an adjusted coinsurance rate based on the inflationary rebate provisions of the IRA for the time period of January 1,
2024 to March 31, 2024. While it remains to be seen how the drug pricing provisions imposed by the IRA will affect the
broader pharmaceutical industry, several pharmaceutical manufacturers and other industry stakeholders have challenged the
law, including through lawsuits brought against the U.S. Department of Health and Human Services, the Secretary of the
U.S. Department of Health and Human Services, CMS, and the CMS Administrator challenging the constitutionality and
administrative implementation of the IRA’s drug price negotiation provisions. In addition, on February 2, 2022, the Biden
administration signaled its continued commitment to the Cancer Moonshot initiative, which was initially launched in 2016.
In its announcement, the administration noted that its new goals under the initiative include addressing inequities in order
to  ensure  broader  access  to  cutting-edge  cancer  therapeutics  and  investing  in  a  robust  pipeline  for  new  treatments.  In
alignment  with  President  Biden’s  Cancer  Moonshot  initiative,  on  June  27,  2023,  the  Center  for  Medicare  Innovation  at
CMS  announced  a  new  model,  the  Enhancing  Oncology  Model,  that  is  designed  to  make  high-quality  cancer  care  more
affordable to both patients and Medicare. On October 14, 2022 President Biden issued an Executive Order on Lowering
Prescription Drug Costs for Americans, which instructed the Secretary of the Department of Health and Human Services to
consider whether to select for testing by the CMS Innovation Center new health care payment and delivery models that
would  lower  drug  costs  and  promote  access  to  innovative  drug  therapies  for  beneficiaries  enrolled  in  the  Medicare  and
Medicaid programs. On February 14, 2023, the Department of Health and Human Services issued a report in response to
the  October  14,  2022  Executive  Order,  which,  among  other  things,  selects  three  potential  drug  affordability  and
accessibility models to be tested by the CMS Innovation Center.  Specifically, the report addresses: (1) a model that would
allow Part D Sponsors to establish a “high-value drug list” setting the maximum out-of-pocket costs for certain common
generic drugs at $2 per drug per month; (2) a Medicaid-focused model that would establish a partnership between CMS,
manufacturers, and state Medicaid agencies that would result in multi-state outcomes-based agreements or certain cell and
gene  therapy  drugs;  and  (3)  a  model  that  would  adjust  Medicare  Part  B  payment  amounts  for  Accelerated  Approval
Program drugs to advance the developments of novel treatments. We expect that additional U.S. federal healthcare reform
measures will be adopted in the future, any of which could limit the extent to which the U.S. federal government covers
particular  healthcare  products  and  services  and  could  limit  the  amounts  that  the  U.S.  federal  government  will  pay  for
healthcare  products  and  services.  This  could  result  in  reduced  demand  for  our  product  candidates  or  additional  pricing
pressures.

Individual  states  in  the  United  States  have  also  increasingly  passed  legislation  and  implemented  regulations
designed  to  control  pharmaceutical  and  biological  product  pricing,  including  price  or  patient  reimbursement  limitations,
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.  Legally  mandated  price  controls  on
payment  amounts  by  third-party  payors  or  other  restrictions  on  coverage  or  access  could  harm  our  business,  results  of
operations,  financial  condition  and  prospects.  In  addition,  regional  healthcare  authorities  and  individual  hospitals  are
increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in
their prescription drug and other healthcare programs. This could reduce the ultimate demand for our product candidates
that we successfully commercialize or put pressure on our product pricing.

Additionally,  in  May  2018,  the  Right  to  Try  Act  was  signed  into  law.  The  law,  among  other  things,  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 obtaining FDA permission under the FDA expanded access
program. There is no obligation for a pharmaceutical manufacturer to make its drug products available to eligible patients
as a result of the Right to Try Act.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation
or  administrative  action  in  the  United  States.  If  we  or  any  third  parties  we  may  engage  are  slow  or  unable  to  adapt  to
changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able
to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained
and we may not achieve or sustain profitability.

Our relationships with customers, third-party payors and others may be subject to applicable anti-kickback, fraud and
abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties,
contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.

Healthcare  providers,  physicians  and  third-party  payors  in  the  United  States  and  elsewhere  will  play  a  primary

role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our

51

Table of Contents

current  and  future  arrangements  with  healthcare  providers,  third-party  payors,  customers,  and  others  may  expose  us  to
broadly  applicable  fraud  and  abuse  and  other  healthcare  laws  and  regulations,  which  may  constrain  the  business  or
financial arrangements and relationships through which we research, as well as sell, market and distribute any products for
which we obtain marketing approval. The applicable federal and state healthcare laws and regulations that may affect our
ability  to  operate  include,  but  are  not  limited  to,  those  described  in  “Business—Government  Regulation—Healthcare
Regulation.”

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors
available  under  such  laws,  it  is  possible  that  some  of  our  business  activities  could  be  subject  to  challenge  under  one  or
more of such laws. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current
environment of healthcare reform. Federal and state enforcement bodies continue to increase their scrutiny of interactions
between  healthcare  companies  and  healthcare  providers,  which  has  led  to  a  number  of  investigations,  prosecutions,
convictions and settlements in the healthcare industry. Ensuring that our business arrangements with third parties comply
with  applicable  healthcare  laws,  as  well  as  responding  to  investigations  by  government  authorities,  can  be  time  and
resource consuming and can divert management’s attention from the business.

If  our  operations  are  found  to  be  in  violation  of  any  of  the  laws  described  above  or  any  other  government
regulations that apply to us, we may be subject to penalties, including civil, criminal and administrative penalties, damages,
fines, disgorgement, individual imprisonment, possible exclusion from participation in federal and state funded healthcare
programs,  contractual  damages  and  the  curtailment  or  restricting  of  our  operations,  as  well  as  additional  reporting
obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations
of  non-compliance  with  these  laws.  Further,  if  the  physicians  or  other  providers  or  entities  with  whom  we  expect  to  do
business are found not to be in compliance with applicable laws, they may be subject to criminal, civil and administrative
sanctions, 
the  approval  and
commercialization  of  any  product  candidate  we  develop  outside  the  United  States  will  also  likely  subject  us  to  foreign
equivalents  of  the  healthcare  laws  mentioned  above,  among  other  foreign  laws.  All  of  these  could  harm  our  ability  to
operate our business and our financial results.

including  exclusion  from  government  funded  healthcare  programs.  In  addition, 

We are subject to certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions and other
trade laws and regulations. We can face serious consequences for violations.

Among other matters, U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions and other
trade  laws  and  regulations,  which  are  collectively  referred  to  as  Trade  Laws,  prohibit  companies  and  their  employees,
agents,  clinical  research  organizations,  legal  counsel,  accountants,  consultants,  contractors  and  other  partners  from
engaging in certain prohibited activities, including transacting with certain foreign individuals or companies, operating in
or  cooperation  with  entities  from  certain  foreign  jurisdictions  or  with  foreign  government  entities,  or  authorizing,
promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper payments or anything else
of value to or from recipients in the public or private sector. Violations of Trade Laws can result in substantial criminal
fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and
fraud litigation, reputational harm and other consequences.

Our  business  is  heavily  regulated  and  therefore  involves  significant  interaction  with  public  officials.  We  have
direct  or  indirect  interactions  with  officials  and  employees  of  government  agencies  or  government-affiliated  hospitals,
universities and other organizations. We also expect our non-U.S. activities to increase in time. Additionally, in many other
countries, the health care providers who prescribe pharmaceuticals are employed by their government, and the purchasers
of  pharmaceuticals  are  government  entities;  therefore,  our  dealings  with  these  prescribers  and  purchasers  are  subject  to
regulation under the U.S. Foreign Corrupt Practices Act of 1977, as amended, or “FCPA”. We plan to engage third parties
for clinical trials or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals and we can be
held  liable  for  the  corrupt  or  other  illegal  activities  of  our  personnel,  agents,  or  partners,  even  if  we  do  not  explicitly
authorize or have prior knowledge of such activities. In particular, our operations will be subject to FCPA, which prohibits,
among other things, U.S. companies and their employees and agents from authorizing, promising, offering, or providing,
directly or indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of
public  international  organizations  and  foreign  government-owned  or  affiliated  entities,  candidates  for  foreign  political
office, and foreign political parties or officials thereof. Recently, the SEC and Department of Justice have increased their
FCPA enforcement activities with respect to biotechnology and pharmaceutical companies. There is no certainty that all of
our employees, agents, suppliers, manufacturers, contractors, or collaborators, or those of our affiliates, will comply with
all applicable laws and regulations, particularly given the high level of complexity of these laws.

52

Table of Contents

Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers, or our employees,
the closing down of facilities, including those of our suppliers and manufacturers, requirements to obtain export licenses,
cessation  of  business  activities  in  sanctioned  countries,  implementation  of  compliance  programs  and  prohibitions  on  the
conduct of our business. Any such violations could also result in prohibitions on our ability to offer our products in one or
more countries as well as difficulties in manufacturing or continuing to develop our products, and could materially damage
our reputation, our brand, our international expansion efforts, our ability to attract and retain employees and our business,
prospects, operating results and financial condition.

We  collaborate  with  research  institutions,  strategic  business  partners,  and  contractors,  including  contract
manufacturing  organizations,  that  are  located  within,  and  exist  under  the  laws  of  foreign  countries.   As  the  Trade  Laws
evolve  and  change,  it  may  restrict  our  ability  to  continue  to  collaborate  with  our  preferred  partners,  institutions  and
contractors abroad.  If Trade Laws are adopted that impact our foreign collaborators, such laws could materially negatively
impact our ability to develop, manufacture and obtain marketing approval for our product candidates.  For example, the
BIOSECURE Act (H.R. 7085) legislation introduced in the United States Congress on January 25, 2024, if enacted, could
restrict the ability of U.S. pharmaceutical companies to collaborate with certain Chinese entities without losing the ability
to contract with the U.S. government. Such could harm our ability to operate our business and our financial results.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or
penalties or incur costs that could have a material adverse effect on the success of our business.

We  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.  Our
operations  involve  the  use  of  hazardous  and  flammable  materials,  including  chemicals  and  biological  materials.  Our
operations  also  produce  hazardous  waste  products.  We  generally  contract  with  third  parties  for  the  disposal  of  these
materials  and  wastes.  We  cannot  eliminate  the  risk  of  contamination  or  injury  from  these  materials.  In  the  event  of
contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages,
and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines
and penalties.

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 connection with our storage or disposal of biological or hazardous materials.

Risks Related to Manufacturing

Given our limited operating history, our manufacturing experience as an organization and with our manufacturing
facility is limited.

Manufacturing is a critical component of our approach to developing therapies and we have invested significantly
in our manufacturing facility. We had manufactured our product candidates for preclinical and clinical trials, but announced
as  part  of  our  restructuring,  paused  the  manufacturing  operations  as  we  believe  ample  clinical  mAb  supply  has  been
produced, including the LNCB74 mAb intermediate, to supply programs in the near term.  

Manufacturing  drugs  for  clinical  trials  and  for  commercial  sale  is  subject  to  oversight  by  the  FDA  to  ensure
compliance with cGMP and by other regulatory authorities under other laws, regulations and standards. We cannot assure
you  that  we  can  successfully  manufacture  our  products  in  compliance  with  cGMP  and  with  any  other  applicable  laws,
regulations  and  standards  in  sufficient  quantities  for  clinical  trials  or  for  commercial  sale,  or  in  a  timely  or  economical
manner.

Our manufacturing facility requires specialized personnel and is expensive to operate and maintain. Validation is
an ongoing process that must be maintained to allow us to manufacture under cGMP guidelines. We cannot guarantee that
our facility will remain in compliance with cGMP.

Manufacturing pharmaceutical products is a highly complex process in which a variety of difficulties may arise

from time to time. We are currently the sole manufacturer of NC410, and the sole manufacturer of antibody materials for

53

Table of Contents

LNCB74, and if anything were to interfere with our continuing manufacturing operations in our facility, it could materially
adversely affect our business and financial condition.

If we fail to secure sufficient manufacturing capacity with a suitable third party, or fail to manufacture our product
candidates economically or on reasonable scale or volumes, or in accordance with cGMP, our development programs and
commercialization  of  any  approved  products  will  be  materially  adversely  affected.  This  may  result  in  delays  in
commencing or continuing our clinical trials for NC410 and LNCB74. Any such delays could materially adversely affect
our business and financial condition.

We may be unable to successfully scale-up manufacturing of our product candidates in sufficient quality and quantity,
which would delay or prevent us from developing and, if approved, commercializing our product candidates.

In  order  to  conduct  clinical  trials  of  our  product  candidates,  we  will  need  to  manufacture  them  in  sufficient
quantities. Currently, our product candidates are manufactured in small quantities for use in various preclinical studies and
our ongoing Phase 1/2 clinical trials of NC410 Combo and Phase 1 clinical trial of NC525. If one or more of our product
candidates  progress  to  late-stage  development,  we  will  need  to  scale  up  our  internal  capabilities  or  otherwise  source
suitable third party manufacturing capabilities, which may require additional significant expenses in the further expansion
or  construction  of  manufacturing  facilities  and  increases  in  personnel  in  order  to  manufacture  product  candidates  in
sufficient quantities. We cannot assure you that we will be able to successfully manufacture product candidates at a larger
scale  in  a  timely  or  economical  manner,  or  at  all.  If  we  are  unable  to  successfully  scale  our  internal  and/or  external
manufacturing    capacity,  the  development,  testing  and  clinical  trials  of  our  current  or  future  product  candidates  may  be
delayed  or  infeasible,  and  regulatory  approval  or  commercial  launch  of  any  resulting  product  may  be  delayed  or  not
obtained, which could significantly harm our business.

The loss of our third-party manufacturing partners or our, or our partners’, failure to comply with applicable regulatory
requirements or to supply sufficient quantities at acceptable quality levels or prices, or at all, would materially and
adversely affect our business.

Although  we  have  manufactured  our  product  candidates  NC410  and  NC525  for  preclinical  and  clinical  trials,
certain  elements  of  manufacturing,  including  Master  Cell  Bank  manufacturing  and  fill-finish  services,  take  place  at
qualified third-party contract manufacturing organizations, or CMOs. Further, we are working with CMOs to manufacture
drug substance for LNCB74 in addition to providing Master Cell Bank manufacturing and fill-finish services.  If approved,
commercial supply of NC410, LNCB74 and any future product candidates may be manufactured at a CMO or CMOs.

The  facilities  used  by  our  CMOs  to  manufacture  our  product  candidates  are  subject  to  various  regulatory
requirements  and  may  be  subject  to  the  inspection  of  the  FDA  or  other  regulatory  authorities.  We  do  not  control  the
manufacturing  process  at  our  CMOs  and  are  completely  dependent  on  them  for  compliance  with  current  regulatory
requirements.  If  we  or  our  CMOs  cannot  successfully  manufacture  material  that  conforms  to  our  specifications  and  the
strict regulatory requirements of the FDA or comparable regulatory authorities in foreign jurisdictions, we may not be able
to rely on their manufacturing facilities for manufacturing elements of our product candidates. In addition, we have limited
control over the ability of our CMOs to maintain adequate quality control, quality assurance and qualified personnel. If the
FDA or a comparable foreign regulatory authority finds our facilities or those of our CMOs inadequate for manufacturing
our product candidates or if such facilities are subject to enforcement action in the future or are otherwise inadequate, we
may  need  to  find  alternative  manufacturing  facilities,  which  would  significantly  impact  our  ability  to  develop,  obtain
regulatory approval for or market our product candidates.

Further,  any  facilities  located  outside  the  United  States  that  are  used  by  our  CMOs  to  manufacture  our  product
candidates, including LNCB74, will likewise be subject to various regulatory requirements of the jurisdiction in which they
are located and in addition be subject to Trade Laws and regulations of the United States that may restrict our ability to
continue to utilize our preferred CMOs.  For example, WuXi XDC, which is currently the only CDMO we currently use to
conjugate our B7-H4 antibody and produce LNCB74 ADC drug product, is affiliated with WuXi AppTec. WuXi AppTec
was  identified  as  a  United  States  national  security  threat  in  the  proposed  BIOSECURE  Act,  which  if  enacted,  or  if
alternatively implemented through executive or administrative action, could restrict WuXi’s business in the United States
or the ability of businesses in the United States to conduct business with WuXi. Moreover, if a foreign regulatory authority
curtails operations at such foreign facilities of our CMOs, or if Trade Laws are adopted limiting our ability to use such

54

Table of Contents

CMO facilities, we may need to find alternative manufacturing facilities, which would significantly impact our ability to
develop, obtain regulatory approval for or market our product candidates.

Additionally,  our  CMOs  may  experience  manufacturing  difficulties  due  to  resource  constraints  or  as  a  result  of
labor disputes or unstable political environments. If our CMOs were to encounter any of these difficulties, our ability to
provide  our  product  candidate  to  patients  in  clinical  trials,  or  to  provide  product  for  the  treatment  of  patients  once
approved, would be jeopardized.

We are subject to multiple manufacturing risks, any of which could substantially increase our costs and limit supply of
our product candidates.

The  process  of  manufacturing  therapies,  including  our  product  candidates,  is  complex,  time-consuming,  highly

regulated and subject to several risks, including:

● product loss during the manufacturing process, including loss caused by contamination, equipment failure or
improper  installation  or  operation  of  equipment,  or  operator  error.  Even  minor  deviations  from  normal
manufacturing  processes  could  result  in  reduced  production  yields,  product  defects  and  other  supply
disruptions. If microbial, viral or other contaminations are discovered in our products or in the manufacturing
facilities  in  which  our  products  are  made,  such  manufacturing  facilities  may  need  to  be  closed  for  an
extended period of time to investigate and remedy the contamination;

● the  manufacturing  facilities  in  which  our  products  are  made  could  be  adversely  affected  by  equipment
failures, labor and raw material shortages, including due to restrictions on the movement of people or goods,
natural disasters, public health emergencies, power failures, other business disruptions and numerous other
factors; and

● any  adverse  developments  affecting  manufacturing  operations  for  our  products  may  result  in  shipment
delays, inventory shortages, lot failures, product withdrawals or recalls, or other interruptions in the supply of
our  products.  We  may  also  have  to  take  inventory  write-offs  and  incur  other  charges  and  expenses  for
products  that  fail  to  meet  specifications,  undertake  costly  remediation  efforts  or  seek  more  costly
manufacturing alternatives.

We may also make changes to our manufacturing processes at various points during development, for a number of
reasons,  such  as  controlling  costs,  achieving  scale,  decreasing  processing  time,  increasing  manufacturing  success  rate  or
other reasons. Such changes carry the risk that they will not achieve their intended objectives, and any of these changes
could cause our product candidates to perform differently and affect the results of our ongoing or future clinical trials. In
some circumstances, changes in the manufacturing process may require us to perform ex vivo comparability studies and to
collect additional data from patients prior to undertaking more advanced clinical trials. For instance, changes in our process
during the course of clinical development may require us to show the comparability of the product used in earlier clinical
phases or at earlier portions of a trial to the product used in later clinical phases or later portions of the trial.

We depend on third-party suppliers for key materials used in our manufacturing processes, and the loss of these third-
party suppliers or their inability to supply us with adequate materials, or rising prices due to inflation, could harm our
business.

We rely on third-party suppliers for certain materials and components required for the production of our product
candidates. Our dependence on these third-party suppliers and the challenges we may face in obtaining adequate supplies
of materials involve several risks, including limited control over pricing, availability, and quality and delivery schedules.
As a small company, our negotiation leverage is limited, and we are likely to get lower priority than our competitors that
are  larger  than  we  are.  In  addition,  COVID-19,  the  war  in  Russia  and  Ukraine,  and  resulting  economic  conditions  have
disrupted  global  supply  chains,  including  pharmaceutical  and  medical  supply  chains.  We  cannot  be  certain  that  our
suppliers  will  continue  to  provide  us  with  the  quantities  of  the  raw  materials  that  we  require  or  satisfy  our  anticipated
specifications  and  quality  requirements  whether  due  to  our  size,  COVID-19,  or  otherwise.   Any  supply  interruption  in
limited or sole sourced raw materials could materially harm our ability to manufacture our product candidates until a new
source of supply, if any, could be identified and qualified. We may be unable to find a sufficient alternative supply channel
in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could delay
the development and potential commercialization of our product candidates, including limiting supplies necessary

55

Table of Contents

for clinical trials and regulatory approvals, which would have a material adverse effect on our business. In addition, the
current inflationary period may result in higher prices from our suppliers, which could materially increase our costs.

Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay.

As product candidates proceed through preclinical studies to late-stage clinical trials towards potential approval
and commercialization, it is common that various aspects of the development program, such as manufacturing methods and
formulation, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they
will not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently
and  affect  the  results  of  planned  clinical  trials  or  other  future  clinical  trials  conducted  with  the  materials  manufactured
using altered processes. Such changes may also require additional testing, FDA notification or FDA approval. This could
delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical
trials, increase clinical trial costs, delay approval of our product candidates and jeopardize our ability to commence sales
and generate revenue.

Risks Related to Intellectual Property

We have filed patent applications for our product candidates, but no patent has yet issued from these applications. If we
are unable to obtain and maintain patent protection for our product candidates, or if the scope of the patent protection
obtained is not sufficiently broad or robust, our competitors could develop and commercialize products similar or
identical to ours, and our ability to successfully commercialize our product candidates may be adversely affected.

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 product candidates. We and our licensors have sought, and intend to seek, to protect our
proprietary  position  by  filing  patent  applications  in  the  United  States  and  abroad  related  to  our  product  candidates  and
technology  that  are  important  to  our  business.  To  date,  only  a  limited  number  of  patents  have  issued  from  our  patent
applications. 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. As a result, the issuance,
scope,  validity,  enforceability  and  commercial  value  of  our  patent  rights  are  highly  uncertain.  Our  pending  and  future
patent  applications  may  not  result  in  patents  being  issued  that  protect  our  technology  or  product  candidates  or  that
effectively  prevent  others  from  commercializing  competitive  technologies  and  product  candidates.  Because  patent
applications in the United States and most other countries are confidential for a period of time after filing, and some remain
so  until  issued,  we  cannot  be  certain  that  we  or  our  licensors  were  the  first  to  file  a  patent  application  relating  to  any
particular aspect of a product candidate. Furthermore, if third parties have filed such patent applications, we may challenge
their ownership, for example in a derivation proceeding before the USPTO, to determine who has the right to the claimed
subject  matter  in  the  applications.  Similarly,  if  our  patent  applications  are  challenged  in  a  derivation  proceeding,  the
USPTO may hold that a third-party is entitled to certain patent ownership rights instead of us. We may then be forced to
seek a license from the third party that may not be available on commercially favorable terms, or at all.

The  patent  prosecution  process  is  expensive,  time-consuming  and  complex,  and  we  may  not  be  able  to  file,
prosecute,  maintain,  enforce  or  license  all  necessary  or  desirable  patent  applications  at  a  reasonable  cost  or  in  a  timely
manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is
too late to obtain patent protection.

Even  if  the  patent  applications  we  license  or  own  do  issue  as  patents,  they  may  not  issue  in  a  form  that  will
provide us with any meaningful protection, prevent competitors or other third parties from competing with us or otherwise
provide us with any competitive advantage. Our competitors or other third parties may be able to circumvent our patents by
developing similar or alternative technologies or products that do not infringe our patents.

We are party to a license agreement with Yale University under which we acquired rights to intellectual property related
to certain of our product candidates. If we breach our obligations under this agreement, the agreement could be
terminated, which would adversely affect our business and prospects.

We are a party to a license agreement with Yale pursuant to which we in-license patents and technology for certain
of  our  product  candidates.  This  license  imposes  various  diligence,  milestone  payment,  royalty,  insurance  and  other
obligations on us. If we fail to comply with these and other obligations or otherwise materially breach this license

56

Table of Contents

agreement, Yale may have the right to terminate the license. If this agreement is terminated, we may not be able to develop,
manufacture, market or sell the product candidates or products covered by the agreement, or we would have to negotiate a
new or reinstated agreement, which may not be available to us on equally favorable terms, or at all.

Our intellectual property agreements with third parties may be subject to disagreements over contract interpretation,
which could narrow the scope of our rights to the relevant intellectual property or technology or increase our financial
or other obligations to our licensors.

Certain  provisions  in  our  intellectual  property  agreements  may  be  susceptible  to  multiple  interpretations.  The
resolution  of  any  contract  interpretation  disagreement  that  may  arise  could  affect  the  scope  of  our  rights  to  the  relevant
intellectual  property  or  technology  or  affect  financial  or  other  obligations  under  the  relevant  agreement,  either  of  which
could have a material adverse effect on our business, financial condition, results of operations and prospects. Moreover, if
disputes  over  intellectual  property  that  we  have  licensed  prevent  or  impair  our  ability  to  maintain  our  current  licensing
arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected
product candidates.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document
submission, fee payment and other requirements imposed by government patent agencies, and our patent protection
could be reduced or eliminated for non-compliance with these requirements.

Periodic  maintenance  fees,  renewal  fees,  annuity  fees  and  various  other  government  fees  on  patents  or
applications will be due to be paid to the USPTO and various government patent agencies outside of the United States over
the lifetime of our licensed patents or applications and any patent rights we own or may own in the future. We rely, in part,
on our outside counsel or our licensing partners to pay these fees due to the USPTO and to non-U.S. patent agencies. The
USPTO and various non-U.S. government patent agencies require compliance with several procedural, documentary, fee
payment  and  other  similar  provisions  during  the  patent  application  process.  In  many  cases,  an  inadvertent  lapse  can  be
cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in
which  non-compliance  can  result  in  abandonment  or  lapse  of  the  patent  or  patent  application,  resulting  in  partial  or
complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the
market and this circumstance could have a material adverse effect on our business.

We may not be able to protect our intellectual property rights throughout the world.

Filing,  prosecuting  and  enforcing  patents  on  product  candidates  in  all  countries  throughout  the  world  would  be
prohibitively  expensive,  and  our  intellectual  property  rights  in  some  countries  outside  the  United  States  are  and  could
remain  less  extensive  than  those  in  the  United  States.  In  addition,  the  laws  of  some  foreign  countries  do  not  protect
intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may be less
likely  to  be  able  to  prevent  third  parties  from  infringing  our  patents  in  all  countries  outside  the  United  States,  or  from
selling or importing products that infringe our patents in and into the United States or other jurisdictions. Competitors may
use  our  technologies  in  jurisdictions  where  we  have  not  obtained  patent  protection  to  develop  their  own  products  and,
further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as
strong  as  that  in  the  United  States.  These  products  may  compete  with  our  products  and  our  patents  or  other  intellectual
property rights may not be effective or sufficient to prevent them from competing.

Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses
to third parties. In addition, many countries limit the enforceability of patents against government agencies or government
contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of
such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to
our  business,  our  competitive  position  may  be  impaired  and  our  business,  financial  condition,  results  of  operations  and
prospects may be adversely affected.

Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our
product candidates.

Changes  in  either  the  patent  laws  or  interpretation  of  the  patent  laws  in  the  United  States  could  increase  the
uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents.
Assuming that other requirements for patentability were met, prior to March 2013, in the United States, the first to invent

57

Table of Contents

the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was
entitled to the patent. After March 2013, under the Leahy-Smith America Invents Act, or the “America Invents Act”, the
United States transitioned to a first inventor to file system in which, assuming that other requirements for patentability are
met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third
party was the first to invent the claimed invention. The America Invents Act also included a number of significant changes
that affected the way patent applications are prosecuted and also may affect patent litigation. These include allowing third-
party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity or
ownership of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review and
derivation  proceedings.  Additional  changes  in  patent  law  could  increase  the  uncertainties  and  costs  surrounding  the
prosecution  of  our  patent  applications  and  the  enforcement  or  defense  of  our  issued  patents,  all  of  which  could  have  a
material adverse effect on our business, financial condition, results of operations and prospects.

In  addition,  the  patent  positions  of  companies  in  the  development  and  commercialization  of  biologics  and
pharmaceuticals are particularly uncertain. Recent rulings from the U.S. Court of Appeals for the Federal Circuit and the
U.S.  Supreme  Court  have  narrowed  the  scope  of  patent  protection  available  in  certain  circumstances  and  weakened  the
rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity
and enforceability of patents. Depending on future actions by the U.S. Congress, the federal courts and the USPTO, the
laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our
existing patent portfolio and our ability to protect and enforce our intellectual property in the future.

We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time-
consuming and unsuccessful.

Competitors  may  infringe  our  patents  or  the  patents  of  our  licensors,  or  we  may  be  required  to  defend  against
claims of infringement. Countering infringement or unauthorized use claims or defending against claims of infringement
can  be  expensive  and  time-consuming.  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
marketing, sales or distribution activities. We may not have sufficient financial or other resources to adequately conduct
such litigation or proceedings. 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  and  more  mature  and  developed  intellectual
property  portfolios.  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.

In  addition,  many  companies  have  encountered  significant  problems  in  protecting  and  defending  intellectual
property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do
not  favor  the  enforcement  of  patents,  trade  secrets  and  other  intellectual  property,  particularly  those  relating  to
biotechnology  products,  which  could  make  it  difficult  for  us  to  stop  the  infringement  of  our  patents  or  marketing  of
competing  products  in  violation  of  our  proprietary  rights  generally.  Proceedings  to  enforce  our  patent  rights  in  foreign
jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could
put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and
could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages
or  other  remedies  awarded,  if  any,  may  not  be  commercially  meaningful.  Accordingly,  our  efforts  to  enforce  our
intellectual  property  rights  around  the  world  may  be  inadequate  to  obtain  a  significant  commercial  advantage  from  the
intellectual property that we own, develop or license.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court. We may
not be able to protect our trade secrets in court.

If we or one of our licensing partners initiate legal proceedings against a third party to enforce any patent that is
issued  covering  one  of  our  product  candidates,  the  defendant  could  counterclaim  that  the  patent  covering  our  product
candidate is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity
or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several
statutory requirements, including lack of novelty, obviousness, written description or non-enablement. In addition, patent

58

Table of Contents

validity  challenges  may,  under  certain  circumstances,  be  based  upon  non-statutory  obviousness-type  double  patenting,
which, if successful, could result in a finding that the claims are invalid for obviousness-type double patenting or the loss
of  patent  term,  including  a  patent  term  adjustment  granted  by  the  USPTO,  if  a  terminal  disclaimer  is  filed  to  obviate  a
finding  of  obviousness-type  double  patenting.  Grounds  for  an  unenforceability  assertion  could  be  an  allegation  that
someone connected with prosecution of the patent withheld information material to patentability from the USPTO, or made
a misleading statement, during prosecution. Third parties also may raise similar claims before administrative bodies in the
United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review,
inter partes review and equivalent proceedings in foreign jurisdictions. Such proceedings could result in the revocation or
cancellation of or amendment to our patents in such a way that they no longer cover our product candidates. The outcome
following  legal  assertions  of  invalidity  and  unenforceability  is  unpredictable.  We  cannot  be  certain  that  there  is  no
invalidating prior art of which the patent examiner and we or our licensing partners were unaware during prosecution. If a
defendant were to prevail on a legal assertion of invalidity or unenforceability, we could lose part, and perhaps all, of the
patent protection on one or more of our product candidates. Such a loss of patent protection could have a material adverse
impact on our business.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements
to  protect  proprietary  know-how  that  is  not  patentable  or  that  we  elect  not  to  patent,  processes  for  which  patents  are
difficult  to  enforce  and  any  other  elements  of  our  product  candidate  discovery  and  development  processes  that  involve
proprietary know-how, information or technology that is not covered by patents, including portions of our FIND platform.
However, trade secrets can be difficult to protect, and some courts inside and outside the United States are less willing or
unwilling to protect trade secrets.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the
outcome of which would be uncertain and could have a material adverse effect on the success of our business and
financial condition.

Our commercial success depends upon our ability and the ability of any collaborators to develop, manufacture,
market and sell our product candidates and use our proprietary technologies without infringing the proprietary rights and
intellectual property of third parties. We cannot provide any assurances that third-party patents do not exist which might be
enforced against our current manufacturing methods, product candidates or future methods or products, resulting in either
an injunction prohibiting our manufacture or sales, or, with respect to our sales, an obligation on our part to pay royalties or
other forms of compensation to third parties.

The biotechnology and pharmaceutical industries are characterized by extensive and complex litigation regarding
patents  and  other  intellectual  property  rights.  We  may  in  the  future  become  party  to,  or  be  threatened  with,  adversarial
proceedings  or  litigation  regarding  intellectual  property  rights  with  respect  to  our  product  candidates  and  technology,
including post grant review and inter partes review before the USPTO. The risks of being involved in such litigation and
proceedings may also increase as our product candidates approach commercialization and as we gain greater visibility as a
public company. Third parties may assert infringement claims against us based on existing patents or patents that may be
granted in the future, regardless of their merit. There is a risk that third parties may choose to engage in litigation with us to
enforce or to otherwise assert their patent rights against us. Even if we believe such claims are without merit, a court of
competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, which could materially
and  adversely  affect  our  ability  to  commercialize  any  of  our  product  candidates  or  technologies  covered  by  the  asserted
third-party patents.

If we are found to infringe a third party’s valid and enforceable intellectual property rights, we could be required
to obtain a license from such third party to continue developing, manufacturing and marketing our product candidates and
technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even
if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access
to  the  same  technologies  licensed  to  us,  and  it  could  require  us  to  make  substantial  licensing  and  royalty  payments.  We
could  be  forced,  including  by  court  order,  to  cease  developing,  manufacturing  and  commercializing  the  infringing
technology or product candidates. 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 from manufacturing and commercializing our product candidates or force us to cease some
of  our  business  operations,  which  could  materially  harm  our  business.  Claims  that  we  have  misappropriated  the
confidential  information  or  trade  secrets  of  third  parties  could  have  a  similar  negative  impact  on  our  business,  financial
condition, results of operations and prospects.

59

Table of Contents

Others may claim an ownership interest in our intellectual property and our product candidates, which could expose us
to litigation and have a significant adverse effect on our prospects.

While we are presently unaware of any claims or assertions by third parties with respect to our patents or other
intellectual property, we cannot guarantee that a third party will not assert a claim or an interest in any of such patents or
intellectual property. For example, a third party may claim an ownership interest in one or more of our, or our licensors’,
patents  or  other  proprietary  or  intellectual  property  rights.  A  third  party  could  bring  legal  actions  against  us  to  seek
monetary damages or enjoin clinical testing, manufacturing or marketing of the affected product candidate or product. If
we  become  involved  in  any  litigation,  it  could  consume  a  substantial  portion  of  our  resources  and  cause  a  significant
diversion of effort by our technical and management personnel. If any such action is successful, in addition to any potential
liability for damages, we could be required to obtain a license to continue to manufacture or market the affected product
candidate or product, in which case we could be required to pay substantial royalties or grant cross-licenses to patents. We
cannot, however, assure you that any such license would be available on acceptable terms, if at all. Ultimately, we could be
prevented from commercializing a product, or forced to cease some aspect of our business operations as a result of claims
of  patent  infringement  or  violation  of  other  intellectual  property  rights.  Further,  the  outcome  of  intellectual  property
litigation is subject to uncertainties that cannot be adequately quantified in advance, including the demeanor and credibility
of witnesses and the identity of any adverse party. This is especially true in intellectual property cases, which may turn on
the testimony of experts as to technical facts upon which experts may reasonably disagree. Any of the foregoing could have
a material adverse effect on our business, financial condition, results of operations or prospects.

If we are unable to protect the confidentiality of our proprietary information, the value of our technology and products
could be adversely affected.

Trade  secrets  and  know-how  can  be  difficult  to  protect.  To  maintain  the  confidentiality  of  trade  secrets  and
proprietary information, we enter into confidentiality agreements with our employees, consultants, collaborators and others
upon  the  commencement  of  their  relationships  with  us.  These  agreements  require  that  all  confidential  information
developed by the individual or made known to the individual by us during the course of the individual’s relationship with
us be kept confidential and not disclosed to third parties. Our agreements with employees and our personnel policies also
provide  that  any  inventions  conceived  by  the  individual  in  the  course  of  rendering  services  to  us  shall  be  our  exclusive
property. However, we cannot guarantee that we have entered into such agreements with each party that may have or have
had  access  to  our  trade  secrets  or  proprietary  technology  and  processes,  and  individuals  with  whom  we  have  these
agreements may not comply with their terms. Thus, despite such agreement, there can be no assurance that such inventions
will  not  be  assigned  to  third  parties.  In  the  event  of  unauthorized  use  or  disclosure  of  our  trade  secrets  or  proprietary
information, these agreements, even if obtained, may not provide meaningful protection, particularly for our trade secrets
or other confidential information. To the extent that our employees, consultants or contractors use technology or know-how
owned by third parties in their work for us, disputes may arise between us and those third parties as to the rights in related
inventions. To the extent that an individual who is not obligated to assign rights in intellectual property to us is rightfully an
inventor of intellectual property, we may need to obtain an assignment or a license to that intellectual property from that
individual,  or  a  third  party  or  from  that  individual’s  assignee.  Such  assignment  or  license  may  not  be  available  on
commercially reasonable terms or at all. We also seek to preserve the integrity and confidentiality of our trade secrets by
other  means,  including  maintaining  physical  security  of  our  premises  and  physical  and  electronic  security  of  our
information technology systems. However, these security measures may be breached, and we may be forced to bring claims
against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our
intellectual property.

Adequate remedies may not exist in the event of unauthorized use or disclosure of our proprietary information.
The disclosure of our trade secrets would impair our competitive position and may materially harm our business, financial
condition and results of operations. Costly and time-consuming litigation could be necessary to enforce and determine the
scope  of  our  proprietary  rights,  and  failure  to  maintain  trade  secret  protection  could  adversely  affect  our  competitive
business position. In addition, others may independently discover or develop our trade secrets and proprietary information,
and the existence of our own trade secrets affords no protection against such independent discovery. For example, a public
presentation  in  the  scientific  or  popular  press  on  the  properties  of  our  product  candidates  could  motivate  a  third  party,
despite any perceived difficulty, to assemble a team of scientists having backgrounds similar to those of our employees to
attempt to independently reverse engineer or otherwise duplicate our antibody technologies to replicate our success.

60

Table of Contents

We may be subject to claims asserting that our employees, consultants or advisors have wrongfully used or disclosed
alleged trade secrets of their current or former employers.

Many  of  our  employees,  consultants  or  advisors  are  currently,  or  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, consultants and advisors do not use the proprietary information or know-how of others in their
work  for  us,  we  may  be  subject  to  claims  that  these  individuals,  or  we,  have  used  or  disclosed  intellectual  property,
including trade secrets or other proprietary information, of any such individual’s current or former employer, or that patents
and applications we have filed to protect inventions of these employees, even those related to one or more of our product
candidates, are rightfully owned by their former or current employer. Litigation may be necessary to defend against these
claims. For example, in 2021, a third party filed a lawsuit in Federal court against the Company, and in 2022 claims were
added to that lawsuit to add our Chief Executive Officer as a co-defendant with Company.  This lawsuit alleges that our
Chief  Executive  Officer  breached  contractual  and  fiduciary  duties  he  owed  to  the  plaintiff  by,  among  other  things,
improperly  utilizing  plaintiff’s  purported  confidential  information  to  benefit  the  Company’s  business,  including  with
respect to our discovery efforts. For more information regarding these proceedings, please refer to Note 8 to the Company’s
Financial Statements. If we fail in defending claims of misappropriation and similar claims, in addition to paying monetary
damages,  we  may  lose  valuable  intellectual  property  rights  or  personnel.  Even  if  we  are  successful  in  defending  against
such claims, litigation could result in substantial costs and be a distraction to management.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in
our markets of interest and our business may be adversely affected.

Any registered trademarks or trade names may be challenged, circumvented or declared generic or determined to
be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need
to  build  name  recognition  among  potential  partners  or  customers  in  our  markets  of  interest.  At  times,  competitors  may
adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading
to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners
of  other  registered  trademarks  or  trademarks  that  incorporate  variations  of  our  registered  or  unregistered  trademarks  or
trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names,
then  we  may  not  be  able  to  compete  effectively,  and  our  business  may  be  adversely  affected.  Our  efforts  to  enforce  or
protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property
may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial
condition or results of operations.

Intellectual property rights do not necessarily address all potential threats.

The  degree  of  future  protection  afforded  by  our  intellectual  property  rights  is  uncertain  because  intellectual
property  rights  have  limitations  and  may  not  adequately  protect  our  business  or  permit  us  to  maintain  our  competitive
advantage. For example:

● others may be able to make products that are similar to our product candidates but that are not covered by the

claims of the patents that we own or license or may own in the future;

● we,  or  any  partners  or  collaborators,  might  not  have  been  the  first  to  make  the  inventions  covered  by  the

issued patent or pending patent application that we license or may own in the future;

● we, or any partners or collaborators, might not have been the first to file patent applications covering certain

of our or their inventions;

● others  may  independently  develop  similar  or  alternative  technologies  or  duplicate  any  of  our  technologies

without infringing our owned or licensed intellectual property rights;

● it is possible that our pending licensed patent applications or those that we may own in the future will not

lead to issued patents;

● issued  patents  that  we  hold  rights  to  may  be  held  invalid  or  unenforceable,  including  as  a  result  of  legal

challenges by our competitors;

61

Table of Contents

● our competitors might conduct research and development activities in countries where we do not have patent
rights and then use the information learned from such activities to develop competitive products for sale in
our major commercial markets;

● we may not develop additional proprietary technologies that are patentable;

● the patents of others may have an adverse effect on our business; and

● we may choose not to file a patent for certain trade secrets or know-how, and a third party may subsequently

file a patent covering such intellectual property.

Should  any  of  these  events  occur,  they  could  significantly  harm  our  business,  financial  condition,  results  of

operations and prospects.

Risks Related to Reliance on Third Parties

We rely or will rely on third parties to help conduct our ongoing and planned preclinical studies and clinical trials for
NC410, NC525, LNCB74 and any future product candidates we develop. If these third parties do not successfully carry
out their contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to
obtain marketing approval for or commercialize NC410, NC525, LNCB74 and any future product candidates we
develop, and our business could be materially harmed.

We  currently  do  not  have  the  ability  to  independently  conduct  preclinical  studies  that  comply  with  GLP
requirements.  We  also  do  not  currently  have  the  ability  to  independently  conduct  any  clinical  trials.  The  FDA  and
regulatory  authorities  in  other  jurisdictions  require  us  to  comply  with  regulations  and  standards,  including  cGCP,  or
requirements for conducting, monitoring, recording and reporting the results of clinical trials, in order to ensure that the
data and results are scientifically credible and accurate and that the trial subjects are adequately informed of the potential
risks of participating in clinical trials. We rely on medical institutions, clinical investigators, contract laboratories and other
third  parties,  such  as  CROs,  to  conduct  GLP-compliant  preclinical  studies  and  cGCP-compliant  clinical  trials  on  our
product  candidates  properly  and  on  time.  While  we  have  agreements  governing  their  activities,  we  control  only  certain
aspects  of  their  activities  and  have  limited  influence  over  their  actual  performance.  The  third  parties  with  whom  we
contract for execution of our GLP-compliant preclinical studies and our cGCP-compliant clinical trials play a significant
role in the conduct of these studies and trials and the subsequent collection and analysis of data. These third parties are not
our  employees  and,  except  for  restrictions  imposed  by  our  contracts  with  such  third  parties,  we  have  limited  ability  to
control the amount or timing of resources that they devote to our current or future product candidates. Although we rely on
these  third  parties  to  conduct  our  GLP-compliant  preclinical  studies  and  cGCP-compliant  clinical  trials,  we  remain
responsible  for  ensuring  that  each  of  our  preclinical  studies  and  clinical  trials  is  conducted  in  accordance  with  its
investigational plan and protocol and applicable laws and regulations, and our reliance on the CROs does not relieve us of
our regulatory responsibilities.

Many  of  the  third  parties  with  whom  we  contract  may  also  have  relationships  with  other  commercial  entities,
including our competitors, for whom they may also be conducting clinical trials or other drug development activities that
could  harm  our  competitive  position.  Further,  under  certain  circumstances,  these  third  parties  may  terminate  their
agreements with us upon as little as 10 days’ prior written notice. Some of these agreements may also be terminated by
such third parties under certain other circumstances. If the third parties conducting our preclinical studies or our clinical
trials  do  not  adequately  perform  their  contractual  duties  or  obligations,  experience  significant  business  challenges,
disruptions  or  failures,  including  as  a  result  of  natural  disasters  or  public  health  emergencies  such  as  the  COVID-19
pandemic, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or
accuracy of the data they obtain is compromised due to their failure to adhere to our protocols or to GLP and cGCP, or for
any other reason, we may need to enter into new arrangements with alternative third parties. This could be difficult, costly
or impossible, and our preclinical studies or clinical trials may need to be extended, delayed, terminated or repeated. As a
result, we may not be able to obtain regulatory approval in a timely fashion, or at all, for the applicable product candidate,
our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase
and our ability to generate revenues could be delayed.

62

Table of Contents

We may depend on third-party collaborators for the discovery, development and commercialization of certain of
our current and future product candidates. If our collaborations are not successful, we may not be able to capitalize on the
market potential of these product candidates.

In  the  future,  we  may  form  or  seek  other  strategic  alliances,  joint  ventures  or  collaborations,  or  enter  into
additional  licensing  arrangements  with  third  parties  that  we  believe  will  complement  or  augment  our  development  and
commercialization efforts with respect to product candidates we develop.

Our  collaborations  pose,  and  potential  future  collaborations  involving  our  product  candidates  may  pose,  the

following risks to us:

● collaborators may have significant discretion in determining the efforts and resources that they will apply to

these collaborations;

● collaborators could independently develop, or develop with third parties, products that compete directly or

indirectly with our products or product candidates;

● collaborators may not properly enforce, maintain or defend our intellectual property rights or may use our
proprietary information in a way that gives rise to actual or threatened litigation or that could jeopardize or
invalidate  our  intellectual  property  or  proprietary  information,  exposing  us  to  potential  litigation  or  other
intellectual property proceedings;

● collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation

and potential liability;

● disputes  may  arise  between  a  collaborator  and  us  that  cause  the  delay  or  termination  of  the  research,
development  or  commercialization  of  the  product  candidate,  or  that  result  in  costly  litigation  or  arbitration
that diverts management attention and resources;

● a collaborator with marketing and distribution rights to one or more of our product candidates that achieve

regulatory approval may not commit sufficient resources to the marketing and distribution of such products;

● if a present or future collaborator were to be involved in a business combination, the continued pursuit and
emphasis  on  our  product  development  or  commercialization  program  under  such  collaboration  could  be
delayed, diminished or terminated; and

● collaboration agreements may restrict our right to independently pursue new product candidates.

If we enter into additional collaboration agreements and strategic partnerships or license our intellectual property,
products  or  businesses,  we  may  not  be  able  to  realize  the  benefit  of  such  transactions  if  we  are  unable  to  successfully
integrate them with our existing operations, which could delay our timelines or otherwise adversely affect our business. We
also  cannot  be  certain  that,  following  a  strategic  transaction  or  license,  we  will  achieve  the  revenue  or  net  income  that
justifies such transaction. Any of the factors set forth above and any delays in entering into new collaborations or strategic
partnership agreements related to any product candidate we develop could delay the development and commercialization of
our product candidates, which would harm our business prospects, financial condition and results of operations.

 In  the  event  a  present  or  future  collaborator  terminates  their  agreement  with  us,  we  would  be  prevented  from

receiving the benefits of any such agreement, which could have a materially adverse effect on our results of operations.

We may seek to establish additional collaborations and, if we are not able to establish them on commercially reasonable
terms, we may have to alter our development and commercialization plans.

The  advancement  of  our  product  candidates  and  development  programs  and  the  potential  commercialization  of
our current and future product candidates will require substantial additional cash to fund expenses. For some of our current
or future product candidates, we may decide to collaborate with additional pharmaceutical and biotechnology companies
with respect to development and potential commercialization. Any of these relationships may require us to incur non-

63

Table of Contents

recurring  and  other  charges,  increase  our  near-  and  long-term  expenditures,  issue  securities  that  dilute  our  existing
stockholders, or disrupt our management and business.

We  face  significant  competition  in  seeking  appropriate  strategic  partners  and  the  negotiation  process  is  time-
consuming  and  complex.  Whether  we  reach  a  definitive  agreement  for  other  collaborations  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 collaborator’s evaluation of a number of factors. Those factors may include the design or results of
clinical  trials,  the  progress  of  our  clinical  trials,  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,  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  and  industry  and  market  conditions  generally.  The  collaborator  may  also  consider
alternative product candidates or technologies for similar indications that may be available to collaborate on and whether
such a collaboration could be more attractive than the one with us for our product candidate.

Further,  we  may  not  be  successful  in  our  efforts  to  establish  a  strategic  partnership  or  other  alternative
arrangements for future product candidates because they may be deemed to be at too early of a stage of development for
collaborative effort and third parties may not view them as having the requisite potential to demonstrate safety and efficacy.

We may also be restricted under existing collaboration agreements from entering into future agreements on certain
terms with potential collaborators. Such exclusivity could limit our ability to enter into strategic collaborations with future
collaborators.  In  addition,  there  have  been  a  significant  number  of  recent  business  combinations  among  large
pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to
do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or
delay its development program or one or more of our other development programs, delay its potential commercialization or
reduce  the  scope  of  any  marketing  or  sales  activities,  or  increase  our  expenditures  and  undertake  development  or
commercialization  activities  at  our  own  expense.  If  we  elect  to  increase  our  expenditures  to  fund  development  or
commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on
acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates
or bring them to market and generate product revenue.

Risks Related to Our Business

We are highly dependent on our key personnel, and if we are not successful in attracting, motivating and retaining
highly qualified personnel, we may not be able to successfully implement our business strategy.

We  are  highly  dependent  on  members  of  our  executive  team.  The  loss  of  the  services  of  any  of  them  may
adversely impact the achievement of our objectives. Any of our executive officers could leave our employment at any time,
as  all  of  our  employees  are  “at-will”  employees,  and  we  do  not  have  “key  person”  insurance  on  them.  The  loss  of  the
services of one or more of our executive officers or of certain members of our SAB could impede the achievement of our
research, development and commercialization objectives.

Recruiting and retaining qualified employees, consultants and advisors for our business, including scientific and
technical  personnel,  is  critical  to  our  success.  We  have  observed  an  increasingly  competitive  labor  market.  Increased
employee turnover and changes in the availability of our workers could result in increased costs. We may not be able to
attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology
companies and academic institutions for skilled individuals. In addition, failure to succeed in preclinical studies, clinical
trials or applications for marketing approval may make it more challenging to recruit and retain qualified personnel. The
inability to recruit, or the loss of services of certain executives, key employees, consultants or advisors, may impede the
progress  of  our  research,  development  and  commercialization  objectives  and  have  a  material  adverse  effect  on  our
business, financial condition, results of operations and growth prospects.

64

Table of Contents

We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will
suffer if we fail to compete effectively.

The biotechnology industry is intensely competitive and subject to rapid and significant technological change. Our
current or future product candidates may face competition from major pharmaceutical companies, specialty pharmaceutical
companies,  universities  and  other  research  institutions  and  from  products  and  therapies  that  currently  exist  or  are  being
developed,  some  of  which  products  and  therapies  we  may  not  currently  know  about.  Many  of  our  competitors  have
significantly greater financial, manufacturing, marketing, product development, technical and human resources than we do.
Large  pharmaceutical  companies,  in  particular,  have  extensive  experience  in  clinical  testing,  obtaining  marketing
approvals, recruiting patients and manufacturing pharmaceutical products, and they may also have products that have been
approved  or  are  in  late  stages  of  development,  and  collaborative  arrangements  in  our  target  markets  with  leading
companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery
and development of novel compounds or to in-license novel compounds that could make the product candidates that we
develop  obsolete.  Mergers  and  acquisitions  in  the  pharmaceutical  and  biotechnology  industries  may  result  in  even  more
resources  being  concentrated  among  a  smaller  number  of  our  competitors.  As  a  result  of  all  of  these  factors,  our
competitors  may  succeed  in  obtaining  patent  protection  and/or  FDA  or  other  regulatory  approval  or  discovering,
developing and commercializing products in our field before we do, which could result in our competitors establishing a
strong market position before we are able to enter the market.

Our competitors may obtain FDA or other regulatory approval of their product candidates more rapidly than we
may or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize
our product candidates or platform technologies. Our competitors may also develop drugs or discovery platforms that are
more effective, more convenient, more widely used or less costly than our product candidates or, in the case of drugs, have
a  better  safety  profile  than  our  product  candidates.  These  competitors  may  also  be  more  successful  than  us  in
manufacturing and marketing their products and have significantly greater financial resources and expertise in research and
development.

There  are  a  large  number  of  companies  developing  or  marketing  treatments  for  cancer,  including  many  major
pharmaceutical and biotechnology companies. Currently marketed oncology drugs and therapeutics range from traditional
cancer  therapies,  including  chemotherapy,  to  antibody-drug  conjugates,  such  as  Genentech’s  Kadcyla,  to  immune
checkpoint inhibitors targeting CTLA-4, such as BMS’ Yervoy, and PD-1/PD-L1, such as BMS’ Opdivo, Merck & Co.’s
Keytruda and Genentech’s Tecentriq, to T-cell-engager immunotherapies, such as Amgen’s Blincyto. Companies are also
developing treatments targeting the Siglec family of proteins, such as Celldex Therapeutics and Palleon Pharmaceuticals,
both of which are currently engaged in preclinical studies. In addition, numerous compounds are in clinical development
for cancer treatment. Many of these companies are well-capitalized and have significant clinical experience (see “Business
—Competition”).

Smaller and other early-stage companies may also prove to be significant competitors. These third parties compete
with  us  in  recruiting  and  retaining  qualified  scientific  and  management  personnel,  establishing  clinical  trial  sites  and
patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our current
and future product candidates. In addition, the biopharmaceutical industry is characterized by rapid technological change.
If  we  fail  to  stay  at  the  forefront  of  technological  change,  we  may  be  unable  to  compete  effectively.  Technological
advances or products developed by our competitors may render our product candidates obsolete, less competitive or not
economical.

Our  commercial  opportunity  could  be  reduced  or  eliminated  if  our  competitors  develop  and  commercialize
products that are safer, more effective, have fewer or less severe side effects, are more convenient, have a broader label, are
marketed more effectively, are reimbursed or are less expensive than any products that we may develop. Our competitors
may also obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our
product  candidates  or  platform  technologies.  Even  if  our  product  candidates  achieve  marketing  approval,  they  may  be
priced  at  a  significant  premium  over  competitive  products  if  any  have  been  approved  by  then,  resulting  in  reduced
competitiveness.  If  we  do  not  compete  successfully,  we  may  not  generate  or  derive  sufficient  revenue  from  any  product
candidate for which we obtain marketing approval and may not become or remain profitable.

65

Table of Contents

We may need to grow the size of our organization, and we may experience difficulties in managing future growth.

As  our  development  plans  and  strategies  develop,  we  may  need  additional  managerial,  operational,  marketing,
sales,  financial  and  other  personnel.  Future  growth  would  impose  significant  added  responsibilities  on  members  of
management, including:

● identifying, recruiting, integrating, maintaining and motivating additional employees;

● managing  our  internal  development  efforts  effectively,  including  the  clinical  and  FDA  review  process  for
NC410,  LNCB74  and  any  future  product  candidates  we  develop,  while  complying  with  our  contractual
obligations to contractors and other third parties; and

● improving our operational, financial and management controls, reporting systems and procedures.

Our  future  financial  performance  and  our  ability  to  advance  development  of  and,  if  approved,  commercialize
NC410, LNCB74 and any future product candidates we develop will depend, in part, on our ability to effectively manage
any future growth, and our management may have to divert a disproportionate amount of its attention away from day-to-
day activities in order to devote a substantial amount of time to managing these growth activities.

We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent
organizations, advisors and consultants to provide certain services. We cannot assure you that the services of independent
organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can
find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or
accuracy  of  the  services  provided  by  consultants  is  compromised  for  any  reason,  our  clinical  trials  may  be  extended,
delayed or terminated, and we may not be able to obtain marketing approval of any current or future product candidates or
otherwise advance our business. We cannot assure you that we will be able to manage our existing consultants or find other
competent outside contractors and consultants on economically reasonable terms, or at all.

If we are not able to effectively expand our organization by hiring new employees and expanding our groups of
consultants  and  contractors,  we  may  not  be  able  to  successfully  implement  the  tasks  necessary  to  further  develop  and
commercialize  NC410,  LNCB74  and  any  future  product  candidates  we  develop  and,  accordingly,  may  not  achieve  our
research, development and commercialization goals.

If we are unable to establish marketing, sales and distribution capabilities for NC410, LNCB74 or any other product
candidate that may receive regulatory approval, we may not be successful in commercializing those product candidates
if and when they are approved.

We do not have sales or marketing infrastructure. To achieve commercial success for NC410, LNCB74 and any
other  product  candidate  for  which  we  may  obtain  marketing  approval,  we  will  need  to  establish  a  sales  and  marketing
organization. In the future, we expect to build a focused sales and marketing infrastructure to market some of our product
candidates  in  the  United  States,  if  and  when  they  are  approved.  There  are  risks  involved  with  establishing  our  own
marketing,  sales  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 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 market our products on our own include:

● our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;

● the inability of sales personnel to obtain access to physicians in order to educate physicians about our product

candidates, once approved;

● the  lack  of  complementary  products  to  be  offered  by  sales  personnel,  which  may  put  us  at  a  competitive

disadvantage relative to companies with more extensive product lines; and

66

Table of Contents

● unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If  we  are  unable  to  establish  our  own  marketing,  sales  and  distribution  capabilities  and  are  forced  to  enter  into
arrangements with, and rely on, third parties to perform these services, our revenue and our profitability, if any, are likely to
be  lower  than  if  we  had  developed  such  capabilities  ourselves.  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 we do not establish marketing, sales and
distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in
commercializing our product candidates.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of our
product candidates.

We face an inherent risk of product liability exposure related to the testing of our product candidates in human
trials and may face greater risk if we commercialize any products that we develop. Product liability claims may be brought
against  us  by  subjects  enrolled  in  our  trials,  patients,  healthcare  providers  or  others  using,  administering  or  selling  our
products. If we cannot successfully defend ourselves against such claims, we could incur substantial liabilities. Regardless
of merit or eventual outcome, liability claims may result in:

● decreased demand for any product candidate we may develop;

● withdrawal of trial participants;

● termination of clinical trial sites or entire trial programs;

● injury to our reputation and significant negative media attention;

● initiation of investigations by regulators;

● significant time and costs to defend the related litigation;

● substantial monetary awards to trial subjects or patients;

● diversion of management and scientific resources from our business operations; and

● the inability to commercialize any product candidates that we may develop.

While  we  currently  hold  trial  liability  insurance  coverage  consistent  with  industry  standards,  the  amount  of
coverage may not adequately cover all liabilities that we may incur. 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.  We  intend  to  expand  our  insurance
coverage  for  products  to  include  the  sale  of  commercial  products  if  we  obtain  marketing  approval  for  our  product
candidates,  but  we  may  be  unable  to  obtain  commercially  reasonable  product  liability  insurance.  A  successful  product
liability  claim  or  series  of  claims  brought  against  us,  particularly  if  judgments  exceed  our  insurance  coverage,  could
decrease our cash and adversely affect our business and financial condition.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls
and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act
is  accumulated  and  communicated  to  management,  and  recorded,  processed,  summarized  and  reported  within  the  time
periods  specified  in  the  rules  and  forms  of  the  SEC.  We  believe  that  any  disclosure  controls  and  procedures  or  internal
controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met.

67

Table of Contents

These  inherent  limitations  include  the  realities  that  judgments  in  decision-making  can  be  faulty,  and  that
breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual
acts  of  some  persons,  by  collusion  of  two  or  more  people  or  by  an  unauthorized  override  of  the  controls.  Accordingly,
because  of  the  inherent  limitations  in  our  control  system,  misstatements  due  to  error  or  fraud  may  occur  and  not  be
detected.

Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain
limitations.

We have incurred substantial losses during our history and do not expect to become profitable in the near future,
and we may never achieve profitability. To the extent that we continue to generate taxable losses, unused losses will carry
forward to offset future taxable income, if any, until such unused losses expire. As of December 31, 2023, we had federal
and state net operating loss carryforwards of $203.9 million and $208.5 million, respectively. Certain federal and state net
operating  loss  carryforwards  will  begin  to  expire,  if  not  utilized,  by  2036.  Limitations  imposed  by  the  applicable
jurisdictions  on  our  ability  to  utilize  net  operating  loss  carryforwards  could  cause  income  taxes  to  be  paid  earlier  than
would be paid if such limitations were not in effect and could cause such net operating loss carryforwards to expire unused,
in each case reducing or eliminating the benefit of such net operating loss carryforwards. Furthermore, we may not be able
to  generate  sufficient  taxable  income  to  utilize  our  net  operating  loss  carryforwards  before  they  expire.  If  any  of  these
events occur, we may not derive some or all of the expected benefits from our net operating loss carryforwards. In addition,
we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which
may be outside of our control. As a result, even if we earn net taxable income, our ability to use our net operating loss and
tax credit carryforwards may be materially limited, which could harm our future operating results by effectively increasing
our future tax obligations.

Natural disasters or other unexpected events may disrupt our operations, adversely affect our results of operations and
financial condition, and may not be covered by insurance.

The occurrence of one or more unexpected events, including fires, tornadoes, tsunamis, hurricanes, earthquakes,
floods,  and  other  forms  of  severe  hazards  in  the  United  States  or  in  other  countries  in  which  we  or  our  suppliers  or
manufacturers  operate  or  are  located  could  adversely  affect  our  operations  and  financial  performance.  These  types  of
unexpected events could result in physical damage to and complete or partial closure of one or more of the manufacturing
facilities operated by our contract manufacturers, or the temporary or long-term disruption in the supply of products, and/or
disruption  of  our  ability  to  deliver  products  to  customers.  Further,  the  long-term  effects  of  climate  change  on  general
economic conditions and the pharmaceutical manufacturing and distribution industry in particular are unclear, and changes
in the supply, demand or available sources of energy and the regulatory and other costs associated with energy production
and  delivery  may  affect  the  availability  or  cost  of  goods  and  services,  including  natural  resources,  necessary  to  run  our
businesses.  Existing  insurance  arrangements  may  not  provide  protection  for  the  costs  that  may  arise  from  such  events,
particularly if such events are catastrophic in nature or occur in combination. Any long-term disruption in our ability to
service our customers from one or more distribution centers or outsourcing facilities could have a material adverse effect
on our operations, our business, results of operations and stock price.

Failure to meet investor and stakeholder expectations regarding environmental, social and corporate governance, or
“ESG” matters may damage our reputation.

There  is  an  increasing  focus  from  certain  investors,  customers,  consumers,  employees  and  other  stakeholders
concerning ESG matters. Additionally, public interest and legislative pressure related to public companies’ ESG practices
continue to grow. If our ESG practices fail to meet investor, customer, consumer, employee or other stakeholders’ evolving
expectations  and  standards  for  responsible  corporate  citizenship  in  areas  including  environmental  stewardship,  Board  of
Directors  and  employee  diversity,  human  capital  management,  corporate  governance  and  transparency,  our  reputation,
brand, appeal to investors and employee retention may be negatively impacted, which could have a material adverse effect
on our business or financial condition.

68

Table of Contents

Risks Related to Our Common Stock

The price of our common stock has been and may continue to be volatile and fluctuate substantially.

Our  stock  price  has  been  and  is  likely  to  remain  volatile.  The  stock  market  in  general,  and  the  market  for
biopharmaceutical  companies  in  particular,  have  experienced  extreme  volatility  that  has  often  been  unrelated  to  the
operating performance or prospects of particular companies. As a result of this volatility, you may not be able to sell your
common stock at or above a recently reported price, or at all. The market price for our common stock may be influenced by
many factors, including:

● the  commencement,  enrollment  or  results  of  our  ongoing  or  future  clinical  trials,  or  changes  in  the

development status of our product candidates;

● any  delay  in  our  regulatory  filings  for  our  product  candidates  and  any  adverse  development  or  perceived
adverse development with respect to the applicable regulatory authority’s review of such filings, including
without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information;

● adverse results or delays in clinical trials;

● our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;

● adverse regulatory decisions, including failure to receive regulatory approval of our product candidates;

● our failure to commercialize our product candidates;

● unanticipated serious safety concerns related to the use of our product candidates;

● the size and growth of our target markets;

● the success of competitive products or technologies;

● regulatory actions with respect to our product candidates or our competitors’ products or product candidates;

● announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures,

collaborations or capital commitments;

● regulatory  or  legal  developments  in  the  United  States  and  other  countries  applicable  to  our  product

candidates, including but not limited to clinical trial requirements for approvals;

● our inability to obtain adequate product supply for any approved product or inability to do so at acceptable

prices;

● developments or disputes concerning patent applications, issued patents or other proprietary rights;

● the recruitment or departure of key personnel;

● the level of expenses related to our product candidates or clinical development programs;

● the results of our efforts to discover, develop, acquire or in-license product candidates;

● actual or anticipated changes in estimates as to financial results, development timelines or recommendations

by securities analysts or publications of research reports about us or our industry;

● variations in our annual or quarterly financial results or those of companies that are perceived by investors to

be similar to us;

69

Table of Contents

● our cash position;

● fluctuations in the valuation of companies perceived by investors to be comparable to us;

● share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

● announcement or expectation of additional financing efforts;

● sales of our common stock by us, our directors, officers or their affiliated funds or our other stockholders;

● changes in the structure of healthcare payment systems;

● significant lawsuits, including intellectual property or stockholder litigation;

● market conditions in the pharmaceutical and biotechnology sectors;

● general economic, industry and market conditions; and

● other events or factors, many of which are beyond our control, or unrelated to our operating performance or

prospects.

In addition, the stock market in general, and Nasdaq and biotechnology companies in particular, have experienced
extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of
these  companies.  Broad  market  and  industry  factors  may  negatively  affect  the  market  price  of  our  common  stock,
regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other
risks, including those described in this “Risk Factors” section, could have a dramatic and material adverse impact on the
market price of our common stock.

If securities analysts do not publish research or reports about our business or if they publish inaccurate or unfavorable
research about our business, the price of our stock could decline.

The  trading  market  for  our  common  stock  relies,  in  part,  on  the  research  and  reports  that  industry  or  financial
analysts  publish  about  us  or  our  business.  We  currently  receive  only  limited  coverage  by  equity  research  analysts.  If
additional analysts do not commence coverage of us, the trading price of our stock could decrease. In addition, if one or
more of the analysts covering our business issue adverse reports about us or downgrade their evaluations of our stock, the
price of our stock could decline. If one or more of these analysts cease to cover our stock or fail to publish reports on us
regularly, we could lose visibility in the market for our stock, which, in turn, could cause our stock price to decline.

Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall,
even if our business is doing well.

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the

public market, the market price of our common stock could decline significantly.

We have filed registration statements on Form S-8 shares of common stock that are either subject to options or
other equity awards issued or reserved for future issuance under our equity incentive plans. The number of shares available
for  issuance  under  the  2019  Omnibus  Plan  is  subject  to  an  automatic  annual  increase  on  January  1st  of  each  year,
continuing until the expiration of the 2019 Omnibus Plan, in an amount equal to four percent (4%) of the total number of
shares of Common Stock outstanding on December 31st of the preceding calendar year. The number of shares available for
issuance under the 2019 Employee Stock Purchase Plan, or “ESPP”, is subject to an automatic annual increase on January
1st of each year, continuing until the expiration of the ESPP, in an amount equal to the least of (i) one percent (1%) of the
total number of shares of Common Stock outstanding on December 31st of the preceding calendar year, (ii) 480,000 shares
of Common Stock (subject to the capitalization adjustment provisions included in the ESPP) and (iii) a number of shares of
Common Stock determined by the administrator of the ESPP. Shares registered under our registration statements on Form
S-8  will  be  available  for  sale  in  the  public  market  subject  to  vesting  arrangements  and  exercise  of  options  and  the
restrictions of Rule 144 in the case of our affiliates.

70

Table of Contents

Our executive officers, directors and current beneficial owners of 5% or more of our common stock and their respective
affiliates exercise significant influence over our company, which limits your ability to influence corporate matters and
could delay or prevent a change in corporate control.

Our  executive  officers,  directors  and  current  beneficial  owners  of  5%  or  more  of  our  common  stock  and  their
respective affiliates beneficially own, in the aggregate, approximately 18% of our outstanding common stock. As a result,
these stockholders, if they act together, will be able to influence our management and affairs and the outcome of matters
submitted to our stockholders for approval, including the election of directors and any sale, merger, consolidation or sale of
all  or  substantially  all  of  our  assets.  This  concentration  of  ownership  might  adversely  affect  the  market  price  of  our
common stock by:

● delaying, deferring or preventing a change of control of us;

● impeding a merger, consolidation, takeover or other business combination involving us; or

● discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

We had and may in the future be subject to securities litigation, which can be expensive and could divert management’s
attention.

Litigation is often expensive and can divert management’s attention and resources from other business concerns,
which  could  adversely  affect  our  business.  If  we  are  ultimately  required  to  pay  significant  defense  costs,  damages  or
settlement amounts, such payments could adversely affect our operations.

We have been and may be the target of securities litigation in the future. The market price of our common stock
has experienced and may continue to experience volatility, and in the past, companies that have experienced volatility in
the  market  price  of  their  stock  have  been  subject  to  securities  litigation.  Any  future  litigation  could  result  in  substantial
costs and divert our management’s attention from other business concerns, which could seriously harm our business. If we
are  ultimately  required  to  pay  significant  defense  costs,  damages  or  settlement  amounts,  such  payments  could  adversely
affect our operations. While we maintain liability insurance, costs or expenses associated with litigation may exceed our
insurance coverage, and we may be forced to bear some or all costs and expenses directly, which could be substantial.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which
may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove
our current management.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may delay or
prevent an acquisition of us or a change in our management. For example, our board of directors has the authority to issue
up  to  10,000,000  shares  of  preferred  stock.  The  board  of  directors  can  fix  the  price,  rights,  preferences,  privileges  and
restrictions  of  the  preferred  stock  without  any  further  vote  or  action  by  our  stockholders.  The  issuance  of  shares  of
preferred stock may delay or prevent a change of control transaction. As a result, the market price of our common stock
and the voting and other rights of our stockholders may be adversely affected. An issuance of shares of preferred stock may
result in the loss of voting control to other stockholders.

These provisions also include a classified board of directors, a prohibition on actions by written consent of our
stockholders  and  the  ability  of  our  board  of  directors  to  issue  preferred  stock  without  stockholder  approval.  In  addition,
because  we  are  incorporated  in  Delaware,  we  are  governed  by  the  provisions  of  Section  203  of  the  Delaware  General
Corporation  Law,  which  limits  the  ability  of  stockholders  owning  in  excess  of  15%  of  our  outstanding  voting  stock  to
merge or combine with us. Although we believe these provisions collectively provide for an opportunity to obtain greater
value for stockholders by requiring potential acquirers to negotiate with our board of directors, they would apply even if an
offer rejected by our board were considered beneficial by some stockholders. In addition, these provisions may frustrate or
prevent  any  attempts  by  our  stockholders  to  replace  or  remove  our  current  management  by  making  it  more  difficult  for
stockholders  to  replace  members  of  our  board  of  directors,  which  is  responsible  for  appointing  the  members  of  our
management.

71

Table of Contents

If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and
timely financial statements could be impaired, investors may lose confidence in our financial reporting and the trading
price of our common stock may decline.

When we lose our status as an “emerging growth company,” our independent registered public accounting firm
will be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the
Sarbanes Oxley Act. The rules governing the standards that must be met for management to assess our internal control over
financial reporting are complex and require significant documentation, testing and possible remediation. To comply with
the requirements of being a reporting company under the Exchange Act, we will need to implement additional financial
and management controls, reporting systems and procedures and hire additional accounting and finance staff.

We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control
over financial reporting in the future. Our independent registered public accounting firm will not be required to provide an
attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an “emerging
growth company,” which may increase the risk that material weaknesses or significant deficiencies in our internal control
over  financial  reporting  go  undetected.  Any  failure  to  maintain  internal  control  over  financial  reporting  could  severely
inhibit  our  ability  to  accurately  report  our  financial  condition,  results  of  operations  or  cash  flows.  If  we  are  unable  to
conclude that our internal control over financial reporting is effective, or if our independent registered public accounting
firm  determines  we  have  a  material  weakness  or  significant  deficiency  in  our  internal  control  over  financial  reporting,
investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common
stock  could  decline,  and  we  could  be  subject  to  sanctions  or  investigations  by  Nasdaq,  the  SEC  or  other  regulatory
authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or
maintain other effective control systems required of public companies, could also restrict our future access to the capital
markets.

We do not intend to pay dividends on our common stock, so any returns will be limited to the value of our stock.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our
business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders
will therefore be limited to the appreciation of their stock.

We have incurred and will continue to incur significantly increased costs as a result of operating as a public company,
and our management will be required to devote substantial time to new compliance initiatives.

As a public company we have incurred, and we expect, particularly after we are no longer an emerging growth
company, to continue to incur significant legal, accounting, investor relations and other expenses that we did not incur as a
private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing
requirements  of  Nasdaq  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. We expect these rules and regulations to substantially increase our legal and financial compliance costs and to
make some activities more time consuming and costly. For example, we expect that these rules and regulations may make it
more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur
substantial costs to maintain sufficient coverage. We cannot predict or estimate the amount or timing of additional costs we
may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to
attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. These
rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a
result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
This  could  result  in  continuing  uncertainty  regarding  compliance  matters  and  higher  costs  necessitated  by  ongoing
revisions to disclosure and governance practices.

72

Table of Contents

Our amended and restated bylaws designate the Court of Chancery of the State of Delaware or the United States District
Court for the District of Delaware as the exclusive forum for certain types of actions and proceedings that may be
initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for
disputes with us or our directors, officers or employees.

Our amended and restated bylaws provide that, unless we consent in writing to an alternative forum, the Court of
Chancery  of  the  State  of  Delaware  or,  if  subject  matter  jurisdiction  over  the  matter  that  is  the  subject  of  such  action  is
vested  exclusively  in  the  federal  courts,  the  United  States  District  Court  for  the  District  of  Delaware  will,  to  the  fullest
extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf,
(ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers and
employees, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law,
our certificate of incorporation or our bylaws, (iv) any action or proceeding to interpret, apply, enforce or determine the
validity of our certificate of incorporation or the bylaws or (v) any action asserting a claim that is governed by the internal
affairs  doctrine,  in  each  case  subject  to  the  Court  of  Chancery  or  the  United  States  District  Court  for  the  District  of
Delaware,  as  applicable,  having  personal  jurisdiction  over  the  indispensable  parties  named  as  defendants  therein.  In
addition, any person holding, owning or otherwise acquiring any interest in any of our securities shall be deemed to have
notice  of  and  to  have  consented  to  this  provision  of  our  bylaws.  The  choice  of  forum  provision  does  not  apply  to  any
actions  arising  under  the  Securities  Act  or  the  Exchange  Act.  The  choice  of  forum  provision  may  limit  a  stockholder’s
ability  to  bring  a  claim  in  a  judicial  forum  that  it  finds  favorable  for  disputes  with  us  or  our  directors,  officers  or
employees,  which  may  discourage  such  lawsuits  against  us  and  our  directors,  officers  and  employees  even  though  an
action, if successful, might benefit our stockholders. Stockholders who do bring a claim in the Court of Chancery or the
United States District Court for the District of Delaware could face additional litigation costs in pursuing any such claim,
particularly if they do not reside in or near the jurisdiction. The Court of Chancery or the United States District Court for
the District of Delaware may also reach different judgments or results than would other courts, including courts where a
stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or
results may be more favorable to us than to our stockholders. Alternatively, if a court were to find this provision of our
amended and restated bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions
or  proceedings,  we  may  incur  additional  costs,  which  could  have  a  material  adverse  effect  on  our  business,  financial
condition or results of operations.

Item 1B. Unresolved Staff Comments
Not Applicable.

Item 1C. Cybersecurity
In the ordinary course of our business, we collect, maintain and transmit large amounts of confidential information
in  digital  form,  including  intellectual  property,  proprietary  business  information,  financial  information,  personal
information, protected health information and data to comply with cGMP and data integrity requirements.  It is critical that
we do so in a secure manner to maintain data security and data integrity of such information. We have established physical,
electronic and organizational measures to safeguard and secure our systems to prevent a data compromise. We have also
outsourced  elements  of  our  information  technology  infrastructure  and  data  security  processes  to  a  number  of  expert
qualified third-party vendors to help us stay current with data and electronic information security best practices.

We  have  implemented  processes  designed  to  identify,  review  and  manage  risks  from  potential  data  breaches,
unauthorized  occurrences,  and  other  information  security  losses  on  or  through  our  information  technology  systems  that
could result in adverse effects on the confidentiality, integrity, and availability of our systems and electronic information.
These processes are managed and monitored by our information technology (IT) team as managed by our Chief Operating
Officer, or “COO”. Our COO has experience in overseeing our cybersecurity and information technology programs. We
rely heavily on information technology consultants for advice and expertise on monitoring evolving industry standards and
to  monitor  our  compliance  with  applicable  policies.  Our  processes  include  mechanisms,  controls,  technologies,  and
systems designed to prevent or mitigate data loss, theft, misuse, or other security incidents or vulnerabilities affecting the
data and maintain a stable information technology environment. With the assistance of our third-party vendors, we conduct
regular  penetration  and  vulnerability  testing,  security  audits,  and  ongoing  risk  assessments.    Our  internal  information
technology team conducts due diligence on key technology vendors, contractors and suppliers. We also conduct periodic
employee training on cyber and information security, among other topics, and conduct internal false flag and/or phishing
campaigns to identify any employees that might need additional training.

73

Table of Contents

Our  COO,  together  with  our  internal  IT  team,  are  responsible  for  assessing  and  managing  cybersecurity  risks.
  They  review  at  least  quarterly  with  our  expert  advisors  our  cybersecurity  measures  and  procedures  in  view  of  the
Company’s  cybersecurity  risks  to  anticipate  future  threats  and  trends,  and  determine  whether  and  how  to  adjust  our
strategies  and  processes  accordingly.  During  the  year  ended  December  31,  2023,  we  did  not  identify  risks  from  known
cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, but we face
certain  ongoing  cybersecurity  risks  or  threats  that,  if  realized,  are  reasonably  likely  to  materially  affect  us.  Additional
information on cybersecurity risks we face is discussed in Part I, Item 1A, “Risk Factors,” under the heading “We depend
on  data  and  our  information  technology  systems,  and  any  failure  of  these  systems  could  harm  our  business.  Security
breaches, loss of data, and other disruptions could compromise sensitive information related to our business or prevent us
from  accessing  critical  information  and  expose  us  to  liability,  which  could  adversely  affect  our  business,  results  of
operations and financial condition.”

The Board of Directors, with the assistance of the Audit Committee, has oversight for the most significant risks
facing  us  and  for  our  processes  to  identify,  prioritize,  assess,  manage,  and  mitigate  those  risks.  As  part  of  its  oversight
responsibilities,  the  Audit  Committee  receives  regular  updates  on  cybersecurity  and  information  technology  matters  and
related risk exposures from our COO. The Board also receives updates from the Audit Committee on cybersecurity risks on
at least an annual basis.

Item 2. Properties
Our corporate headquarters is located in Beltsville, Maryland and consists of approximately 28,500 square feet of
office,  20,600  square  feet  of  laboratory  and  manufacturing  and  20,200  square  feet  of  warehouse  space.  The  lease  terms
expire  in  March  2030.  We  believe  that  these  facilities  are  adequate  for  our  current  needs  and  that  suitable  additional  or
substitute space will be available in the future if needed.

Item 3. Legal Proceedings
The information set forth under the heading “Legal Proceedings” in Note 8, Commitments and Contingencies, in

Notes to Financial Statements in Part II Item 8 of this Annual Report, is incorporated herein by reference.

Item 4. Mine Safety Disclosures
Not Applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities

Market Information and Holders of Record

Our common stock trades on the Nasdaq Global Select Market, or “Nasdaq”, under the symbol “NXTC.” As of
March 18, 2024 we had 20 holders of record of our common stock. The actual number of shareholders is greater than this
number of record holders and includes shareholders who are beneficial owners but whose shares are held in street name by
brokers and other nominees. This number of holders of record also does not include shareholders whose shares may be held
in trust by other entities.

Dividends

We  have  never  declared  or  paid  cash  dividends  on  our  capital  stock,  and  we  do  not  anticipate  paying  any  cash
dividends in the foreseeable future. We currently intend to retain all available funds and any future earnings to support our
operations and finance the growth and development of our business.

Item 6. Selected Financial Data
[Reserved]

74

Table of Contents

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together
with  the  financial  statements  and  the  related  notes  appearing  elsewhere  in  this  Annual  Report.  This  discussion  contains
forward-looking  statements  that  are  based  on  management’s  current  expectations,  estimates,  and  projections  about  our
business  and  operations,  and  involve  risks  and  uncertainties.  Our  actual  results  could  differ  materially  from  those
discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are
not  limited  to,  those  discussed  in  the  sections  entitled  “Risk  Factors”  and  “Special  Note  Regarding  Forward-Looking
Statements”  and  elsewhere  in  this  Annual  Report.  The  following  discussion  and  analysis  is  expected  to  better  allow
investors to view the company from management’s perspective.

Overview

We are a clinical-stage biopharmaceutical company that is focused on advancing innovative medicines that treat
cancer patients that do not respond to, or have disease progression on, current therapies, through the use of differentiated
mechanisms  of  actions  including  Antibody  Drug  Conjugates  (ADCs),  antibodies,  and  proteins.  We  focus  on  advancing
therapies that leverage our core strengths in understanding biological pathways and biomarkers, the interactions of cells,
including in the tumor microenvironment, and the role each interaction plays in a biologic response.

We are focusing on our highest-value opportunities:

i) NC410, a LAIR-2 fusion protein that, in combination with pembrolizumab, demonstrated early evidence of

clinical activity in colorectal (CRC) and ovarian cancers.  We expect several potential catalysts in 2024.

ii) LNCB74, an ADC that is directed to B7-H4, a clinically validated cancer target. Given our internal expertise
of B7-H4 coupled with LegoChem Biosciences, Inc.’s (LegoChem) ADC technology, we plan for an Investigational New
Drug application (IND) in 2024.

In  March  2024,  we  announced  a  prioritization  and  restructuring  of  our  operations  to  align  with  our  focused
pipeline.  We are pausing our internal manufacturing operations and reducing our workforce. In addition, we are seeking to
partner  our  clinical  programs  NC525  and  NC318  and  our  preclinical  non-oncology  programs  NC605,  for  chronic  bone
diseases, and NC181, for Alzheimer’s disease. We project these actions will extend our cash runway into the second half of
2026.

Financial Overview

Since commencing operations in 2015, we have devoted substantially all of our efforts and financial resources to
organizing and staffing our company, identifying business development opportunities, raising capital, securing intellectual
property rights related to our product candidates, building and optimizing our manufacturing capabilities and conducting
discovery, research and development activities for our product candidates.

To  date,  we  have  not  generated  any  revenue  from  product  sales  and  have  financed  our  operations  primarily
through  proceeds  from  public  offerings  of  our  common  stock,  with  private  placements  of  our  preferred  stock  and  with
upfront  fees  received  under  our  former  research  and  development  collaboration  agreement.  Since  inception  through
December 31, 2023, we raised approximately $423 million in gross proceeds from the sale of equity instruments and had
received  a  $25  million  upfront  payment  from  our  former  collaboration  partner.  We  have  never  been  profitable  and  have
incurred net losses since the commencement of our operations. Our net losses for the years ended December 31, 2023 and
2022  were  $62.7  million  and  $74.7  million,  respectively.  As  of  December  31,  2023,  we  had  an  accumulated  deficit  of
$324.5  million,  primarily  as  a  result  of  research  and  development  and  general  and  administrative  expenses.  We  do  not
expect  to  generate  product  revenue  unless  and  until  we  obtain  marketing  approval  for  and  commercialize  a  product
candidate, and we cannot make assurances that we will ever generate significant revenue or profits.

As of December 31, 2023, we had cash, cash equivalents and marketable securities of $108.3 million. We believe
that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations into the
second half of 2026. We have based this estimate on assumptions that may prove to be incorrect, and we could exhaust our
available capital resources sooner than we currently expect.

We  expect  to  incur  substantial  expenditures  in  the  foreseeable  future  as  we  advance  our  product  candidates

through clinical development, the regulatory approval process and, if approved, commercialization. Specifically, in the

75

Table of Contents

near term, we expect to incur substantial expenses relating to our Phase 1b/2 clinical trial of NC410 in combination with
pembrolizumab,  our  pre-clinical  development  activities  with  respect  to  LNCB74  and  other  research  and  development
activities.

We will need substantial additional funding to support our continuing operations and to pursue our development
strategy. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to
finance  our  operations  through  a  combination  of  public  and  private  equity  offerings,  debt  financings,  marketing  and
distribution arrangements, other collaborations, strategic alliances and licensing arrangements. Adequate funding may not
be  available  to  us  on  acceptable  terms,  or  at  all.  If  we  fail  to  raise  capital  or  enter  into  such  agreements  as  and  when
needed,  we  may  be  required  to  delay,  limit,  reduce  or  terminate  preclinical  studies,  clinical  trials,  or  other  research  and
development activities or one or more of our development programs.

Components of Our Results of Operations

Operating Expenses

Research and Development Expenses

Research  and  development  expenses  consist  primarily  of  costs  incurred  for  our  clinical  trials,  discovery  efforts,

research activities, and development and testing of our product candidates and include:

● expenses incurred under agreements with third parties, including agreements with third parties that conduct

research, preclinical activities or clinical trials on our behalf;

● the costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

● the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical

trial materials;

● salaries,  benefits  and  other  related  costs,  including  stock-based  compensation,  for  personnel  engaged  in

research and development functions; and

● facility-related  expenses,  which  include  direct  depreciation  costs  and  allocated  expenses  for  rent  and

maintenance of facilities and other operating costs.

We expense research and development costs as incurred. Our expenses related to clinical trials are based on actual
costs incurred and estimates of other incurred costs. These estimated costs are based on several factors, including patient
enrollment  and  related  expenses  at  clinical  investigator  sites,  contract  services  received,  consulting  agreement  costs  and
efforts expended under contracts with research institutions and third-party contract research organizations that conduct and
manage  clinical  trials  on  our  behalf.  We  generally  accrue  estimated  costs  related  to  clinical  trials  based  on  contracted
amounts  applied  to  the  level  of  patient  enrollment  and  other  activity  according  to  the  protocol.  If  future  timelines  or
contracts are modified based on changes in the clinical trial protocol or scope of work to be performed, we would modify
our estimates of accrued expenses accordingly on a prospective basis. Historically, any such modifications have not been
material.

Research  and  development  activities  are  central  to  our  business  model.  We  expect  that  our  research  and
development expenses will increase substantially in the future as we advance our product candidates through development.

We cannot determine with certainty the duration and costs of future clinical trials of NC410, LNCB74 or any other
product candidate we may develop or if, when or to what extent we will generate revenue from the commercialization and
sale of any product candidate for which we may obtain marketing approval. We may never succeed in obtaining marketing
approval for any product candidate. The duration, costs and timing of clinical trials and development of NC410,  LNCB74
and any other product candidate we may develop will depend on a variety of factors, including:

● the scope, progress, results and costs of clinical trials of NC410 and LNCB74 as well as of any future clinical

trials of other product candidates and other research and development activities that we may conduct;

76

Table of Contents

● uncertainties in selection of indications, clinical trial design and patient enrollment rates;

● the  probability  of  success  for  our  product  candidates,  including  safety  and  efficacy,  early  clinical  data,

competition, ease and ability of manufacturing and commercial viability;

● significant and changing government regulation and regulatory guidance;

● the timing and receipt of any development or marketing approvals; and

● the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property

rights.

A change in the outcome of any of these variables with respect to the development of a product candidate could
lead  to  a  significant  change  in  the  costs  and  timing  associated  with  the  development  of  that  product  candidate.  For
example,  if  the  FDA  or  another  regulatory  authority  were  to  require  us  to  conduct  clinical  trials  beyond  those  that  we
anticipate  will  be  required  for  the  completion  of  clinical  development  of  a  product  candidate,  or  if  we  experience
significant  delays  in  our  clinical  trials  due  to  patient  enrollment  or  other  reasons,  we  would  be  required  to  expend
significant additional financial resources and time to complete clinical development for any such product candidate.

General and Administrative Expenses

General  and  administrative  expenses  consist  primarily  of  personnel-related  costs,  including  payroll  and  stock-
based compensation, for personnel in executive, finance, human resources, business and corporate development and other
administrative  functions,  professional  fees  for  legal,  intellectual  property,  consulting  and  accounting  services,  rent  and
other  facility-related  costs,  depreciation  and  other  general  operating  expenses  not  otherwise  classified  as  research  and
development  expenses.  General  and  administrative  expenses  also  include  all  patent-related  costs  incurred  in  connection
with filing and prosecuting patent applications, which are expensed as incurred.

Other Income, Net

Other income, net consists primarily of interest income earned on marketable securities.

Results of Operations

Comparison of the Years Ended December 31, 2023 and 2022

The following table summarizes our results of operations for the periods indicated (in thousands):

Operating expenses:

Research and development
General and administrative

Loss from operations
Other income, net
Net loss

Year Ended
December 31, 

2023

2022

Change

$

$

 47,931
 19,706
 (67,637)
 4,914
 (62,723)

$

$

$

 54,199
 21,710
 (75,909)
 1,176
 (74,733) $

 (6,268)
 (2,004)
 8,272
 3,738
 12,010

77

    
    
    
 
   
   
  
 
 
 
 
 
 
 
 
 
Table of Contents

Research and Development Expenses

The  following  table  summarizes  our  research  and  development  expenses  by  product  candidate  for  the  periods

indicated (in thousands):

(in thousands)
External research and development expenses:

NC410
NC762
NC525
Other programs and preclinical development
Total external research and development expenses
Total internal research and development expenses
Total research and development expenses

Year Ended
December 31, 

2023

2022

Change

$

$

 7,586
 3,780
 3,747
 9,739
 24,852
 23,079
 47,931

$

$

 6,211
 4,966
 4,053
 15,941
 31,171
 23,028
 54,199

$

$

 1,375
 (1,186)
 (306)
 (6,202)
 (6,319)
 51
 (6,268)

We  do  not  allocate  personnel-related  costs,  including  stock-based  compensation  costs,  or  other  indirect  costs  to
specific  programs,  as  they  are  deployed  across  multiple  projects  under  development  and  discovery  and,  as  such,  are
separately classified as internal research and development expenses in the table above.

Research and development expenses for the year ended December 31, 2023 decreased by $6.3 million, 12%, to
$47.9 million compared to $54.2 million for the year ending December 31, 2022. The decrease was due to the decision to
discontinue clinical development of NC762, which was announced in the fourth quarter of 2023 and lower costs on other
programs and preclinical development.

General and administrative expenses for the year ended December 31, 2023 decreased by $2.0 million to $19.7
million as compared to $21.7 million for the year ending December 31, 2022. The decrease was driven primarily by $1.4
million  lower  personnel-related  costs,  including  $1.2  million  of  stock  compensation,  and  $0.4  million  lower  insurance
costs.

Other Income, Net

Other  income,  net  for  the  year  ended  December  31,  2023  increased  by  $3.7  million  to  $4.9  million  from  $1.2

million for the year ended December 31, 2022 due to higher interest income as a result of higher interest rates.

Liquidity and Capital Resources

Since  inception  through  December  31,  2023,  we  raised  approximately  $423  million  in  gross  proceeds  from  the

sale of equity instruments and had received a $25 million upfront payment from our former collaboration partner.

On August 4, 2023, the Company entered into a sales agreement (the “Sales Agreement”) with Leerink Partners
LLC  (the  “Agent”),  pursuant  to  which  the  Company  may  sell,  from  time  to  time,  up  to  an  aggregate  sales  price  of  $75
million of its common stock through the Agent in negotiated transactions that are deemed to be an “at the market offering.”
The  Agent  will  be  entitled  to  compensation  equal  to  3.0%  of  the  gross  proceeds  from  the  sale  of  all  shares  of  common
stock sold through it as Agent under the Sales Agreement. Actual sales will depend on a variety of factors to be determined
by  the  Company  from  time  to  time,  including,  among  other  things,  market  conditions,  the  trading  price  of  the  common
stock, capital needs and determinations by the Company of the appropriate sources of funding for the Company. We have
not yet sold any shares of our common stock pursuant to the Sales Agreement.

As of December 31, 2023, we had cash, cash equivalents and marketable securities of $108.3 million. We believe
that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations into the
second half of 2026.

We  will  continue  to  require  additional  capital  to  develop  our  product  candidates  and  fund  operations  for  the
foreseeable future. We may seek to raise capital through sale of equity, debt financings, strategic alliances and licensing
arrangements.  Adequate  additional  funding  may  not  be  available  to  us  on  acceptable  terms  or  at  all.  If  we  fail  to  raise
capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue

78

    
    
    
 
Table of Contents

the development of our product candidates or delay our efforts to expand our pipeline of product candidates. Our need to
raise additional capital will depend on many factors, including:

● the scope, progress, results and costs of researching and developing NC410, NCB74 and our other programs,  and

of conducting preclinical studies and clinical trials;

● the  timing  of,  and  the  costs  involved  in,  obtaining  marketing  approvals  for  NC410,  LNCB74  and  any  future

product candidates we develop, if clinical trials are successful;

● the costs of manufacturing NC410, LNCB74 and any future product candidates we develop for preclinical studies

and clinical trials in preparation for marketing approval and commercialization;

● the costs of commercialization activities, including marketing, sales and distribution costs, for NC410, LNCB74
and  any  future  product  candidates  we  develop,  whether  alone  or  with  a  collaborator,  if  any  such  product
candidates are approved for sale, including marketing, sales and distribution costs;

● our ability to establish and maintain additional collaborations, licenses or other arrangements on favorable terms,

if at all;

● the  costs  involved  in  preparing,  filing,  prosecuting,  maintaining,  expanding,  defending  and  enforcing  patent

claims, including litigation costs and the outcome of any such litigation;

● our current collaboration and license agreements remaining in effect and our achievement of milestones and the
timing and amount of milestone payments we are required to make, or that we may be eligible to receive, under
those agreements;

● the timing, receipt and amount of sales of, or royalties on, our future products, if any; and

● the emergence of competing therapies and other adverse developments in the oncology market.

Adequate  additional  financing  may  not  be  available  to  us  on  acceptable  terms,  or  at  all.  If  we  raise  additional
funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter
may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or
additional  debt,  pay  dividends,  repurchase  our  common  stock,  make  certain  investments  and  engage  in  certain  merger,
consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not
favorable  to  us  or  our  stockholders.  If  we  raise  additional  funds  through  government  or  private  grants,  collaborations,
strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish
valuable rights to our future revenue streams, product candidates or research programs or to grant licenses on terms that
may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, reduce or
terminate some or all of our development programs and clinical trials. We may also be required to sell or license to others
rights  to  our  product  candidates  in  certain  territories  or  indications  that  we  would  prefer  to  retain  for  ourselves.  See  the
section entitled “Risk Factors” for additional risks associated with our substantial capital requirements.

79

Table of Contents

Cash Flows

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods

presented below (in thousands):

Net cash (used in) provided by:

Operating activities
Investing activities
Financing activities

Net (decrease) increase in cash and cash equivalents

Year Ended
December 31, 

2023

2022

$  (52,974)
 39,272
 154
$  (13,548)

$  (53,886)
 67,979
 200
$  14,293

Cash Used in Operating Activities

Net  cash  used  in  operating  activities  was  $53.0  million  for  the  year  ended  December  31,  2023,  which  was
primarily the result of our net loss of $62.7 million and a $1.9 million net use of operating assets and liabilities, partially
offset by non-cash charges for depreciation and amortization of $3.7 million and stock-based compensation of $8.2 million.
Net cash used in operating activities was $53.9 million for the year ended December 31, 2022, which was primarily due to
our  net  loss  of  $74.7  million,  partially  offset  by  non-cash  charges  for  depreciation  and  amortization  of  $4.1  million,
amortization  of  premiums  and  discounts  on  marketable  securities  of  $3.0  million,  stock-based  compensation  of  $9.5
million, a $2.0 million decrease in prepaid expenses and other assets and a $2.3 million increase in accounts payable.

Cash Provided by Investing Activities

Cash  provided  by  investing  activities  for  the  year  ended  December  31,  2023  was  $39.3  million,  which  was
primarily  due  to  net  proceeds  from  marketable  securities  of  $40.1  million,  partially  offset  by  purchases  of  property  and
equipment of $0.8 million.  Cash provided by investing activities for the year ended December 31, 2022 was $68.0 million,
which  was  primarily  due  to  net  proceeds  from  marketable  securities  of  $70.1  million,  partially  offset  by  purchases  of
property and equipment of $2.1 million.  

Cash Used in Financing Activities

Cash provided by financing activities was $0.2 million for the year ended December 31, 2023, which was due to
the exercise of stock options and sales of our stock under the Employee Stock Purchase Plan (ESPP). Cash provided by
financing activities was $0.2 million for the year ended December 31, 2022, which was due to the exercise of stock options
and sales of our stock under the ESPP.

Contractual Obligations and Commitments

Operating Leases

We  are  party  to  several  non-cancelable  lease  agreements  for  office  and  laboratory  space  that  expire  in  March
2030.  The monthly base rent for these leases totals $92,004 as of December 31, 2023 per month plus our prorated share of
operating expenses.  The monthly base rent is subject to annual 3% increases through the lease term.

We  also  have  potential  contingent  payment  obligations  upon  the  achievement  by  us  of  clinical,  regulatory,  and
commercial events, as applicable, or royalty payments that we may be required to make under license agreements we have
entered  into  with  various  entities  pursuant  to  which  we  have  in-licensed  intellectual  property,  including  our  license
agreement with Yale. The timing and amount (if any) of any such payments cannot be reasonably estimated at this time.
See “Business—Our Collaboration Agreements” for additional information.

We enter into contracts in the normal course of business with third-party contract organizations for clinical trials,
non-clinical  studies  and  testing,  manufacturing  and  other  services  and  products  for  operating  purposes.  These  contracts
generally provide for termination following a certain period after notice, and therefore we believe that our non-cancelable
obligations under these agreements are not material.

80

    
    
 
   
  
 
 
 
 
Table of Contents

Critical Accounting Policies, Significant Judgments and Use of Estimates

Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or
“GAAP”.  The  preparation  of  our  financial  statements  requires  us  to  make  estimates  and  assumptions  that  affect  the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported expenses incurred during the reporting periods. The most significant assumptions used
in the financial statements are valuing share-based compensation. Our estimates are based on our historical experience and
on  various  other  factors  that  we  believe  are  reasonable  under  the  circumstances,  the  results  of  which  form  the  basis  for
making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. We
evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates under different
assumptions or conditions.

While our significant accounting policies are described in the notes to our financial statements, we believe that the
following critical accounting policies are most important to understanding and evaluating our reported financial results, as
these policies relate to the more significant areas involving management’s judgments and estimates.

Research and Development Expenses, Including Clinical Trial Accruals

Research costs consist of employee-related costs, contractor expenses, laboratory supplies and facility costs, for
research  and  development  of  product  candidates  which  are  expensed  as  incurred.  Development  costs,  including  clinical
trial-related expenses, incurred by third parties, such as CROs, are expensed as the contracted work is performed. Where
contingent  milestone  payments  are  due  to  third  parties  under  research  and  development  arrangements,  the  milestone
payment  obligations  are  expensed  when  the  milestone  results  are  probable  of  being  achieved.  When  evaluating  the
adequacy  of  the  accrued  liabilities,  we  analyze  progress  of  the  studies,  including  the  phase  or  completion  of  events,
invoices  received  and  contracted  costs.  For  further  discussion  of  research  and  development  expenses,  including  clinical
trial accruals, see Note 2 to our audited financial statements included elsewhere in this Annual Report.

Stock-Based Compensation

We  account  for  stock-based  compensation,  including  stock  options  and  restricted  stock  units,  based  on  the  fair
value of the award as of the grant date. We utilize the Black-Scholes option-pricing model as the method for estimating the
fair  value  of  our  stock  option  grants.  The  Black-Scholes  option-pricing  model  requires  the  use  of  highly  subjective  and
complex assumptions, including the options’ expected term and the price volatility of the underlying stock. The fair value
of  the  portion  of  the  award  that  is  ultimately  expected  to  vest  is  recognized  as  compensation  expense  over  the  award’s
requisite service period. We recognize stock-based compensation to expense using the straight-line method and recognize
forfeitures  as  they  occur.  If  there  are  any  modifications  or  cancelations  of  stock-based  awards,  we  may  be  required  to
accelerate, increase, or decrease any remaining unrecognized stock-based compensation expense.

For  further  discussion  of  our  accounting  for  stock-based  compensation,  see  Note  2  to  our  audited  financial

statements included elsewhere in this Annual Report.

Off-Balance Sheet Arrangements

Since  our  inception,  we  have  not  engaged  in  any  off-balance  sheet  arrangements,  as  defined  in  the  rules  and

regulations of the Securities and Exchange Commission.

JOBS Act Accounting Election

The Jumpstart Our Business Startups Act of 2012, or “the JOBS Act”, permits an “emerging growth company”
such  as  us  to  take  advantage  of  an  extended  transition  period  to  comply  with  new  or  revised  accounting  standards
applicable to public companies. We have elected to take advantage of this extended transition period to enable us to comply
with  new  or  revised  accounting  standards  that  have  different  effective  dates  for  public  and  private  companies  until  the
earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the
extended  transition  period  provided  in  the  JOBS  Act.  As  a  result,  our  financial  statements  may  not  be  comparable  to
companies that comply with new or revised accounting pronouncements as of public company effective dates.

For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions

from various public company reporting requirements, including not being required to have our internal control over

81

Table of Contents

financial  reporting  audited  by  our  independent  registered  public  accounting  firm  pursuant  to  Section  404(b)  of  the
Sarbanes-Oxley  Act  of  2002.  We  will  remain  an  emerging  growth  company  until  the  earliest  of  (i)  December  31,  2024,
(ii) the last day of the first fiscal year in which we have total annual gross revenues of at least $1.2 billion, (iii) the last day
of the first fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700.0 million
on June 30th and (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the
prior three-year period.

Recent Accounting Pronouncements

See Note 2 to our audited financial statements included elsewhere in this Annual Report for a discussion of recent

accounting pronouncements that have impacted or may impact our financial position and results of operations.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk
As a smaller reporting company, we are not required to provide the information requested by this Item.

82

Table of Contents

Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Balance Sheets as of December 31, 2023 and 2022
Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2023 and 2022
Statements of Stockholders’ Equity for the Years Ended December 31, 2023 and 2022
Statements of Cash Flows for the Years Ended December 31, 2023 and 2022
Notes to Financial Statements

Page

84
85
86
87
88
89

83

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of NextCure, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of NextCure, Inc. (the “Company”) as of December 31, 2023
and  2022,  the  related  statements  of  operations  and  comprehensive  loss,  stockholders’  equity  and  cash  flows  for  each  of
the  two  years  in  the  period  ended  December  31,  2023,  and  the  related  notes  (collectively  referred  to  as  the  “financial
statements”).  In  our  opinion,  the  financial  statements  present  fairly,  in  all  material  respects,  the  financial  position  of  the
Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in
the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the  financial  statements  are  free  of  material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal  control  over  financial  reporting  but  not  for  the  purpose  of  expressing  an  opinion  on  the  effectiveness  of  the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining,
on  a  test  basis,  evidence  regarding  the  amounts  and  disclosures  in  the  financial  statements.  Our  audits  also  included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2018.

Baltimore, MD
March 21, 2024

84

 
 
 
Table of Contents

NEXTCURE, INC.
BALANCE SHEETS
(in thousands, except share and per share amounts)

Assets
Current assets:

Cash and cash equivalents
Marketable securities
Prepaid expenses and other current assets

Total current assets

Property and equipment, net
Right of use assets
Other assets

Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued liabilities and other liabilities

Total current liabilities

Lease liabilities, long term
Other long-term liabilities

Total liabilities
Stockholders’ equity:

Preferred stock, par value of $0.001 per share; 10,000,000 shares authorized at December 31, 2023
and December 31, 2022; No shares issued and outstanding at December 31, 2023 and
December 31, 2022
Common stock, par value of $0.001 per share; 100,000,000 shares authorized at
December 31, 2023 and December 31, 2022; 27,903,027 and 27,774,536 shares issued and
outstanding at December 31, 2023 and December 31, 2022, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity

December 31, 

2023

2022

$

$

$

13,082
95,217
4,426
112,725
9,033
4,398
1,882
128,038

2,330
4,553
6,883
5,949
785
13,617

26,630
133,281
4,072
163,983
11,897
5,016
3,265
184,161

4,270
4,857
9,127
6,605
899
16,631

—

—

28
439,097
(222)
(324,482)
114,421
128,038

$

28
430,755
(1,494)
(261,759)
167,530
184,161

$

$

$

$

The accompanying notes are an integral part of these financial statements.

85

    
    
 
  
 
  
 
 
 
 
 
 
 
 
 
  
 
  
 
  
 
  
 
 
 
 
 
 
 
 
 
  
 
  
 
 
 
 
 
 
 
 
Table of Contents

NEXTCURE, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share amounts)

Operating expenses:

Research and development
General and administrative
Total operating expenses

Loss from operations
Other income, net

Net loss
Net loss per common share - basic and diluted
Weighted-average shares outstanding - basic and diluted
Comprehensive loss:

Net loss
Unrealized gain (loss) on marketable securities

Total comprehensive loss

December 31, 

2023

December 31, 

2022

$

$
$

$

$

47,931
19,706
67,637
(67,637)
4,914
(62,723)
(2.25)
27,836,584

(62,723)
1,272
(61,451)

$

$
$

$

$

54,199
21,710
75,909
(75,909)
1,176
(74,733)
(2.69)
27,744,209

(74,733)
(831)
(75,564)

The accompanying notes are an integral part of these financial statements.

86

    
 
 
 
 
 
 
Table of Contents

NEXTCURE, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)

Balance as of December 31, 2021

Stock-based compensation
Exercise of stock options
Issuance of shares under ESPP
Unrealized loss on marketable securities, net of tax $0
Net loss

Balance as of December 31, 2022

Stock-based compensation
Exercise of stock options
Issuance of shares under ESPP
Unrealized gain on marketable securities, net of tax $0
Net loss

Balance as of December 31, 2023

Common Stock

Amount

Shares
27,680,997
—
50,420
43,119
—
—
27,774,536
—
5,057
123,434
—
—
27,903,027

$

$

$

Stockholders’ Equity

Additional
Paid-in
Capital

Accumulated Other
Comprehensive
(Loss) Income

Accumulated
Deficit

Stockholders’
Equity

28
—
—
—
—
—
28
—
—
—
—
—
28

$

$

$

421,047
9,508
66
134
—
—
430,755
8,188
5
149
—
—
439,097

$

$

$

(663)
—
—
—
(831)
—
(1,494)
—
—
—
1,272
—
(222)

$

$

$

(187,026) $
—
—
—
—
(74,733)
(261,759) $
—
—
—
—
(62,723)
(324,482) $

233,386
9,508
66
134
(831)
(74,733)
167,530
8,188
5
149
1,272
(62,723)
114,421

The accompanying notes are an integral part of these financial statements.

87

 
    
    
    
    
    
 
 
 
 
 
 
 
Table of Contents

NEXTCURE, INC.
STATEMENTS OF CASH FLOWS
(in thousands)

Cash flows from operating activities:

Net loss
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization
Amortization of premiums and discounts on marketable securities
Stock-based compensation
Noncash operating lease expense
Loss on disposal of property and equipment
Changes in operating assets and liabilities:

Prepaid expenses and other assets
Accounts payable
Accrued liabilities and other liabilities
Lease liabilities
Other long-term liabilities

Net cash used in operating activities

Cash flows from investing activities:

Sales and maturities of marketable securities
Purchases of marketable securities
Purchases of property and equipment

Net cash provided by investing activities

Cash flows from financing activities:

Proceeds from exercise of stock options
Proceeds from shares issued under ESPP

Net cash provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents  – end of period
Supplemental disclosures of cash flow information:

Cash paid for interest

Supplemental disclosure of noncash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities
Recognition of initial lease liabilities

Year Ended
December 31, 

2023

2022

$

(62,723)

$

(74,733)

3,684
(756)
8,188
573
—

1,074
(1,940)
(304)
(656)
(114)
(52,974)

113,597
(73,505)
(820)
39,272

5
149
154
(13,548)
26,630
13,082

81

$

$

4,124
3,047
9,508
356
87

2,038
2,328
(641)
—
—
(53,886)

104,739
(34,644)
(2,116)
67,979

66
134
200
14,293
12,337
26,630

90

— $
— $

6,047
7,549

$

$

$
$

The accompanying notes are an integral part of these financial statements.

88

    
    
 
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

1. Nature of the Business and Basis of Presentation
Organization

NextCure,  Inc.  (“NextCure”  or  the  “Company”)  was  incorporated  in  Delaware  in  September  2015  and  is
headquartered  in  Beltsville,  Maryland.  The  Company  is  a  clinical-stage  biopharmaceutical  company  that  is  focused  on
advancing innovative medicines that treat cancer patients that do not respond, to or have disease progression on, current
therapies,  through  the  use  of  differentiated  mechanisms  of  actions  including  antibody-drug  conjugates,  antibodies  and
proteins.  We  focus  on  advancing  therapies  that  leverage  our  core  strengths  in  understanding  biological  pathways  and
biomarkers,  the  interactions  of  cells,  including  in  the  tumor  microenvironment,  and  the  role  each  interaction  plays  in  a
biologic  response.  Since  inception,  the  Company  has  devoted  substantially  all  of  its  efforts  and  financial  resources  to
research and development activities for the Company’s product candidates, identifying business development opportunities,
raising capital, securing intellectual property rights related to the Company’s product candidates, building and optimizing
the Company’s manufacturing capabilities and conducting discovery.

Public Offerings of Common Stock

On May 13, 2019, the Company closed its initial public offering (“IPO”), in which the Company issued and sold
5,750,000  shares  of  common  stock  at  a  public  offering  price  of  $15.00  per  share,  for  net  proceeds  to  the  Company  of
approximately  $77.0  million  after  deducting  underwriting  discounts  and  commissions  of  $6.0  million  and  offering
expenses of $3.4 million.

In preparation for the IPO, on May 3, 2019, the Company effected a 1-for-8.0338 reverse stock split of its issued
and outstanding common stock. The par value and authorized shares of common stock were not adjusted as a result of the
reverse stock split. All of the share and per share information presented in the accompanying financial statements has been
adjusted to reflect the reverse common stock split on a retroactive basis for all periods and as of all dates presented.

Upon  the  closing  of  the  IPO,  all  of  the  outstanding  shares  of  the  Company’s  convertible  preferred  stock
automatically  converted  into  15,560,569  shares  of  common  stock  at  the  applicable  conversion  ratio  then  in  effect.
Subsequent  to  the  closing  of  the  IPO,  there  were  no  shares  of  preferred  stock  outstanding.  Additionally,  the  Company’s
certificate of incorporation was amended and restated to provide for 100,000,000 authorized shares of common stock with
a par value of $0.001 per share and 10,000,000 authorized shares of preferred stock with a par value of $0.001 per share.

On November 19, 2019, the Company completed an underwritten public offering, in which the Company issued
and  sold  4,077,192  shares  of  common  stock  at  a  public  offering  price  of  $36.75  per  share.  On  December  2,  2019,  the
underwriters exercised in full their option to purchase an additional 611,578 shares of common stock at the public offering
price  of  $36.75,  for  total  net  proceeds  to  the  Company  of  $160.9  million  after  deducting  underwriting  discounts  and
commissions of $10.3 million and offering expenses of $1.0 million.

Liquidity

The  Company  has  not  generated  any  revenue  to  date  from  product  sales  and  does  not  expect  to  generate  any
revenues  from  product  sales  in  the  foreseeable  future.  Through  December  2023,  the  Company  has  funded  its  operations
primarily with proceeds from public offerings of its common stock, private placements of its preferred stock and upfront
fees  received  under  the  Company’s  former  agreement  with  Eli  Lilly  and  Company.  The  Company  expects  to  incur
additional operating losses and negative operating cash flows for the foreseeable future.

As of the issuance date of the financial statements for the year ended December 31, 2023, the Company expects
that its cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements to
mid-2026.  The  future  viability  of  the  Company  beyond  that  date  may  depend  on  its  ability  to  raise  additional  capital  to
finance its operations.

The  Company  plans  to  seek  additional  funding  through  public  or  private  equity  offerings,  debt  financings,
marketing and distribution arrangements, other collaborations, strategic alliances, licensing arrangements or other methods.
The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be

89

Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

able to enter into strategic alliances or other arrangements on favorable terms, or at all. The terms of any financing may
adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, the
Company could be required to delay, reduce or eliminate research and development programs, product portfolio expansion
or future commercialization efforts, which could adversely affect its business prospects.

Although management continues to pursue these funding plans, there is no assurance that the Company will be
successful in obtaining sufficient funding on terms acceptable to the Company, if at all, to fund continuing operations past
two years from the issuance date of these financial statements.

Risks and Uncertainties

The Company is subject to risks common to early-stage companies in the biotechnology industry including, but
not  limited  to:  having  a  limited  operating  history  and  no  products  approved  for  commercial  sale;  having  a  history  of
significant losses; its need to obtain additional financing; dependence on its ability to advance its current and future product
candidates through clinical trials, marketing approval and commercialization; the unproven approach to the discovery and
development of product candidates; the lengthy and expensive nature and uncertain outcomes of the clinical development
process; the lengthy, time-consuming and unpredictable nature of the regulatory approval process; the results of preclinical
studies  and  early-stage  clinical  trials  that  may  not  be  predictive  of  future  results;  dependence  on  its  key  personnel;  its
limited manufacturing experience as an organization and with its manufacturing facility; risks related to patent protection
and  the  Company’s  pending  patent  applications;  dependence  on  third-party  collaborators  for  the  discovery,  development
and commercialization of current and future product candidates; and significant competition from other biotechnology and
pharmaceutical companies. Pursuit of the Company’s business efforts will require significant amounts of additional capital,
adequate  personnel,  infrastructure  and  extensive  compliance-reporting  capabilities.  Even  if  the  Company’s  development
efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Segment and Geographic Information

Operating segments are defined as components of an entity 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 chief operating decision maker views the operations and manages the business in a single
operating segment and one reportable segment that operates exclusively in the United States. All long-lived assets of the
Company reside in the United States.

2. Summary of Significant Accounting Policies
Basis of Presentation

The  accompanying  financial  statements  include  the  accounts  of  the  Company.  The  Company’s  financial
statements have been prepared in accordance with United States generally accepted accounting principles (‘‘GAAP’’). Any
reference  in  these  notes  to  applicable  guidance  is  meant  to  refer  to  the  authoritative  GAAP  as  found  in  the  Accounting
Standards  Codification  (‘‘ASC’’)  and  Accounting  Standards  Update  (‘‘ASU’’)  of  the  Financial  Accounting  Standards
Board (‘‘FASB’’).

Use of Estimates

The  preparation  of  financial  statements  in  accordance  with  GAAP  requires  management  to  make  estimates  and
assumptions  that  affect  the  amounts  reported  in  the  financial  statements  and  accompanying  notes.  These  estimates  and
assumptions  affect  the  reported  amounts  of  assets  and  liabilities,  the  disclosure  of  contingent  assets  and  liabilities  at  the
date  of  the  financial  statements  and  the  reported  amounts  of  revenues  and  expenses  for  the  period  presented.  Although
actual results could differ from those estimates, management does not believe that such differences would be material.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the date
of  purchase  to  be  cash  equivalents.  The  Company  deposits  its  cash  primarily  in  checking,  sweep  account  and  money
market accounts. Cash equivalents are stated at amortized cost, plus accrued interest, which approximates fair value.

90

Table of Contents

Marketable Securities

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

Marketable securities primarily consist of government debt securities, corporate bonds and agency bonds. These
marketable securities are classified as available-for-sale, and as such, are carried at fair value as determined by prices for
identical or similar securities at the balance sheet date. Marketable securities consist of Level 2 financial instruments in the
fair-value  hierarchy.  The  Company’s  policy  is  to  classify  all  investments  with  contractual  maturities  within  one  year  as
current.  At  each  reporting  date,  the  Company  evaluates  the  classification  of  its  investments  with  maturities  beyond  one
year  based  on  the  nature  of  the  investment  securities  and  whether  the  investments  are  considered  available  for  use  in
current  operations.  Investment  income  is  recognized  when  earned  and  reported  net  of  investment  expenses.  Unrealized
holding gains and losses are reported within accumulated other comprehensive income (loss) as a separate component of
stockholders’  equity.  The  amortized  cost  of  debt  securities  is  adjusted  for  amortization  of  premiums  and  accretion  of
discounts  to  maturity.  Such  amortization  and  interest  on  securities  are  included  in  other  income,  net,  on  the  Company’s
statements of operations.

At  each  balance  sheet  date,  the  Company  assesses  available-for-sale  securities  in  an  unrealized  loss  position  to
determine whether the unrealized loss is other-than-temporary. If a decline in the fair value of a marketable security below
the  Company’s  cost  basis  is  determined  to  be  other-than-temporary,  such  marketable  security  is  written  down  to  its
estimated fair value as a new cost basis and the amount of the write-down is included in earnings as an impairment charge.
The Company considers factors including the significance of the decline in value compared to the cost basis, underlying
factors contributing to a decline in the prices of securities in a single asset class, the length of time the market value of the
security has been less than its cost basis, the security's relative performance versus its peers, sector or asset class, expected
market volatility and the market and economy in general. The Company also evaluates whether it is more likely than not
that it will be required to sell a security prior to recovery of its fair value. The cost of securities sold is based on the specific
identification method.

Concentration of Credit Risk

Financial  instruments  that  potentially  expose  the  Company  to  concentrations  of  credit  risk  primarily  consist  of
cash and cash equivalents. The Company maintains its cash and cash equivalents at two accredited financial institutions
that are federally insured. While balances deposited often exceed federally insured limits, the Company does not believe
that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The
Company's  investment  policy  limits  investments  to  certain  types  of  debt  securities  issued  by  the  U.S.  government,  its
agencies and institutions and corporate bonds with investment-grade credit ratings and places restrictions on maturities and
concentration  by  type  and  issuer.  The  counterparties  are  various  corporations,  financial  institutions  and  government
agencies of high credit standing.

Fair Value of Financial Instruments

ASC  Topic  820,  Fair  Value  Measurement  (“ASC  820”),  establishes  a  fair  value  hierarchy  for  instruments
measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s
own  assumptions  (unobservable  inputs).  Observable  inputs  are  inputs  that  market  participants  would  use  in  pricing  the
asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs
that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability
and  are  developed  based  on  the  best  information  available  in  the  circumstances.  ASC  820  identifies  fair  value  as  the
exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value
measurements, ASC 820 establishes a three-tier value hierarchy that distinguishes between the following:

Level 1—Quoted market prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market

prices, interest rates and yield curves.

Level  3—Unobservable  inputs  developed  using  estimates  of  assumptions  developed  by  the  Company,  which

reflect those that a market participant would use. Use of these inputs involves significant and subjective judgments to be

91

Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

made by a reporting entity – e.g., determining an appropriate adjustment to a discount factor for illiquidity associated with
a given security.

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the
determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in
determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value
hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Property and Equipment, Net

Property and equipment are valued at cost less accumulated depreciation. Depreciation is recognized on a straight-
line  basis  over  the  estimated  useful  lives  of  the  related  assets.  Leasehold  improvements  are  amortized  on  a  straight-line
basis over the shorter of the useful life or term of the lease. Upon retirement or disposal, the cost and related accumulated
depreciation are removed from the balance sheet and the resulting gain or loss is recorded to general and administrative
expenses in the accompanying statement of operations and comprehensive loss. Routine expenditures for maintenance and
repairs are expensed as incurred.

Estimated useful lives for property and equipment are as follows:

Computers and peripherals
Equipment
Furniture and fixtures
Leasehold improvements

Estimated Useful Life

3 years
5 years
7 years
  Lesser of estimated useful life or remaining lease term

The  Company  reviews  long-lived  assets,  which  primarily  consist  of  property  and  equipment,  for  impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be
fully recoverable based on the criteria for accounting for the impairment or disposal of long-lived assets under ASC Topic
360, Property, Plant and Equipment. These events or changes in circumstances may include a significant deterioration of
operating  results,  changes  in  business  plans,  or  changes  in  anticipated  future  cash  flows.  If  an  impairment  indicator  is
present,  the  Company  evaluates  recoverability  by  comparing  the  carrying  amount  of  the  assets  group  to  future
undiscounted net cash flows expected to be generated by the assets group. Assets are grouped at the lowest level for which
there is identifiable cash flows that are largely independent of the cash flows generated by other asset groups. If the total of
the expected undiscounted future cash flows is less than the carrying amount of the asset, an impairment loss is recognized
for the difference between the fair value and carrying value of assets within the group. Fair value is generally determined
by estimates of discounted cash flows. The discount rate used in any estimate of discounted cash flows would be the rate
required for a similar investment of like risk. No impairment losses were recognized during the years ended December 31,
2023 or 2022.

Construction  in  progress  (Note  5)  is  carried  at  cost  and  consists  of  specifically  identifiable  direct  and  indirect
development  and  construction  costs.  While  under  construction,  costs  of  the  property  are  included  in  construction  in
progress  until  the  property  is  placed  in  service,  at  which  time  costs  are  transferred  to  the  appropriate  property  and
equipment account including, but not limited to, leasehold improvements or other such accounts.

Leases

The Company determines if an arrangement is a lease or implicitly contains a lease at inception based on the lease
definition and also determines if the lease is classified as an operating lease or finance lease, each in accordance with ASU
No. 2016-02, Leases (Topic 842). Operating leases are included in operating lease right-of-use (ROU) assets and operating
lease liabilities in its balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease
term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets
and lease liabilities are recognized at the commencement date or the adoption date for existing leases based on the present
value of lease payments over the lease term using an estimated discount rate. As the Company’s leases do not provide an
implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date
or the adoption date in determining the present value of lease payments over a similar term. In

92

    
 
 
 
Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

determining the estimated incremental borrowing rate, the Company considered a rate obtained from its primary banker for
discussion purposes of a potential collateralized loan with a term similar to the lease term and the Company’s historical
borrowing capability in the market. For operating leases, lease expense is recognized on a straight-line basis over the lease
term. Lease and non-lease components within a contract are generally accounted for separately.

Preferred Stock

The Company did not have any outstanding preferred stock as of December 31, 2023 and 2022.

Collaboration Arrangements

The  Company  assesses  whether  collaboration  agreements  are  subject  to  Accounting  Standards  Codification
(“ASC”) 808, Collaborative Arrangements ("ASC 808"), based on whether they involve joint operating activities involving
two or more parties that are active participants in the activity and are exposed to significant risks and rewards dependent on
the commercial success of the activities.

A collaborative arrangement within the scope of ASC 808 may be partially (or entirely) within the scope of other
guidance  (including  ASC  606).  The  Company  evaluates  the  individual  units  of  account  (e.g.,  components)  within  a
collaborative arrangement to assess the appropriate recognition and measurement. The Company accounts for components
of a collaborative arrangement that are within the scope of other ASC guidance following the relevant provisions of that
guidance rather than the guidance provided in ASC 808.

ASC 808 states that a collaborative arrangement should be accounted for under ASC 606 when the counterparty is
a customer for a distinct good or service (i.e., a unit of account). That is, the Company is required to apply the unit-of-
account guidance in ASC 606 to determine the distinct components of a collaborative arrangement. If the counterparty is a
customer for that distinct good or service (or bundle of goods and/or services), it is accounted for under ASC 606. For units
of account that are in the scope of ASC 606, all of the guidance in ASC 606 applies, including the guidance on recognition,
measurement, presentation and disclosure.

The  Company  accounts  for  collaborative  arrangements  or  components  of  collaborative  arrangements  that  are
outside  the  scope  of  other  guidance  by  analogy  to  the  authoritative  accounting  literature  or,  if  there  is  no  appropriate
analogy,  by  using  a  reasonable,  rational  and  consistently  applied  accounting  policy  election.    When  evaluating  an
appropriate analogy to other accounting guidance or an accounting policy for a collaborative arrangement, the Company
assesses the nature of the arrangement, the nature of its business operations and the contractual terms of the arrangement.
  The  Company  recognizes  the  shared  costs  incurred  that  are  not  within  the  scope  of  other  accounting  literature  as  a
component of the related expense in the period incurred by analogy to ASC 730, Research and Development, and records
reimbursements from counterparties as an offset to the related research and development costs.

Research and Development Costs, Including Clinical Trial Accruals

Research costs consist of employee-related costs, contractor expenses, laboratory supplies and facility costs, for
research  and  development  of  product  candidates  are  expensed  as  incurred.  Development  costs,  including  clinical  trial-
related expenses, incurred by third parties, such as clinical research organizations (“CROs”), are expensed as the contracted
work  is  performed.  Where  contingent  milestone  payments  are  due  to  third  parties  under  research  and  development
arrangements, the milestone payment obligations are expensed when the milestone results are probable of being achieved.
When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase
or completion of events, invoices received and contracted costs.

Clinical  trial  expenses  are  a  significant  component  of  research  and  development  expenses,  and  the  Company
outsources a significant portion of these costs to third parties. Third-party clinical trial expenses include investigator fees,
site and patient costs, CRO costs, and costs for central laboratory testing and data management. The accrual for site and
patient costs includes inputs such as estimates of patient enrollment, patient cycles incurred, clinical site activations, and
other pass-through costs. These inputs are required to be estimated due to a lag in receiving the actual clinical information
from third parties. Payments for these activities are based on the terms of the individual arrangements, which may differ
from the pattern of costs incurred, and are reflected on the balance sheets as a prepaid asset or accrued expenses. These
third-party agreements are generally cancelable, and related costs are recorded as research and development expenses as

93

Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

incurred. Non-refundable advance clinical payments for goods or services that will be used or rendered for future research
and development activities are recorded as a prepaid asset and recognized as expense as the related goods are delivered or
the related services are performed. When evaluating the adequacy of the accrued expenses, the Company analyzes progress
of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments
and estimates may be made in determining the accrued balances at the end of any reporting period. Actual results could
differ from the estimates made. The historical clinical accrual estimates have not been materially different from the actual
costs.

Patent Costs

All  patent-related  costs  incurred  in  connection  with  filing  and  prosecuting  patent  applications  are  expensed  as
incurred  due  to  the  uncertainty  about  the  recovery  of  the  expenditure.  Amounts  incurred  are  classified  as  general  and
administrative expenses in the accompanying statement of operations and comprehensive loss.

Stock-Based Compensation

The Company accounts for its stock-based compensation in accordance with ASC Topic 718, Compensation-Stock
Compensation  (“ASC  718”).  ASC  718  requires  all  share-based  payments  to  employees,  consultants  and  directors,
including grants of incentive stock options, nonqualified stock options, restricted stock awards, unrestricted stock awards
or  restricted  stock  units  to  employees,  consultants  and  directors  of  the  Company,  to  be  recognized  as  expense  in  the
statement of operations and comprehensive loss based on their grant date fair values. The Company estimates the fair value
of  options  granted  using  the  Black-Scholes  option  pricing  model  (“Black-Scholes”)  for  stock  option  grants  to  both
employees and non-employees and the fair value of common stock to determine the fair value of restricted stock.

The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including (i) the
expected  stock  price  volatility,  (ii)  the  expected  term  of  the  award,  (iii)  the  risk-free  interest  rate  and  (iv)  expected
dividends. Due to the lack of a public market for the Company’s common stock and lack of company-specific historical
and implied volatility data, the Company has based its computation of expected volatility on the historical volatility of a
representative  group  of  public  companies  with  similar  characteristics  to  the  Company,  including  stage  of  product
development and life science industry focus. The historical volatility is calculated based on a period of time commensurate
with  expected  term  assumption.  The  Company  uses  the  simplified  method  as  prescribed  by  the  SEC  Staff  Accounting
Bulletin No. 107, Share-Based Payment, to calculate the expected term for options granted to employees as it does not have
sufficient  historical  exercise  data  to  provide  a  reasonable  basis  upon  which  to  estimate  the  expected  term.  The  expected
term is applied to the stock option grant group as a whole, as the Company does not expect substantially different exercise
or post-vesting termination behavior among its employee population. For options granted to non-employees, the Company
utilizes the simplified method also as the basis for the expected term assumption. The risk-free interest rate is based on a
treasury instrument whose term is consistent with the expected term of the stock options. The expected dividend yield is
assumed to be zero because the Company has never paid dividends and has no current plans to pay any dividends on its
common  stock.  The  Company  recognizes  forfeitures  as  they  occur  as  allowed  by  ASU  No.  2016-09,  Improvements  to
Employee Share-Based Payment Accounting (“ASU 2016-09”).

There  are  significant  judgments  and  estimates  inherent  in  the  determination  of  the  fair  value  of  the  Company’s
common stock. These estimates and assumptions include a number of objective and subjective factors, including external
market conditions, the prices at which the Company sold shares of preferred stock, the superior rights and preferences of
securities senior to its common stock at the time of a liquidity event, such as the IPO or a sale, and the likelihood of such
an event.

The  Company  expenses  the  fair  value  of  its  share-based  compensation  awards  on  a  straight-line  basis  over  the

requisite service period, which is generally the vesting period.

Income Taxes

The  Company  uses  the  asset  and  liability  method  of  accounting  for  income  taxes.  Deferred  tax  assets  and
liabilities  are  recognized  for  the  estimated  future  tax  consequences  attributable  to  temporary  differences  between  the
financial statement carrying amounts of existing assets and liabilities and their respective tax base. Deferred tax assets and
liabilities, which relate primarily to the carrying amount of the Company’s its net operating loss carryforwards, are

94

Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Deferred tax expense or benefit is the result of changes in the deferred tax assets and
liabilities.  Valuation  allowances  are  established  when  necessary  to  reduce  deferred  tax  assets  where,  based  upon  the
available evidence, the Company concludes that it is more-likely-than-not that the deferred tax assets will not be realized.
In evaluating its ability to recover deferred tax assets, the Company considers all available positive and negative evidence,
including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction
basis.  Because  of  the  uncertainty  of  the  realization  of  deferred  tax  assets,  the  Company  has  recorded  a  full  valuation
allowance against its deferred tax assets as of December 31, 2023 and 2022.

Reserves are provided for tax benefits for which realization is uncertain. Such benefits are only recognized when
the  underlying  tax  position  is  considered  more-likely-than-not  to  be  sustained  on  examination  by  a  taxing  authority,
assuming they possess full knowledge of the position and facts. Interest and penalties related to uncertain tax positions are
recognized  in  the  provision  of  income  taxes;  however,  the  Company  currently  has  no  interest  or  penalties  related  to
uncertain income tax benefits.

Comprehensive Income (Loss)

Comprehensive income (loss) is the change in equity of a business enterprise during a period from transactions
and other events and circumstances from non-owner sources. Comprehensive income (loss) includes net income (loss) and
the change in accumulated other comprehensive income (loss) for the period. Accumulated other comprehensive income
(loss) consisted entirely of unrealized gains and losses on available-for-sale marketable securities at December 31, 2023
and 2022.

Net Loss per Share

Basic loss per common share is determined by dividing loss attributable to common stockholders by the weighted-
average  number  of  common  shares  outstanding  during  the  period,  without  consideration  of  common  stock  equivalents.
Diluted  loss  per  share  is  computed  by  dividing  the  loss  attributable  to  common  stockholders  by  the  weighted-average
number  of  common  share  equivalents  outstanding  for  the  period.  The  treasury  stock  method  is  used  to  determine  the
dilutive effect of the Company's stock option grants.

Recently Issued Accounting Pronouncements

The Company qualifies as an emerging growth company (“EGC”) as defined under the Jumpstart Our Business
Startups  Act  (the  “JOBS  Act”).  Using  exemptions  provided  under  the  JOBS  Act  provided  to  EGCs,  the  Company  has
elected  to  defer  compliance  with  new  or  revised  financial  accounting  standards  until  it  is  required  to  comply  with  such
standards, which is generally consistent with required adoption dates of private companies.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax
Disclosures,  to  improve  the  transparency  of  income  tax  disclosures  by  requiring  consistent  categories  and  greater
disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The ASU also
includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023-
09  are  effective  for  fiscal  years  beginning  after  December  15,  2024,  with  early  adoption  permitted  for  annual  financial
statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impact
ASU No. 2023-09 will have on its financial statements.

The  Company  considers  the  applicability  and  impact  of  all  ASUs  issued  by  the  FASB.  All  other  ASUs  issued
subsequent to the filing of the Company’s Annual Report were assessed and determined to be either inapplicable or not
expected to have a material impact on the Company’s financial position or results of operations.

95

Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

3. Marketable Securities

Marketable securities consist of the following:

(in thousands)
Corporate bonds
U.S. Treasury and Government agencies

Total

(in thousands)
Corporate bonds
U.S. Treasury and Government agencies

Total

Amortized
Cost
73,334
22,105
95,439

$

$

Amortized
Cost
$ 133,163
1,612
$ 134,775

$

$

$

$

December 31, 2023

Gross
Unrealized
Gain

Gross
Unrealized
Loss

36
5
41

$

$

December 31, 2022

Estimated
     Fair Value
73,160
22,057
95,217

(210) $
(53)
(263) $

Gross
Unrealized
Gain

— $
—
— $

Gross
Unrealized
Loss

Estimated
     Fair Value
(1,457) $ 131,706
1,575
(1,494) $ 133,281

(37)

The  Company  uses  the  specific  identification  method  when  calculating  realized  gains  and  losses.  For  the  years
ended  December  31,  2023  and  2022,  respectively,  the  Company  recorded  $0  and  $9  thousand  in  realized  gains  on
available-for-sale securities, which is included in other income on the statements of operations and comprehensive loss.

The Company reviewed all investments which were in a loss position at the respective balance sheet dates, as well
as the remainder of the portfolio. As of December 31, 2023, the Company had investments with a total fair market value of
$80.3 million in an unrealized loss position, of which $7.5 million were in a continuous unrealized loss position for more
than twelve months. The Company analyzed the unrealized losses and determined that market conditions were the primary
factor driving these changes, and such unrealized losses are temporary as the Company anticipates a full recovery of the
amortized cost basis of these securities at maturity. After analyzing the securities in an unrealized loss position, the portion
of these losses that relate to changes in credit quality is insignificant. The Company does not intend to sell these securities,
nor is it more likely than not that the Company will be required to sell them prior to the end of their contractual terms.
Furthermore, the Company does not believe that these securities expose the Company to undue market risk or counterparty
credit risk.

The following table summarizes maturities of the Company’s investments available-for-sale as of December 31,

2023:

(in thousands)
Maturities:
Within 1 year
Between 1 to 2 years
Total investments available-for-sale

December 31, 2023

Fair
Value

Cost

$

$

92,512
2,927
95,439

$

$

92,268
2,949
95,217

The Company has classified all of its investments available-for-sale, including those with maturities beyond one
year, as current assets on the accompanying balance sheets based on the highly liquid nature of these investment securities
and because these investment securities are considered available for use in current operations.

The Company has elected to report interest receivable from its marketable securities with prepaid expenses and
other current assets on its balance sheet.  Interest receivable included in prepaid expenses and other current assets totaled
$0.8 million and $0.7 million as of December 31, 2023 and 2022, respectively.

96

    
    
    
    
    
    
    
    
 
 
Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

4. Fair Value Measurements

The  Company  has  certain  financial  assets  recorded  at  fair  value,  which  have  been  classified  as  Level  1,  2  or  3

within the fair value hierarchy as described in the accounting standards for fair value measurements.

Level 1—Quoted market prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market

prices, interest rates and yield curves.

Level  3—Unobservable  inputs  developed  using  estimates  of  assumptions  developed  by  the  Company,  which

reflect those that a market participant would use.

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the
determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in
determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value
hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The  following  tables  set  forth  the  fair  value  of  the  Company’s  financial  assets  by  level  within  the  fair  value

hierarchy as of December 31, 2023 and 2022:

(in thousands)
Cash equivalents:

Money market funds
Marketable securities:

Corporate bonds
U.S. Treasury and Government agencies

Total

(in thousands)
Cash equivalents:

Money market funds
Marketable securities:

Corporate bonds
U.S. Treasury and Government agencies

Total

December 31, 2023

Quoted Prices in
Active Markets or
Identical Assets
(Level 1)

Total

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
(Level 3)

$

12,582

$

12,582

$

— $

73,160
22,057
$ 107,799

$

—
—
12,582

$

73,160
22,057
95,217

$

—

—
—
—

December 31, 2022

Quoted Prices in
Active Markets or
Identical Assets
(Level 1)

Total

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
(Level 3)

$

6,782

$

6,782

$

— $

131,706
15,745
$ 154,233

$

—
—
6,782

$

131,706
15,745
147,451

$

—

—
—
—

The  Company  did  not  transfer  any  assets  measured  at  fair  value  on  a  recurring  basis  between  levels  during

the years ended December 31, 2023 and 2022.

The carrying value of financial instruments, including trade receivables, accounts payable and accrued liabilities
approximate  fair  value  because  of  the  short-term  maturity  of  these  items.  The  estimated  fair  values  may  not  represent
actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the
future.

97

    
    
    
    
    
    
    
    
Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

5. Property and Equipment, Net

Property and equipment consist of the following:

(in thousands)

Research equipment
Leasehold improvements
Computer equipment
Furniture and fixtures
Construction in progress

Property and equipment, gross

Less: accumulated depreciation and amortization

Property and equipment, net

December 31,  December 31, 

2023

2022

$

$

18,634
9,309
908
186
225
29,262
(20,229)
9,033

$

$

17,244
9,336
908
186
853
28,527
(16,630)
11,897

Construction in progress at December 31, 2023 and 2022 consists of the costs incurred for research equipment and

for the build-out of additional lab and office space.

Depreciation and amortization expense was $3.7 million and $4.1 million for the years ended December 31, 2023

and 2022, respectively.

6. Accrued Liabilities and Other Liabilities

Accrued liabilities consist of the following:

(in thousands)
Payroll and related benefits
Clinical trial costs
Sponsored research
Lease liabilities, current portion
Operating expenses
Other

Total accrued liabilities

7. Leases

December 31, 
2023

December 31, 
2022

$

$

992
1,133
424
656
1,235
113
4,553

$

$

1,639
1,531
417
518
647
105
4,857

The Company's lease portfolio consists of office space and laboratory facilities.  All of the Company's leases are 
classified as operating leases. The terms of the Company's lease agreements that have commenced currently extend through 
March 2030 and provide the Company with an option for a five-year extension.  Under the terms of the leases, the 
Company pays base annual rent subject to fixed dollar increases each year and other normal operating expenses such as 
taxes, repairs, and maintenance.  The Company evaluates renewal options at lease inception and on an ongoing basis and 
considers renewal options that the Company is reasonably certain to exercise in its expected lease terms when classifying 
leases and measuring lease liabilities in accordance with ASC 842, Leases.  The leases do not require variable lease 
payments or residual value guarantees and do not contain restrictive covenants.

The leases do not provide an implicit rate, therefore the Company uses its incremental borrowing rate as the discount 

rate when measuring the operating lease liability.  The incremental borrowing rate represents an estimate of the interest rate 
the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized 
basis over the term of the lease.

Operating lease expense was $1.1 million and $1.0 million for the years ended December 31, 2023 and 2022, 

respectively.  Operating cash flows used for operating leases during the years ended December 31, 2023 and December 31, 
2022 were $1.0 million and $0.9 million, respectively.  As of December 31, 2023, the weighted-average remaining lease 
term was 6.25 years, and the weighted average discount rate was 7.47%.

98

    
    
 
 
 
 
 
 
 
 
 
 
 
 
    
    
 
 
 
 
Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

As of December 31, 2023, the maturities of the Company’s operating lease liabilities were as follows (in thousands),
which are included in Accrued liabilities and other liabilities and Lease liabilities, long term in the accompanying balance
sheet:

Year Ending December 31,
2024
2025
2026
2027
2027
Thereafter
Total future minimum payments
Less: present value discount
Present value of lease liabilities

8. Commitments and Contingencies
Legal Proceedings

$

$

$

1,127
1,214
1,355
1,396
1,438
1,857
8,387
(1,782)
6,605

The  Company,  from  time  to  time,  is  a  party  to  litigation  or  legal  proceedings  arising  in  the  ordinary  course  of
business, including the resolved litigations described immediately below. The Company is not a party to any litigation or
legal proceedings, nor is management aware of any pending or threatened litigation that, in the opinion of the Company’s
management,  are  likely  to  materially  affect  the  Company’s  business  or  financial  results.  At  each  reporting  date,  the
Company evaluates whether a potential loss amount or a potential range of loss is probable and reasonably estimable under
the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses the costs
related to its legal proceedings as incurred.

9. Preferred Stock

As  of  December  31,  2023,  the  Company’s  certificate  of  incorporation,  as  amended  and  restated,  authorized  the
Company  to  issue  10,000,000  shares  of    preferred  stock,  $0.001  par  value,  and  there  were  no  shares  of  preferred  stock
issued or outstanding. The Company can fix the price, rights, preferences, privileges and restrictions of the preferred stock
without any further vote or action by its stockholders.

10. Common Stock

As of December 31, 2023, the Company’s Certificate of Incorporation, as amended and restated, authorized the
Company  to  issue  100,000,000  shares  of  $0.001  par  value  common  stock,  of  which  27,903,027  were  issued  and
outstanding.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s
stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any,
subject to the preferential dividend rights of any preferred stock. No dividends have been declared or paid by the Company
through December 31, 2023.

In  the  event  of  any  liquidation  or  dissolution  of  the  Company,  the  holders  of  common  stock  are  entitled  to  the
remaining assets of the Company legally available for distribution after the payment of the full liquidation preference for
any preferred stock.

11. Stock-Based Compensation
Employee Equity Plans

The NextCure, Inc. 2015 Omnibus Incentive Plan (the “2015 Plan”) was adopted in December 2015 and provides
for  the  grant  of  awards  of  stock  options,  restricted  stock  awards,  unrestricted  stock  awards  and  restricted  stock  units  to
employees, consultants and directors of the Company. The 2015 Plan is administered by the board of directors or, at the
discretion of the board of directors, by a committee of the board of directors.

99

    
 
 
 
 
Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

On  May  3,  2019,  the  Company’s  stockholders  approved  the  NextCure,  Inc.  2019  Omnibus  Incentive  Plan  (as
amended,  the  “2019  Plan”),  which  became  effective  on  May  8,  2019,  the  date  on  which  the  Company’s  Registration
Statement  on  Form  S-1  (Reg.  No.  333-230837)  was  declared  effective  (the  “Effective  Date”).  The  Company’s  board  of
directors (the “Board”) determined not to make additional awards under the 2015 Plan following the effectiveness of the
2019  Plan.  The  2019  Plan  provides  for  the  grant  of  awards  of  stock  options,  stock  appreciation  rights,  restricted  stock,
restricted  stock  units,  deferred  stock  units,  unrestricted  stock,  dividend  equivalent  rights,  other  equity-based  awards  and
cash  bonus  awards  to  the  Company’s  officers,  employees,  non-employee  directors  and  other  key  persons  (including
consultants).  The  number  of  shares  of  common  stock  reserved  for  issuance  under  the  2019  Plan  is  2,900,000  plus  the
number of shares of stock related to awards outstanding under the 2015 Plan that subsequently terminate by expiration or
forfeiture, cancellation or otherwise without the issuance of such shares. The number of shares reserved for issuance under
the 2019 Plan will automatically increase each January 1st during the term of the 2019 Plan by 4% of the number of shares
of the Company’s common stock outstanding on December 31st of the preceding calendar year or such lesser number of
shares determined by the Board.

As of December 31, 2023, 2,204,868 shares were reserved for future issuance under the 2019 Plan.

Stock options granted under the 2015 Plan and 2019 Plan (together, the “Plans”) to employees generally vest over

four years and expire after 10 years.

A summary of stock option activity for awards under the Plans is presented below:

Options Outstanding and Exercisable

Outstanding as of January 1, 2022

Granted
Exercised
Forfeitures

Outstanding as of December 31, 2022

Granted
Exercised
Forfeitures

Outstanding as of December 31, 2023
Exercisable as of December 31, 2023

Number of
Shares
4,545,794
1,739,350
(50,420)
(972,545)
5,262,179
2,074,750
(5,057)
(514,770)
6,817,102
3,851,843

$
$
$
$
$
$
$
$
$
$

Weighted
Average
Exercise
Price

14.15

Weighted
Average
Remaining
Contractual

Aggregate
Intrinsic
Value(1)

     Life (Years)      (in thousands)
2,860
—
—
—
115
—
—
—

8.1
$
—  
—
—
7.6
—
—
—
7.3

$

$

52

5.34  
1.32
13.77
11.44  
1.55
0.99
6.25
8.83
12.50  

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying

options and the fair value of the common stock for the options that were in the money at December 31, 2023
and 2022.

The weighted average grant date fair value per share of stock options granted during the years ended December
31, 2023 and 2022 was $1.11 and $3.69 respectively. The aggregate intrinsic value of stock options exercised during the
years ended December 31, 2023 and 2022 was $3,000 and $13,000, respectively.

The aggregate grant date fair value of stock options and restricted stock vested during the year ended December

31, 2023 and 2022 was approximately $9.1 million and $11.0 million, respectively.

On May 3, 2019, the Company’s stockholders approved the NextCure, Inc. 2019 Employee Stock Purchase Plan
(the  “ESPP”),  which  became  effective  on  the  Effective  Date.  The  ESPP  is  intended  to  qualify  as  an  “employee  stock
purchase plan” within the meaning of Section 423(b) of the Internal Revenue Code. A total of 240,000 shares of common
stock were reserved for issuance under this plan. In addition, the number of shares of common stock that may be issued
under the ESPP will automatically increase each January 1st until expiration of the ESPP, in an amount equal to the lesser
of  (i)  1%  of  the  number  of  shares  of  the  Company’s  common  stock  outstanding  on  December  31st  of  the  preceding
calendar  year,  (ii)  480,000  shares  of  common  stock  and  (iii)  a  number  of  shares  of  common  stock  determined  by  the
administrator

100

    
    
 
 
 
Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

of  the  ESPP.  As  of  December  31,  2023,  173,017  shares  of  common  stock  had  been  issued  pursuant  to  the  ESPP  and
617,663 shares were reserved for future issuance thereunder.

Stock-Based Compensation

The  Company  recorded  stock-based  compensation  expense  of  $8.2  million  and  $9.5  million  during  the  years
ended  December  31,  2023  and  2022,  respectively.  As  of  December  31,  2023,  there  was  $7.7  million  of  unrecognized
compensation  cost  related  to  unvested  stock-based  compensation  arrangements  granted  under  the  Plans.  This  remaining
compensation expense is expected to be recognized over a weighted-average period of 1.8 years as of December 31, 2023.

Stock-based  compensation  expense  recorded  as  research  and  development  and  general  and  administrative

expenses is as follows:

(in thousands)
Research and development
General and administrative

Total stock-based compensation expense

December 31, 

2023

2022

2,924
5,264
8,188

$

$

3,056
6,452
9,508

$

$

The assumptions used in the Black-Scholes option-pricing model for stock options granted were as follows:

Expected term
Expected volatility
Risk free interest rate
Expected dividend yield

12. Collaboration Agreements
LegoChem Agreement

Year Ended
December 31, 

2023
6.1 years 
81.4 %
  3.5 - 4.09 %
— %

2022
5.5 - 6.1 years 

79.7 - 81.4 %
1.8 - 4.2 %
— %

In  November  2022,  the  Company  entered  into  the  LegoChem  Agreement  to  develop  up  to  three  antibody  drug
conjugates.  Under the terms of the LegoChem Agreement, both parties equally share the costs of developing the molecules
and profits on commercialized products.  The collaboration consists of up to three research programs for which a research
plan will be developed.  With respect to a research plan, each party shall use reasonable efforts to execute and perform the
activities assigned to it.  Each party shall be solely responsible for costs associated with its assigned activities as outlined in
the  research  plan.    Upon  successful  completion  of  a  research  plan,  or  as  otherwise  agreed,  the  parties  may  designate  a
research product as a co-development product.  Upon designation of a co-development product, cost sharing on a 50-50
basis  between  the  Company  and  LegoChem  would  begin.    The  activities  associated  with  the  research  plan  and  co-
development  products  will  be  coordinated  by  a  joint  steering  committee,  which  is  comprised  of  an  equal  number  of
representatives from the Company and LegoChem.  If and when a co-development product becomes commercialized, the
Company and LegoChem would equally share in the profits.  There are no implied licenses or other rights created under the
LegoChem Agreement after designation of a co-development product.  

Effective April 1, 2023, the parties designated LNCB74 as the first co-development product under the LegoChem
Agreement.  As such, cost sharing on a 50-50 basis commenced for the first co-development product under the LegoChem
Agreement.  

Given the involvement by both parties under the LegoChem Agreement, management assessed the criteria under
ASC 808 to determine if such agreement is within the scope of ASC 808. Based on the terms of the LegoChem Agreement,
the Company concluded that the LegoChem Agreement meets the requirements of a collaboration within the guidance of
ASC 808.  The Company and LegoChem are active participants in the activities associated with the LegoChem Agreement
and are exposed to significant risks and rewards dependent on the commercial success of the activity.  The LegoChem

101

    
 
 
    
    
 
 
 
Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

Agreement is not reflective of a vendor-customer relationship and therefore not within the scope of ASC 606.  Accordingly,
the net costs associated with the co-development are expensed as incurred and recognized within research and development
expenses on the statement of operations.

As  of  December  31,  2023,  LNCB74  was  the  lone  co-development  product  and  was  in  the  early  stages  of
development.    During  the  year  ended  December  31,  2023,  the  Company  incurred  more  costs  than  LegoChem  under  the
LegoChem Agreement, and recorded a receivable from LegoChem and a corresponding reduction of $0.5 million in costs
reflecting the 50-50 cost sharing terms.

13. Net Loss per Share Attributable to Common Stockholders

The Company’s potential dilutive securities, which include common stock options, have been excluded from the
computation of diluted net loss per share as the effect would be anti-dilutive. Therefore, the weighted average number of
common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders
is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at
period end, from the computation of diluted net loss per share attributable to common stockholders for the period indicated
because including them would have had an anti-dilutive effect:

Outstanding options to purchase common stock

Total

December 31, 

2023
6,817,102
6,817,102

2022
5,262,179
5,262,179

14. Income Taxes

The reconciliation of federal statutory income tax rate to the Company’s effective income tax rate is as follows:

Expected income tax benefit at the federal statutory rate
State taxes, net of federal benefit
Research and development credit, net
Non-deductible items
Prior year provision to return adjustments
Change in valuation allowance

Total

December 31, 

2023

2022

21.0 %  
6.7  
4.5  
(0.9) 
(0.1) 
(31.2) 

— %  

21.0 %
6.5
3.4
(1.7)
(0.1)
(29.1)

— %

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.

102

    
    
 
 
 
    
    
 
 
 
 
 
 
 
Table of Contents

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

The  principal  components  of  the  Company’s  deferred  tax  assets  consisted  of  the  following  as  of  December  31,

2023 and 2022:

(in thousands)
Deferred tax assets:

Federal and state net operating loss carryforwards
Research and development tax credits
Capitalized R&D Costs
Operating lease liabilities
Share-based compensation
Accruals and other

Gross deferred tax assets

Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:

Depreciation and amortization
Operating lease assets
Gross deferred tax liabilities

Net deferred tax assets

December 31, 

2023

2022

  $

  $

  $

  $
  $

56,409   $
14,208
20,776
1,818
6,053
1,076
100,340
(98,960)

1,380   $

  $

(1,380)
(1,380)  $
—   $

49,789
11,395
12,424
1,960
4,389
1,305
81,262
(79,724)
1,538

—
(1,538)
(1,538)
—

Based on the Company’s history of losses, the Company recorded a full valuation allowance against its deferred
tax assets as of December 31, 2023. The Company increased its valuation allowance by approximately $19.2 million for
the  year  ended  December  31,  2023.  The  Company  intends  to  maintain  a  valuation  allowance  until  sufficient  positive
evidence exists to support a reversal of the allowance.

As of December 31, 2023, the Company had federal and state net operating loss carryforwards of $203.9 million
and  $208.5  million,  respectively,  some  of  which  begin  to  expire  in  the  year  ending  December  31,  2036.  Approximately
$181.1 million of the federal net operating loss carryforwards do not expire. The Company had federal and state research
and  development  tax  credit  carryforwards  of  approximately  $14.1  million  and  $0.1  million,  respectively,  as  of
December 31, 2023. The federal credits begin to expire in the year ending December 31, 2036, and the state credits begin
to expire in the year ending December 31, 2024.

Under  the  provisions  of  Sections  382  and  383  of  the  Internal  Revenue  Code  (the  “IRC”),  certain  substantial
changes in the Company’s ownership may have limited, or may limit in the future, the amount of net operating loss and
credit carryforwards that can be used to reduce future income taxes if there has been a significant change in ownership of
the  Company,  as  defined  by  the  IRC.  Future  owner  or  equity  shifts  could  result  in  limitations  on  net  operating  loss  and
credit carryforwards.

The Company files income tax returns in the U.S. federal jurisdiction as well as in Maryland. The tax years 2020
to 2022 remain open to examination by the major jurisdictions in which the Company is subject to tax. Fiscal years outside
the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years,
which have been carried forward and may be audited in subsequent years when utilized.

The  Company  evaluates  tax  positions  for  recognition  using  a  more-likely-than-not  recognition  threshold,  and
those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely
of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information.
As  of  December  31,  2023,  the  Company  had  no  unrecognized  income  tax  benefits  that  would  affect  the  Company’s
effective tax rate if recognized.

15. Employee Benefit Plan

The Company sponsors a 401(k) plan which stipulates that eligible employees can elect to contribute to the 401(k)
plan, subject to certain limitations, up to the lesser of the statutory maximum or 100% of eligible compensation on a pre-
tax basis. For the years ended December 31, 2023, and 2022, the Company made matching contributions of $0.4 million
and $0.3 million, respectively.  

103

      
      
 
  
 
  
Table of Contents

16. Subsequent Event

NEXTCURE, INC.
NOTES TO FINANCIAL STATEMENTS

On  March  21,  2024,  the  Company  implemented  a  plan  to  reduce  operating  costs  and  better  align  its  workforce
with the needs of its business. Under the cost reduction plan, the Company reduced its workforce by approximately 36%.
The Company estimates that it will incur one-time restructuring charges of approximately $0.8 million including employee
severance, benefits and related termination costs, the majority of which the Company expects to pay in the second quarter
of 2024.

104

Table of Contents

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange  Act  of  1934,  as  amended,  or  the  Exchange  Act,  as  of  December  31,  2023.  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, 2023, 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.

Changes in Internal Control over Financial Reporting

None.

Report of Management on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act). Under the supervision of and with the participation of our Principal
Executive Officer and Principal Financial Officer, our management assessed the effectiveness of our internal control over
financial report as of December 31, 2023 based on the criteria set forth by the Committee of Sponsoring Organizations of
the  Treadway  Commission  in  "Internal  Control-Integrated  Framework"  (2013).  Based  on  this  assessment,  management
concluded that our internal control over financial reporting was effective as of December 31, 2023.

This Annual Report does not include an attestation report of our independent registered public accounting firm on
our  internal  control  over  financial  reporting  due  to  an  exemption  established  by  the  JOBS  Act  for  "emerging  growth
companies."

Item 9B. Other Information

Director and Officer Trading Plans

During the quarter ending December 31, 2023, none of the Company’s directors or executive officers adopted or
terminated  any  contract,  instruction  or  written  plan  for  the  purchase  or  sale  of  Company  securities  that  was  intended  to
satisfy the affirmative defense conditions of Rule 10b5-1 or any non-Rule 10b5-1 trading arrangement.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item will be contained under the headings “Proposal No. 1: Election of Class III
Directors,”  “Corporate  Governance  and  our  Board  of  Directors,”  and  “Executive  Officers”  in  our  definitive  proxy
statement for our 2024 annual meeting of stockholders, or our “Proxy Statement,” to be filed with the SEC within 120 days
of December 31, 2023 and is incorporated herein by reference.

Item 11. Executive Compensation
The  information  required  by  this  Item  will  be  contained  in  the  Proxy  Statement  under  the  headings  “Executive

Compensation” and “Director Compensation” and is incorporated herein by reference.

105

Table of Contents

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this Item will be contained in the Proxy Statement under the headings “Ownership of

our Common Stock” and “Equity Compensation Plan Information” and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence
The  information  required  by  this  Item  will  be  contained  in  the  Proxy  Statement  under  the  headings  “Certain
Relationships  and  Related  Person  Transactions”  and  “Board  Leadership  and  Governance  Structure”  and  is  incorporated
herein by reference.

Item 14. Principal Accountant Fees and Services
The information required by this Item will be contained in the Proxy Statement under the heading “Proposal No.
2:  Ratification  of  Appointment  of  Independent  Registered  Public  Accounting  Firm”  and  is  incorporated  herein  by
reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules

The following documents are filed as part of this report:

(1) Financial Statements

See Index to Financial Statements in Part II Item 8 of this Annual Report.

(2) Financial Statement Schedules

All schedules are omitted because they are not applicable, or the required information is shown in the

financial statements or notes thereto.

(3) Exhibits

The documents listed in the following Exhibit Index are incorporated by reference or are filed with this

report, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

Exhibit
No.

3.1

3.2

4.1

4.2

EXHIBIT INDEX

Exhibit Description

Third Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1
filed with Company’s Current Report on 8-K filed with the Commission on May 13, 2019).

Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s  
Current Report on 8-K filed on June 26, 2023).

Amended and Restated Investors’ Rights Agreement, dated as of November 5, 2018, by and among
the  Company  and  the  investors  party  thereto  (incorporated  by  reference  to  Exhibit  4.1  filed  with
Company’s Registration Statement on Form S-1 filed with the Commission on April 12, 2019).

Description  of  Registered  Securities  (incorporated  by  reference  to  Exhibit  4.2  filed  with  the
Company's Annual Report on Form 10-K filed with the Commission on March 12, 2020).

10.1†

License  Agreement,  dated  as  of  December  29,  2015,  by  and  between  the  Company  and  Yale
University (incorporated by reference to Exhibit 10.1 filed with Company’s Registration Statement
on Form S-1 filed with the Commission on April 12, 2019).

106

 
Table of Contents

10.2†

10.3†

10.4+

10.5+

10.6+

10.7+

10.8+

10.9+

10.10+

10.11+

10.12+

10.13+

10.14+

10.15+

10.16†

Corporate  Sponsored  Research  Agreement,  dated  as  of  December  29,  2015,  by  and  between  the
Company  and  Yale  University  (incorporated  by  reference  to  Exhibit  10.2  filed  with  Company’s
Registration Statement on Form S-1 filed with the Commission on April 12, 2019).

Amendment  to  License  Agreement  and  SRA,  dated  as  of  April  25,  2020,  by  and  between  the
Company and Yale University (incorporated by reference to Exhibit 10.3 filed with the Company’s
Annual Report on Form 10-K filed with the SEC on March 4, 2021).

NextCure, Inc. 2015 Omnibus Incentive Plan, (incorporated by reference to Exhibit 10.6 filed with
Company’s Registration Statement on Form S-1 filed with the Commission on April 12, 2019).

Form  of  Stock  Option  Agreement  under  the  NextCure,  Inc.  2015  Omnibus  Incentive  Plan
(incorporated by reference to Exhibit 10.7 filed with Company’s Registration Statement on Form S-
1 filed with the Commission on April 12, 2019).

NextCure, Inc. 2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.8 filed with
Registration Statement on Form S-1/A filed with the Commission on April 29, 2019).

Forms  of  Incentive  and  Nonqualified  Stock  Option  Agreement  under  the  NextCure,  Inc.  2019
Omnibus  Incentive  Plan  (incorporated  by  reference  to  Exhibit  10.9  filed  with  Company’s
Registration Statement on Form S-1/A filed with the Commission on April 29, 2019).

Form  of  Restricted  Stock  Agreement  under  the  NextCure,  Inc.  2019  Omnibus  Incentive  Plan
(incorporated  by  reference  to  Exhibit  10.10  filed  with  Company’s  Registration  Statement  on
Form S-1/A filed with the Commission on April 29, 2019).

Form of Restricted Stock Unit Agreement under the NextCure, Inc. 2019 Omnibus Incentive Plan
(incorporated  by  reference  to  Exhibit  10.11  filed  with  Company’s  Registration  Statement  on
Form S-1/A filed with the Commission on April 29, 2019).

NextCure,  Inc.  2019  Employee  Stock  Purchase  Plan  (incorporated  by  reference  to  Exhibit  10.12
filed with Company’s Registration Statement on Form S-1/A filed with the Commission on April 29,
2019).

Non-Employee  Director  Compensation  Program  (incorporated  by  reference  to  Exhibit  10.1  filed
with  the  Company’s  Current  Report  on  Form  8-K  filed  with  the  Commission  on  September  14,
2020).

Form  of  Indemnification  Agreement  by  and  between  the  Company  and  each  of  its  directors  and
executive  officers  (incorporated  by  reference  to  Exhibit  10.5  filed  with  Company’s  Registration
Statement on Form S-1 filed with the Commission on April 12, 2019).

Employment Agreement, effective as of July 27, 2020, by and between the Company and Michael
Richman  (incorporated  by  reference  to  Exhibit  10.1  filed  with  the  Company’s  Current  Report  on
Form 8-K filed with the Commission on July 31, 2020).

Employment Agreement, effective as of July 27, 2020, by and between the Company and Steven P.
Cobourn  (incorporated  by  reference  to  Exhibit  10.2  filed  with  the  Company’s  Current  Report  on
Form 8-K filed with the Commission on July 31, 2020).

Employment Agreement, effective as of July 27, 2020, by and between the Company and Solomon
Langermann,  Ph.D.  (incorporated  by  reference  to  Exhibit  10.3  filed  with  the  Company’s  Current
Report on Form 8-K filed with the Commission on July 31, 2020).

Lease  Agreement,  dated  as  of  January  30,  2019,  by  and  between  the  Company  and  ARE-
8000/9000/10000  Virginia  Manor,  LLC  (incorporated  by  reference  to  Exhibit  10.14  filed  with
Company’s Registration Statement on Form S-1 filed with the Commission on April 12, 2019).

107

Table of Contents

10.17†

10.18+

10.19†

10.20†

10.21†

10.22†

10.23†

10.24†

10.25†

10.26†

First Amendment to Lease Agreement, dated as of August 2, 2019, by and between the Company
and  ARE-8000/9000/10000  Virginia  Manor,  LLC  (incorporated  by  reference  to  Exhibit  10.1  filed
with Company’s Quarterly Report on Form 10-Q filed on November 12, 2019).

Amendment  to  the  NextCure,  Inc.  2015  Omnibus  Incentive  Plan  dated  as  of  September  30,  2021
(incorporated  by  reference  to  Exhibit  10.1  filed  with  Company’s  Quarterly  Report  on  Form  10-Q
filed on November 4, 2021).

Amended  and  Restated  Sublease  Agreement,  dated  as  of  March  15,  2019,  by  and  between  the
Company  and  Lupin,  Inc.  (incorporated  by  reference  to  Exhibit  10.4  filed  with  Company’s
Registration Statement on Form S-1 filed with the Commission on April 12, 2019).

Second Amendment to License Agreement and SRA, dated as of October 20, 2021, by and between
the  Company  and  Yale  University.  (incorporated  by  reference  to  Exhibit  10.23  filed  with  the
Company's Annual Report on Form 10-K filed with the Commission on March 3, 2022).

Executive Employment Agreement, effective as of January 11, 2021, by and between the Company
and Han Myint, M.D. (incorporated by reference to Exhibit 10.24 filed with the Company's Annual
Report on Form 10-K filed with the Commission on March 3, 2022).

Second  Amendment  to  Lease  Agreement,  dated  as  of  February  19,  2020,  by  and  between  the
Company and ARE-8000/9000/10000 Virginia Manor, LLC. (incorporated by reference to Exhibit
10.25 filed with the Company's Annual Report on Form 10-K filed with the Commission on March
3, 2022).

Third Amendment to Lease Agreement, dated as of  February 4, 2022, by and between the Company
and ARE-8000/9000/10000 Virginia Manor, LLC. (incorporated by reference to Exhibit 10.26 filed
with the Company's Annual Report on Form 10-K filed with the Commission on March 3, 2022).

Fourth Amendment to Lease Agreement, dated as of June 10, 2022, by and between the Company
and ARE-8000/9000/10000 Virginia Manor, LLC (incorporated by reference to Exhibit 10.27 to the
Company’s Annual Report on Form 10-K filed on March 2, 2023).

Third Amendment to SRA, dated as of September 14, 2022, by and between the Company and Yale
University  (incorporated  by  reference  to  Exhibit  10.28  to  the  Company’s  Annual  Report  on  Form
10-K filed on March 2, 2023).

Fifth  Amendment  to  Lease  Agreement,  dated  as  of  November  28,  2022,  by  and  between  the
Company  and  ARE-8000/9000/10000  Virginia  Manor,  LLC  (incorporated  by  reference  to  Exhibit
10.29 to the Company’s Annual Report on Form 10-K filed on March 2, 2023).

10.27+†

Employment  Agreement,  effective  as  of  February  28,  2023,  by  and  between  the  Company  and
Kevin  G.  Shaw  (incorporated  by  reference  to  Exhibit  10.30  to  the  Company’s  Annual  Report  on
Form 10-K filed on March 2, 2023).

10.28

10.29

Sales Agreement, dated as of August 4, 2023, by and between the Company and Leerink Partners
LLC (incorporated by reference to Exhibit 1.2 to the Company’s Registration Statement on Form S-
3 filed on August 4, 2023).

Sixth Amendment to Lease Agreement, dated as of April 19, 2023, by and between the Company
and ARE-8000/9000/10000 Virginia Manor, LLC (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q filed on May 4, 2023).

10.30*†

Research  Collaboration  and  Co-Development  Agreement,  dated  as  of  November  9,  2022,  by  and
between Nextcure, Inc. and LegoChem Biosciences, Inc.

108

Table of Contents

23.1*

Consent of Ernst & Young LLP, independent registered public accounting firm.

24.1*

Power of Attorney (included on the signature page of this Annual Report on Form 10-K).

31.1*

31.2*

32.1*

Certification of Michael Richman pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Steven P. Cobourn pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification  of  Michael  Richman  and  Steven  P.  Cobourn  pursuant  to  18  U.S.C.  Section  1350  as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97*

NextCure, Inc. Policy on Recoupment of Incentive Compensation.

EX-101.INS

Inline XBRL Instance Document

EX-101.SCH

Inline XBRL Taxonomy Extension Schema Document

EX-101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

EX-101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

EX-101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

EX-101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Coverage Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*   Filed herewith.
+   Indicates a management contract or compensatory plan.
†   Portions of this exhibit have been omitted in compliance with Item 601 of Regulation S-K.

Item 16. Form 10-K Summary
None.

109

Table of Contents

Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly

caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

Date: March 21, 2024

NEXTCURE, INC.

/s/ Michael Richman

By:
Name: Michael Richman

President and Chief Executive Officer

Each  person  whose  signature  appears  below  constitutes  and  appoints  Michael  Richman  and  Steven  P.  Cobourn
and each of them, jointly and severally, his or her attorneys-in-fact, each with full power of substitution, for him or her in
any  and  all  capacities,  to  sign  any  and  all  amendments  to  this  Annual  Report  on  Form  10-K,  and  to  file  the  same,  with
exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission.

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

/s/ Michael Richman
Michael Richman

/s/ Steven P. Cobourn
Steven P. Cobourn

/s/ David Kabakoff
David Kabakoff, Ph.D.

/s/ Anne Borgman
Anne Borgman, M.D.

/s/ Ellen G. Feigal
Ellen G. Feigal, M.D.

/s/ John G. Houston
John G. Houston, Ph.D.

/s/ Elaine V. Jones
Elaine V. Jones, Ph.D.

/s/ Chau Q. Khuong
Chau Q. Khuong

/s/ Stephen Webster
Stephen Webster

President, Chief Executive Officer and Director
(Principal Executive Officer)

Chief Financial Officer
(Principal Financial and Accounting Officer)

Chair of the Board

Director

Director

Director

Director

Director

Director

110

Date

March 21, 2024

March 21, 2024

March 21, 2024

March 21, 2024

March 21, 2024

March 21, 2024

March 21, 2024

March 21, 2024

March 21, 2024

Exhibit 10.30

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT
BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT
TREATS AS PRIVATE OR CONFIDENTIAL. OMITTED INFORMATION HAS BEEN
REPLACED WITH ASTERISKS [***]

RESEARCH COLLABORATION AND 
CO-DEVELOPMENT AGREEMENT

BY AND BETWEEN

NEXTCURE, INC.

AND

LEGOCHEM BIOSCIENCES, INC.

NOVEMBER 9, 2022

- 1 -

 
RESEARCH COLLABORATION AND CO-DEVELOPMENT AGREEMENT

This Research Collaboration and Co-Development Agreement (this “Agreement”) is made
effective  as  of  the  9th  day  of  November  2022  (the  “Effective Date”)  by  and  between  NextCure,
Inc.  a corporation having its principal place of business at 9000 Virginia Manor Road, Suite 200,
Beltsville, MD 20705, U.S.A (“NextCure”) and LegoChem Biosciences, Inc., a corporation having
its principal place of business at 10, Gukjegwahak 10-ro, Yuseong-gu, Daejeon, 34002, Republic
of Korea (“LCB”).  LCB and NextCure are sometimes referred to herein individually as a “Party”
and collectively as the “Parties.”

RECITALS

WHEREAS,  NextCure  is  a  biopharmaceutical  company  engaged  in  the  research  and
development antibody-based products useful in the treatment or prevention of human diseases and
conditions;

WHEREAS,  LCB  is  a  biopharmaceutical  company  that  has  developed  proprietary  site-
specific,  isoprenoid  transferase-mediated  conjugation,  and  isosubstrate  and  self-immolative  beta-
glucuronide containing linker technologies thereof and payload technologies thereof;

WHEREAS, NextCure has developed and/or Controls proprietary antibodies and has other
valuable Know-How relating to antibody drug candidates (“NextCure Platform” as defined below)
for use with Research Program Targets (as defined below);

WHEREAS,  the  Parties  desire  to  collaborate  on  the  research  and  development  of  new
Research  Products  (as  defined  below)  that  utilize  the  LCB  Platform  in  combination  with  the
NextCure Platform, all in accordance with the terms and conditions of this Agreement;

NOW, THEREFORE, in consideration of the foregoing and the premises and conditions

set forth herein, the Parties agree as follows:

ARTICLE 1
DEFINITIONS

1.1

“Acceptance”  means:  (a)  with  respect  to  a  Regulatory  Approval  Application,
receipt of a written communication from the applicable Regulatory Authority acknowledging that
it  has  received  such  Regulatory  Approval  Application  and  that  such  Regulatory  Approval
Application is sufficiently complete to permit a substantive review for approval purposes; or (b)
with respect to an IND, the expiration of the statutory waiting period without a notice of clinical
hold or rejection from the applicable Regulatory Authority.

1.2
cytotoxic payload.

“ADC”  or  “Antibody  Drug  Conjugate”  means  an  Antibody  conjugated  to  a

 
1.3

“Access  and  Pricing  Plan”  means,  with  respect  to  a  given  Co-Development
Product, the Territory-specific plan for such Co-Development Product prepared by NextCure and
LCB and reviewed by the JSC that calculates the Applicable Retail Baseline Price, launch timing
ranges and target population for a Co-Development Product.

1.4

“Affiliate”  means,  with  respect  to  a  particular  Party,  a  person,  corporation,
partnership, or other entity that controls, is controlled by or is under common control with such
Party.    For  the  purposes  of  this  definition,  the  word  “control”  (including,  with  correlative
meaning, the terms “controlled by” or “under the common control with”) means the actual power,
either directly or indirectly through one or more intermediaries, to direct or cause the direction of
the management and policies of such entity, whether by the ownership of fifty percent (50%) or
more of the voting stock of such entity, by contract or otherwise.

1.5

“Antibody” means an unconjugated monoclonal antibody.

1.6

lipo-protein),
“Antigen”  means  any  protein  (including  any  glyco-  or 
carbohydrate,  compound  or  other  composition  that  stimulates  the  production  of  Antibodies  or
against which Antibodies are Directed.  

1.7

“Applicable Law”  means  all  applicable  statutes,  ordinances,  regulations,  rules,
or orders of any kind whatsoever of any Governmental Authority, including the U.S. Food, Drug
and  Cosmetic  Act,  (21  U.S.C.  §301  et  seq.)  (“FFDCA”),  Prescription  Drug  Marketing  Act,  the
Generic Drug Enforcement Act of 1992 (21 U.S.C. §335a et seq.), Biologics Price Competition
and  Innovation  Act  (“BPCIA”)  of  2009,  U.S.  Patent  Act  (35  U.S.C.  §1  et  seq.),  Federal  Civil
False Claims Act (31 U.S.C. §3729 et seq.), and the Anti-Kickback Statute (42 U.S.C. §1320a-7b
et seq.), all as amended from time to time, together with any rules, regulations, and compliance
guidance promulgated thereunder, as well as foreign equivalents of any of the foregoing.

1.8

“Applicable  Retail  Baseline  Price”  means  the  applicable  base  list  price  under
which both NextCure and LCB may Commercialize a Co-Development Product in the Territory as
determined by the methodology set forth in the Applicable Retail Baseline Price Schedule or as
otherwise agreed upon in writing by both Parties.

1.9

“Bankruptcy Laws” has the meaning set forth in Section 11.3 of this Agreement.

1.10

“Breaching Party” has the meaning set forth in Section 11.2 of this Agreement.

1.11

“Business Day”  means  a  day  other  than  Saturday,  Sunday  or  any  other  day  on
which commercial banks located either in the United States or the Republic of Korea, as the case
may be, are authorized or obligated by Applicable Law to close.

1.12

“Calendar  Quarter”  means  the  respective  periods  of  three  (3)  consecutive
calendar  months  ending  on  March  31,  June  30,  September  30  and  December  31;  provided,
however, that (a) the first Calendar Quarter of the Term shall extend from the Effective Date to
the end of the first complete Calendar Quarter thereafter; and (b) the last Calendar Quarter of the
Term shall end upon the expiration or termination of this Agreement.

1.13

“Calendar Year” means the twelve (12) month period ending on December 31;
provided however, that (a) the first Calendar Year of the Term, shall begin on the Effective Date
and  end  on  December  31,  2022;  and  (b)  the  last  Calendar  Year  of  the  Term  shall  end  on  the
effective date of expiration or termination of this Agreement.

1.14

“Claim” has the meaning set forth in Section 13.1of this Agreement.

1.15

“Clinical  Trial”  means  any  human  clinical  study  or  trial  of  Products  in  the

Territory, including Phase I Trials, Phase II Trials, Phase III Trials and Phase IV Trials.

1.16

“Co-Commercialization Product” means any Co-Development Product that has
received regulatory approval for sale and/or marketing and for which the Parties have executed an
active and binding Commercialization Agreement in accord with Section 5.1.

1.17

“Co-Development  Budget”  means  a  detailed  budget  for  the  completion  of  the
activities  contemplated  under  the  Co-Development  Plan  for  such  Co-Development  Product.   A
sample  of  a  preliminary  and  partial  Co-Development  Budget  for  the  first  Research  Program
Target is attached hereto as Exhibit C.

1.18

“Co-Development Plan”  means  a  reasonably  detailed  written  plan  setting  forth
those Co-Development activities, to be completed by the Parties that are necessary or desirable to
obtain  or  maintain  Regulatory  Approvals  for  the  Co-Development  Products.  The  Co-
Development Plan shall include: (i) all key Development activities to be conducted with respect to
the  Co-Development  Products,  (ii)  milestones  to  evaluate  the  progress  of  the  Co-Development
Products, and (iii) an allocation of responsibilities in relation to the foregoing activities, including
those responsibilities of the Parties that will be performed by Subcontractors or Sublicensees;

1.19

“Combination  Product”  means  either:  (a)  any  pharmaceutical  product  that
consists of the active ingredient of a Product and at least one other active ingredient that is not the
active  ingredient  a  Product;  or  (b)  any  combination  of  a  Product  and  a  second  pharmaceutical
product  (that  itself  is  not  a  Product)  where  the  second  pharmaceutical  product  contains  at  least
one  other  active  ingredient  not  contained  in  the  Product  and  where  such  Product  and  second
pharmaceutical  product  are  not  formulated  together  but  are  sold  together  and  invoiced  as  one
product.

1.20

“Co-Development  Product”  means  any  Product  directed  to  a  Co-Development
Target, including all forms, presentations, doses and formulations thereof and any combinations
with one or more other active ingredients.  For the avoidance of doubt, Co-Development Products
excludes Research Products until such time as they are designated as Co-Development Products.

1.21

“Co-Development  Target”  means  any  Research  Program  Target  for  which  the

Parties designate as a Target for further Development after Research Program.

1.22

“Commercialization  Agreement”  means  an  agreement  detailing  all  activities
undertaken  relating  to  the  marketing,  promotion  (including  advertising,  detailing,  sponsored
product or continuing medical education), any other offering for sale, distribution, or sale of any
Co-Development and Co-Commercialization Product as described in Section 5.1.

1.23

“Commercialization and Related Costs” means all costs incurred by a Party and
its  Affiliates  during  the  Term  in  connection  with  the  commercialization  of  Co-Development
Products in the Territory.

1.24

“Commercially  Reasonable  Efforts”  means,  with  respect  to  the  efforts  to  be
expended,  or  considerations  to  be  undertaken,  by  a  Party  or  its  Affiliate  with  respect  to  any
objective,  activity  or  decision  to  be  undertaken  hereunder,  reasonable,  good  faith  efforts  to
accomplish such objective, activity or decision as such Party would normally use to accomplish a
similar objective, activity or decision under similar circumstances, it being understood and agreed
that with respect to the Development, Manufacture, seeking and obtaining Regulatory Approval,
or  commercialization  of  the  Products,  such  efforts  and  resources  shall  be  consistent  with  those
efforts  and  resources  commonly  used  by  a  Party  under  similar  circumstances  for  similar
compounds or products owned by it or to which it has similar rights, which compound or product,
as  applicable,  is  at  a  similar  stage  in  its  development  or  product  life  and  is  of  similar  market
potential  taking  into  account:  (a)  issues  of  efficacy,  safety,  and  expected  and  actual  approved
labelling, (b) the expected and actual competitiveness of alternative products sold by Third Parties
of  similar  size  and  having  similar  resources  in  the  marketplace,  (c)  the  expected  and  actual
product profile of the Products, (d) the expected and actual patent and other proprietary position
of the Products, (e) the likelihood of Regulatory Approval given the regulatory structure involved,
including  regulatory  or  data  exclusivity,  (f)  the  expected  and  actual  profitability  and  return  on
investment of the compound or product, or other compounds or products in a Party’s  portfolio of
compounds  or  products,  taking  into  consideration,  among  other  factors,  expected  and  actual  (i)
Third Party expenses, (ii) royalty, milestone and other payments to Third Parties and among the
Parties,  and  (iii)  the  pricing  and  reimbursement  relating  to  the  product(s).  Commercially
Reasonable  Efforts  shall  be  determined  on  a  country-by-country  and  indication-by-indication
basis for each Product, as applicable, and it is anticipated that the level of effort and resources that
constitute  “Commercially  Reasonable  Efforts”  with  respect  to  a  particular  country  or  indication
will change over time, reflecting changes in the status of each Product, as applicable,

and the country(ies) involved.  Notwithstanding the foregoing, (a) neither Party shall be obligated
to  Develop,  seek  Regulatory  Approval  for,  or  commercialize  a  Product:  (i)  which,  in  its
reasonable opinion after discussion with the other Party, caused or is likely to cause a fatal, life-
threatening or other adverse safety event that is reasonably expected, based upon then available
data, to preclude obtaining Regulatory Approval for such Product, or, if Regulatory Approval of
such Product has already been obtained, to preclude continued marketing of such Product; or (ii)
in  a  manner  inconsistent  with  Applicable  Law;  and  (b)  the  Parties  shall  not  be  obligated  to
commercialize  a  Co-Development  Product  in  any  jurisdiction  where  such  Co-Development
Product has not received a Pricing Approval.

1.25

“Competitive Product” means an ADC product Developed or Exploited against
a  Co-Development  Target  by  one  Party  independently  of  the  other  Party  and  outside  of  this
Agreement.    For  clarity,  a  Terminated  Product  or  other  product  directed  to  a  Terminated  Target
that are being advanced by a Sole Developing Party are not Competitive Products.

1.26

“Confidential  Information”  means,  subject  to  ARTICLE  10,  all  non-public  or
proprietary Information disclosed by a Party or its Affiliate to the other Party or its Affiliate under
this  Agreement,  which  may  include  ideas,  Inventions,  concepts,  compounds,  compositions,
formulations, formulas, practices, procedures, processes, methods, knowledge, Know-How, trade
secrets, technology, inventories, machines, techniques, development, designs, drawings, computer
programs,  skill,  experience,  documents,  apparatus,  results,  clinical  and  regulatory  strategies,
regulatory  documentation,  information  and  submissions  pertaining  to,  or  made  in  association
with, filings with any Governmental Authority, data, including pharmacological, toxicological and
clinical data, analytical and quality control data, manufacturing data and descriptions, patent and
legal  data,  market  data,  financial  data  or  descriptions,  devices,  assays,  chemical  formulations,
specifications,  material,  product  samples  and  other  samples,  physical,  chemical  and  biological
materials  and  compounds,  and  the  like,  without  regard  as  to  whether  any  of  the  foregoing  is
marked “confidential” or “proprietary,” or disclosed in oral, written, graphic, or electronic form.
 Confidential Information shall include: (a) the terms and conditions of this Agreement; and (b)
Confidential Information disclosed by either Party pursuant to the Mutual Confidential Disclosure
Agreement between the Parties dated January 26, 2022.

1.27

“Control” or “Controlled” means, with respect to any Information, Know-How,
Patent or other Intellectual Property Right, possession (including ownership) by a Party, including
its  Affiliates,  of  the  ability  (without  taking  into  account  any  rights  granted  by  one  Party  to  the
other Party under the terms of this Agreement) to grant access, a license or a sublicense to such
Information,  Patent  or  other  Intellectual  Property  Right  without  violating  the  terms  of  any
agreement  or  other  arrangement  with,  or  necessitating  the  consent  of,  any  Third  Party,  at  such
time  that  the  Party  would  be  first  required  under  this  Agreement  to  grant  the  other  Party  such
access, license or sublicense.

1.28

“Cover”, “Covering” or “Covered” means, with respect to a product, technology,
process or method, that, in the absence of ownership of or a license granted under a Valid Claim,
the practice or Exploitation of such product, technology, process or method would infringe such
Valid Claim (or, in the case of a Valid Claim that has not yet issued, would infringe such Valid
Claim if it were to issue).

1.29

“Cure Period” has the meaning set forth in Section 11.2 of this Agreement.

1.30

“Development”  means,  with  respect  to  the  Products,  all  research,  non-clinical
and  clinical  drug  development  activities,  including  toxicology,  pharmacology,  and  other  non-
clinical efforts, statistical analysis, formulation development, delivery system development, CDx
development,  the  performance  of  any  such  research  or  Clinical  Trials,  including  the  process
development and Manufacturing of Product for use in Clinical Trials, or other activities to obtain,
but not maintain, Regulatory Approval of Products in the Field in the Territory.  “Development”
shall exclude all commercialization activities.  When used as a verb, “Develop” means to engage
in Development activities.

1.31

“Directed” means, with respect to an Antigen, that an Antibody or a Product is

selected, generated or optimized to specifically bind to such Antigen.

1.32

“Disclosing Party” has the meaning set forth in Section 10.1 of this Agreement.

1.33

“Dispute” has the meaning set forth in Section 12.1 of this Agreement.

1.34

“EMA”  means  the  European  Medicines  Agency  or  any  successor  agency  or

authority having substantially the same function.

1.35

“Exploit” or “Exploitation” means, either by itself or through Affiliates or Third
Parties,  to  research,  make,  distribute,  import,  export,  distribute,  use,  sell,  or  offer  for  sale,
including  to  Develop,  commercialize,  register,  modify,  enhance,  improve,  Manufacture,  or
otherwise dispose of for commercial gain or profit.

1.36

“FDA” means the U.S. Food and Drug Administration, or any successor agency

thereto.

1.37

“Field” means the use of monospecific ADC for the treatment of human diseases

in all therapeutic areas.

1.38

“Force Majeure” means any event beyond the reasonable control of the affected
Party  including  embargoes;  war  or  acts  of  war,  including  terrorism,  insurrections,  riots,  or  civil
unrest; strikes, lockouts or other labor disturbances; epidemics, fire, floods, earthquakes or other
acts of nature; or acts, omissions or delays in acting by any Governmental Authority (including

the  refusal  of  the  competent  Governmental  Authorities  to  issue  required  Regulatory  Approvals
due to reasons other than the affected Party’s negligence or wilful misconduct or any other cause
within  the  reasonable  control  of  the  affected  Party)  and  failure  of  plant  or  machinery  (provided
that such event or failure could not have been prevented by the exercise of skill, diligence, and
prudence that would be reasonably and ordinarily expected from a skilled and experienced person
engaged in the same type of undertaking under the same or similar circumstances).

1.39

“FTE” means twelve (12) months of work per full Calendar Year (or equivalent
pro-rata  portion  thereof  for  a  period  less  than  12  months)  devoted  to  or  in  support  of  the
Development of Research Products in accordance with the Research Program, that is carried out
by one or more qualified scientific or technical employees of the Parties or its Affiliates, as such
hours are measured in accordance with the Parties’ normal time allocation practices.  FTE only
applies to employees of the Parties and does not apply to third-party contractors of the Parties.

1.40

“FTE Cost”  means,  for  any  period,  the  FTE  Rate  multiplied  by  the  number  of

FTEs in such period.

1.41

“FTE  Rate”  means  the  hourly  cost,  as  mutually  agreed  by  the  Party’s  in  a
specific Commercialization Agreement, Co-Development Plan, and/or Co-Development Budget,
for  a  specific  Party’s  FTEs  that  will  be  applicable  to  such  FTEs  for  such  specific  development
plan or budget, a Calendar Year for personnel engaged in Development activities. The FTE Rate
shall be “fully burdened” and cover (a) employee salaries, bonuses, benefits, profit sharing, stock
option  grants,  and  FICA  costs  and  benefits  and  other  similar  ex-US  costs,  (b)  direct  costs  for
equipment  and  other  materials  and  services  (including  equipment  expenses,  and  ordinary
laboratory  and  manufacturing  consumables  utilized  by  such  employees),  and  (c)    reasonably
attributable and assignable indirect costs (including training, recruiting, and relocation, facilities
and  other  overhead  associated  with  such  employee  and  the  performance  of  its  planned  and
budgeted activities).

1.42

“Good Clinical Practice”, “GCP” or “cGCP” means the then-current standards,
practices  and  procedures  promulgated  or  endorsed  by  the  FDA  as  set  forth  in  the  guidelines
adopted by the International Conference on Harmonization (“ICH”), titled “Guidance for Industry
E6  Good  Clinical  Practice:  Consolidated  Guidance,”  (or  any  successor  document)  including
related  regulatory  requirements  imposed  by  the  FDA  and  comparable  regulatory  standards,
practices  and  procedures  promulgated  by  the  EMA,  PMDA  or  other  Regulatory  Authority
applicable to the Territory, as they may be updated from time to time.

1.43

“Good  Laboratory  Practice”,  “GLP”,  or  “cGLP”  means  the  then-current
standards, practices and procedures promulgated or endorsed by the FDA as set forth in 21 C.F.R.
Part 58 (or any successor statute or regulation), including related regulatory requirements imposed
by the FDA and comparable regulatory standards, practices and procedures promulgated by the

EMA, PMDA or other Regulatory Authority applicable to the Territory, as they may be updated
from time to time, including applicable guidelines promulgated under the ICH.

1.44

“Good  Manufacturing  Practice”,  “GMP”,  or  “cGMP”  means  the  then-current
good manufacturing practice required by the FDA, as set forth in the FFDCA, as amended, and
the  regulations  promulgated  thereunder,  for  the  manufacture  and  testing  of  pharmaceutical
materials,  and  comparable  Applicable  Law  related  to  the  manufacture  and  testing  of
pharmaceutical  materials  in  jurisdictions  outside  the  U.S.,  including  the  quality  guideline
promulgated  by  the  ICH  designated  ICH  Q7A,  titled  “Q7A  Good  Manufacturing  Practice
Guidance for Active Pharmaceutical Ingredients” and the regulations promulgated thereunder, in
each case as they may be updated from time to time.

1.45

“Governmental  Authority”  means  any  multi-national,  federal,  state,  local,
municipal  or  other  government  authority  of  any  nature  (including  any  governmental  division,
subdivision,  department,  instrumentality,  agency,  bureau,  branch,  office,  commission,  council,
court or other tribunal).

1.46

“Global Brand Plan” means, with respect to a given Co-Development Product,
the  global,  cross-functional  commercialization  plan  for  such  Co-Development  Product  prepared
by both NextCure and LCB, including any applicable Global Payer Plan.

1.47

“Global  Payer  Plan”  means  the  global  plan  for  a  Co-Development  Product
prepared  by  both  NextCure  and  LCB  that  sets  forth  the  strategic  direction,  positioning,  value
proposition and reimbursement for such Co-Development Product.

1.48

“IND”  means  (a)  an  Investigational  New  Drug  application  as  defined  in  the
FFDCA, as amended, and applicable regulations promulgated hereunder by the FDA, (b) a similar
clinical trial authorization application for a product filed with a Regulatory Authority in any other
regulatory jurisdiction outside the U.S., the filing of which (in the case of (a) or (b)) is necessary
to  commence  or  conduct  clinical  testing  of  a  pharmaceutical  product  in  humans  in  such
jurisdiction,  or  (c)  documentation  issued  by  a  Regulatory  Authority  that  permits  the  conduct  of
clinical testing of a product in humans in such jurisdiction.

1.49

“Indemnifying  Party”  has  the  meaning  set  forth  in  Section  13.4  of  this

Agreement.

1.50

“Indemnitee” has the meaning set forth in Section 13.4 of this Agreement.

1.51

“Information”  means 

information,  Inventions,  compounds,  compositions,
formulations, formulas, practices, procedures, processes, methods, knowledge, Know-How, trade
secrets, 
techniques,  designs,  drawings,  correspondence,  computer  programs,
documents, apparatus, results, strategies, regulatory documentation, information and submissions

technology, 

pertaining  to,  or  made  in  association  with,  filings  with  any  Governmental  Authority  or  patent
office,  data,  including  pharmacological,  toxicological,  non-clinical  and  clinical  data,  analytical
and  quality  control  data,  manufacturing  data  and  descriptions,  market  data,  financial  data  or
descriptions, devices, assays, chemical formulations, specifications, material, product samples and
other  samples,  physical,  chemical  and  biological  materials  and  compounds,  and  the  like,  in
written, electronic, oral or other tangible or intangible form, now known or hereafter developed,
whether or not patentable.

1.52

“Initiation” means, with respect to (i) a GLP toxicology study, the dosing of the
first  animal  with  a  Co-Development  Product  pursuant  to  the  toxicology  protocol  for  the  Co-
Development  Product  and  (ii)  a  Clinical  Trial,  the  dosing  of  the  first  patient  with  a  Co-
Development Product pursuant to the clinical protocol for the specified Clinical Trial.

1.53

“Intellectual Property Rights”  means  Patents,  copyrights,  database  rights,  trade
secrets, Know-How, and similar rights of any type (excluding trademarks) under the Laws of any
territory,  including  all  applications,  registrations,  extensions  and  renewals  relating  to  any  of  the
foregoing.

1.54

“Inventions” means any and all technical developments, inventions, discoveries
or  findings,  improvements  and  developments,  whether  or  not  patentable,  made,  conceived  or
reduced to practice during the Term, whether made, conceived or reduced to practice solely by, or
on behalf of, LCB, NextCure, the Parties jointly, or any Affiliate of the same.

1.55

1.56

1.57

“JDT” has the meaning set forth in Section 2.4 of this Agreement.

“JPT” has the meaning set forth in Section 2.3 of this Agreement.

“JSC” has the meaning set forth in Section 2.12 of this Agreement.

1.58

“Know-How”  means,  with  respect  to  a  Party,  unpublished  Information  and
Inventions  Controlled  by  such  Party.    Know-How  excludes  any  Information  contained  within  a
Party’s published Patents.  

1.59

“Knowledge”  means,  as  applied  to  a  Party,  that  such  Party  shall  be  deemed  to
have knowledge of a particular fact or other matter to the extent that a reasonably prudent person
with primary responsibility for the applicable subject matter (being a director, senior manager, C-
suite  member  of  the  Party’s  leadership  team,  patent  and  legal  personnel,  senior  R&D  team
members of such Party) knew or after performing reasonable inquiry would have known of such
fact or other matter.

1.60

“LCB Indemnitee” has the meaning set forth in Section 13.1 of this Agreement.

1.61

“LCB  Know-How”  means  all  Know-How  owned  or  Controlled  by  LCB  as  of
the Effective Date and during the Term that is necessary or useful to Develop or Exploit a Product
in the Field in the Territory, including but not limited to any Know-How related to any of the LCB
Platform and LCB Platform Improvement Know-How.

1.62

“LCB  Patents”  means  all  Patents  owned  or  Controlled  by  LCB,  as  of  the
Effective Date or during the Term that are necessary or reasonably useful to Develop or Exploit
Products  in  the  Field  in  the  Territory,  including  but  not  limited  to  Patents  Controlled  by  LCB
directed to the LCB Platform, LCB Platform Improvement Patents, and LCB’s rights and interests
in all Research Program Patents.

1.63

“LCB  Platform”  means  LCB’s  proprietary  (a)  site-specific, 

isoprenoid
transferase-mediated  conjugation  and  isosubstrate,  Farnesyltransferase  (FTase)  enzyme,  self-
immolative  beta-glucuronide  containing  linker  technologies  thereof,  and  payload  technologies
thereof  and  (b)  other  cleavage,  conjugation  and  linker  technologies  useful  in  ADCs,  each  as
relating to the LCB Patents and LCB Know-How Controlled by LCB as of the Effective Date.

1.64

“LCB  Platform  Improvement  Know-How”  means  Know-How  generated  by  or
on  behalf  of  LCB  (including  its  Affiliates  and/or  Subcontractors)  or  by  or  on  behalf  of
collaboration partners of LCB independently of the Research Program, provided that such Know-
How  is  Controlled  by  LCB  and  is  related  to  the  Research  Program,  or  Know-How  generated
under the Research Program and related to the LCB Platform, and which is an improvement to the
LCB  Platform  and  is  not  Research  Program  Know-How,  provided  that  such  Know-How  is
Controlled by LCB and is related to the Research Program.

1.65

“LCB Platform Improvement Patents” means any Patent claiming an Invention
generated by or on behalf of LCB independently of the Research Program, or any Patent claiming
and  improvement  of  the  LCB  Technology  conceived  or  reduced  to  practice  by  or  on  behalf  of
LCB (including its Affiliates and/or Subcontractors) or collaboration partners of LCB or jointly
with NextCure (including its Affiliates and/or Subcontractors) during the conduct of the Research
Program  that  is  not  a  Research  Program  Patent,  collectively  provided  that  such  Patent  is
Controlled by LCB and is related to the Research Program.

1.66

“LCB  Platform 

Improvement  Technology”  means  all  LCB  Platform

Improvement Know-How and LCB Platform Improvement Patents.

1.67

“LCB Research Expenses” means FTE Costs and reasonable out of pocket Third
Party expenses, in each case, incurred by LCB in furtherance of the completion of those activities
assigned to it under a Research Plan.

1.68

“LCB Technology” means all LCB Know-How and LCB Patents.

1.69

“Losses” has the meaning set forth in Section 13.1 of this Agreement.

1.70

“Manufacture” means all activities related to the manufacturing of Products, or
any ingredient thereof, for Development and commercialization, labelling, packaging, in-process
and final Product testing, release of Products or any ingredient thereof, quality assurance activities
related to manufacturing and release of Products, ongoing stability tests and regulatory activities
related to any of the foregoing including such operations undertaken by Subcontractors on behalf
of LCB or NextCure with regard to the Product.  When used as a verb, “Manufacture” means to
engage in Manufacturing activities.

1.71

“Materials” has the meaning set forth in Section 3.6 of this Agreement.

1.72

“NextCure  Platform”  means  NextCure’s  proprietary  antibodies,  related  targets
and  their  biology  (including  cell  banks  and  lines),  non-clinical  and  clinical  development
methodologies, manufacturing processes, and related companion diagnostics, each as relating to
the  NextCure  Patents  and  NextCure  Know-How  Controlled  by  NextCure  as  of  the  Effective
Date.

1.73

“NextCure  Indemnitee”  has  the  meaning  set  forth  in  Section  13.2  of  this

Agreement.

1.74

“NextCure Know-How” means all Know-How Controlled by NextCure as of the
Effective Date or during the Term that are necessary or useful to Develop or Exploit Products in
the  Field  in  the  Territory,  including  but  not  limited  to  any  Know-How  related  to  any  of  the
NextCure Platform and NextCure Platform Improvement Know-How.

1.75

“NextCure  License”  has  the  meaning  set  forth  in  Section  6.1(a)  of  this

Agreement.

1.76

“NextCure  Patents”  means  all  Patents  Controlled  by  NextCure,  as  of  the
Effective Date or during the Term, that are necessary or useful to Develop or Exploit Products in
the Field in the Territory, including but not limited to Patents Controlled by NextCure directed to
the  NextCure  Platform,  NextCure  Platform  Improvement  Patents,  and  NextCure’s  rights  and
interests in all Research Program Patents.

1.77

1.78

“NextCure Technology” means all NextCure Know-How and NextCure Patents.

“NextCure  Platform  Improvement  Technology”  means  all  NextCure  Platform

Improvement Know-How and NextCure Platform Improvement Patents.

1.79

“NextCure Platform Improvement Know-How” means Know-How generated by
or  on behalf of NextCure  (including  its  Affiliates  and/or  Subcontractors)  or  by or on behalf of
collaboration partners of NextCure independently of the Research Program, provided that such
Know-How  is  Controlled  by  NextCure  and  is  related  to  the  Research  Program,  or  Know-How
generated  under  the  Research  Program  and  related  to  the  NextCure  Platform,  and  which  is  an
improvement to the NextCure Platform and is not Research Program Know-How, provided that
such Know-How is Controlled by NextCure and is related to the Research Program.

1.80

“NextCure  Platform  Improvement  Patents”  means  any  Patent  claiming  an
Invention generated by or on behalf of NextCure independently of the Research Program, or any
Patent claiming and improvement of the NextCure Technology conceived or reduced to practice
by  or  on  behalf  of  NextCure  (including  its  Affiliates  and/or  Subcontractors)  or  collaboration
partners of NextCure or jointly with LCB (including its Affiliates and/or Subcontractors) during
the conduct of the Research Program that is not a Research Program Patent, collectively provided
that such Patent is Controlled by NextCure and is related to the Research Program.

1.81

“NextCure Research Expenses” means FTE Costs and reasonable out of pocket
Third  Party  expenses,  in  each  case,  incurred  by  NextCure  in  furtherance  of  the  completion  of
those activities assigned to it under a Research Plan.

1.82

“Non-Breaching  Party”  has  the  meaning  set  forth  in  Section  11.2  of  this

Agreement.

1.83

“Overhead”  means  an  amount  covering  a  Party’s  internal  overhead  costs,
including  equipment  maintenance  costs,  utilities,  general,  administrative,  supervisory  and
facilities expenses, including allocated personnel, building operating costs and depreciation and
repairs and maintenance.

1.84

“Patents” means all: (a) patents, including any utility or design patent; (b) patent
applications,  including  provisionals,  substitutions,  divisionals,  continuations,  continuations  in-
part  or  renewals;  (c)  patents  of  addition,  restorations,  extensions,  supplementary  protection
certificates,  registration  or  confirmation  patents,  patents  resulting  from  post-grant  proceedings,
re-issues and re-examinations; (d) other patents or patent applications claiming priority directly
or indirectly to: (i) any such specified patent or patent application specified in (a) through (c), or
(ii)  any  patent  or  patent  application  from  which  a  patent  or  patent  application  specified  in  (a)
through (c) claim direct or indirect priority; (e) inventor’s certificates; (f) other rights issued from
a Governmental Authority similar to any of the foregoing specified in (a) through (e); and (g) in
each of (a) through (f), whether such patent, patent application or other right arises in the U.S. or
any other jurisdiction in the Territory.

1.85

“Person”  means  an 

individual,  sole  proprietorship,  partnership, 

limited
partnership,  limited  liability  partnership,  corporation,  limited  liability  company,  business  trust,
joint  stock  company,  trust,  incorporated  association,  joint  venture  or  similar  entity  or
organization,  including  a  government  or  political  subdivision,  department  or  agency  of  a
government.

1.86

“Phase  I  Trial”  means  a  Clinical  Trial  of  a  Product  with  the  endpoint  of
determining initial tolerance, safety, pharmacokinetic or pharmacodynamic information in single
dose,  single  ascending  dose,  multiple  doses  and/or  multiple  ascending  dose  regimens,  as  more
fully  described  in  U.S.  federal  regulation  21  C.F.R.  §  312.21(a)  and  its  equivalents  in  other
jurisdictions.  

1.87

“Phase  II  Trial”  means  a  Clinical  Trial  of  a  Product  with  the  endpoint  of
evaluating  its  effectiveness  for  a  particular  indication  or  indications  in  one  or  more  specified
doses or its short-term tolerance and safety, as well as its pharmacokinetic and pharmacodynamic
information in patients with the indications under study, as more fully described in U.S. federal
regulation 21 C.F.R. § 312.21(b) and its equivalents in other jurisdictions.

1.88

“Phase  III  Trial”  means  a  pivotal  Clinical  Trial  of  a  Product  on  a  sufficient
number  of  patients,  which  trial  is  designed  to:  (a)  establish  that  the  Product  is  safe  and
efficacious for its intended use; (b) define any warnings, precautions and adverse reactions that
are associated with the Product in the dosage range to be prescribed; and (c) support Regulatory
Approval  for  the  Product,  as  more  fully  described  in  U.S.  federal  regulation  21  C.F.R.  §
312.21(c) and its equivalents in other jurisdictions.

1.89

“Pricing  Approval”  means 

agreement,
determination  or  decision  establishing  prices  that  can  be  charged  and/or  reimbursed  for  a  Co-
Development  Product  to  be  commercially  sold  in  a  jurisdiction  where  the  applicable
Governmental  Authority  or  Regulatory  Authority  approves  or  determines  the  pricing  and/or
reimbursement of medicinal products.

any  governmental 

approval, 

1.90

“Product”  means  any  pharmaceutical,  biological  or  other  medicinal  product,
including  all  forms,  presentations,  strengths,  doses  and  formulations  (including  any  method  of
delivery), that includes an ADC based on an Antibody that is Controlled by NextCure and that
uses the LCB Platform.

1.91

“Product  Liabilities”  means  all  losses,  damages,  fees,  expenses  and  other
liabilities incurred by, or on behalf of, a Party, its Affiliate or its sublicensee and resulting from
or  relating  to  human  use  of  a  Co-Development  Product,  including  use  in  Clinical  Trials  or
commercialization  of  such  Products,  in  the  Territory  during  the  Term,  but  excluding  all  losses,
damages, fees, expenses and other liabilities that are a result of a Party’s, its Affiliates’ or its

sublicensee’s  negligence,  wilful  misconduct  or  breach  of  such  Party’s  obligations  under  this
Agreement,  including  its  representations  and  warranties  made  hereunder.  For  the  avoidance  of
doubt, Product Liabilities include reasonable attorneys’ and experts’ fees and expenses relating
to any claim or potential claim against a Party, its Affiliate, or its sublicensee.  Product Liabilities
shall  include  any  losses,  damages,  fees,  expenses  and  other  liabilities  associated  with  recalls
and/or  the  voluntary  or  involuntary  withdrawal  of  a  Research  Product  or  a  Co-Development
Product.

1.92

“Quality Agreement” means any quality agreements generated by one Party (if
such Party is Manufacturer) or between a Party and a Third-Party contract manufacturer related
to Co-Development and/or Co-Commercialization Products supplied pursuant to this Agreement
for clinical or commercial use.

1.93

“Receiving Party” has the meaning set forth in Section 10.1 of this Agreement.

1.94

“Regulatory  Approval”  means  any  approval  of  an  application  (including
supplement, amendment, pre- and post-approval, Pricing Approval and reimbursement approval),
or the issuance of a license, registration or authorization, of any national, regional, state or local
Regulatory Authority, department, bureau, commission, council or other Government Authority,
that is necessary for the commercialization of Products under this Agreement in the Territory.

1.95

“Regulatory  Approval  Application”  means  a  biologics  license  application

(“BLA”), or any corresponding application for Regulatory Approval in the Territory.  

1.96

“Regulatory Authority” means any applicable Governmental Authority involved
in  granting  Regulatory  Approval  in  a  country  or  jurisdiction  in  the  Territory,  including  in  the
U.S.,  the  FDA  and  any  other  applicable  Governmental  Authority  having  jurisdiction  over  the
Product; in the EU, the EMA or any competent Governmental Authority in the EU; in Japan, the
PMDA;  in  China,  the  NMPA;  and  any  other  applicable  Governmental  Authority  having
jurisdiction over a Product.

1.97

“Regulatory Documentation”  means,  with  respect  to  each  Research  Product  or
Co-Development Product, all: (a) Regulatory Materials, including all data contained therein and
all supporting documents created for, submitted to or received from an applicable governmental
agency  or  Regulatory  Authority  relating  to  such  Regulatory  Materials;  and  (b)  other
documentation  or  Information  Controlled  by  a  Party  which  is  reasonably  necessary  in  order  to
Exploit  such  Product  in  the  Field  in  the  Territory,  including  any  registrations  and  licenses,
regulatory drug lists, advertising and promotion documents shared with Regulatory Authorities,
adverse event files, complaint files and Manufacturing records.  

1.98

“Regulatory Materials”  means,  with  respect  to  each  Research  Product  and  Co-
Development  Product,  all  documentation,  correspondence,  submissions  and  notifications
submitted  to  or  received  from  a  Regulatory  Authority  or  created  to  memorialize  a
communication with a Regulatory Authority that are necessary or reasonably useful in order to
Exploit  such  Product  in  the  Field  in  the  Territory.    For  the  avoidance  of  doubt,  Regulatory
Materials shall include, with respect to each Research Product and Co-Development Product, all
INDs,  Regulatory  Approval  Applications,  Regulatory  Approvals,  Pricing  Approvals  and
amendments  and  supplements  for  any  of  the  foregoing,  as  well  as  the  contents  of  any  minutes
from meetings (whether in person or by audio conference or videoconference) with a Regulatory
Authority.

1.99

“Research Plan” means a plan setting for the research activities to be completed
by the Parties for each respective Research Program Target.  A first Research Plan for the first
Research Program Target is set out in Exhibit A of this Agreement.  

1.100

“Research Product” means each Product developed under the Research Program
in accordance with the applicable Research Plan. For the avoidance of doubt, a Research Product
is not a Co-Development Product unless and until the Parties designate the Research Product as
Co-Development Product.

1.101

“Research  Program”  means  the  program  pursuant  to  which  the  Parties  will
conduct research activities related to each Research Program Target, each pursuant to a Research
Plan.

1.102

“Research  Program  Know-How”  means  all  Know-How  within  the  Research

Program Technology.

1.103
Technology.

“Research  Program  Patents”  means  all  Patents  within  the  Research  Program

1.104

“Research Program Target” means an Antigen, designated by the Parties as the

subject of a Research Plan.  

1.105

“Research Program Technology” has the meaning set forth in Section 8.1(c).

1.106

“Results”  means  all  data,  information,  or  materials  identified,  developed,
generated, created, or conceived under the Agreement, including all tangible records of such data
and information.

1.107

“Sales Force Costs” means NextCure or LCB or any of its Affiliates’ Costs for
the Sales Force in or for the Territory, calculated in accordance with Section 5.11 (Calculation of
Sales Force Costs and Other Personnel Costs).

1.108
Agreement.

“Sole  Developing  Party”  has  the  meaning  set  forth  in  Section  11.5  of  this

1.109

“Subcontractor”  means  a  Third  Party  contractor  (including  contract  research
organizations or contract manufacturing organizations) engaged by a Party on a fee-for-service
basis  to  perform  certain  obligations  of  such  Party  or  exercise  certain  rights  on  behalf  of  such
Party, in each case, under this Agreement.

1.110

“Sublicense”  means,  in  connection  with  its  Development,  Manufacture  or
Commercialization  of  Products  under  this  Agreement,  an  agreement  made  by  a  Party  with  a
Third Party where such Party grants to such Third Party a sublicense under the rights granted to
such  Party  under  this  Agreement.    For  clarity,  a  respective  sublicense  may  be,  to  the  extent
consistent  with  all  terms  and  conditions  of  this  Agreement,  exclusive  or  non-exclusive,
sublicensable or non-sublicensable, and/or transferable or non-transferrable, as appropriate to the
given circumstances.

1.111

“Sublicensing  Revenue”  means  any  cash  consideration,  or  the  cash  equivalent
value  of  non-cash  consideration,  regardless  of  whether  in  the  form  of  upfront  payments,
milestones,  or  royalties,  actually  received  by  a  Party  or  its  Affiliate  from  a  Third  Party  in
consideration for a grant of any rights for such Third Party to develop or commercialize one or
more Products in the Territory, but excluding any amounts paid as bona fide reimbursement for
research and development costs to the extent incurred by the Party following such grant.

1.112

“Term” has the meaning set forth in Section 11.1 of this Agreement.

1.113

“Terminated  Product”  means  any  Product  for  which  the  Parties  terminates  in

accordance with Article 11 of this Agreement.

1.114

“Terminated  Target”  means  any  (i)  Research  Program  Target  for  which  the
Parties did not designate as Co-Development Target or (ii) Co-Development Target for which the
Parties terminates in accordance with Article 11 of this Agreement.

1.115

“Territory” means worldwide.

1.116

“Test Materials” means those research and development purposes Materials that

are produced from NextCure’s Materials by LCB using the LCB Platform.

1.117
Affiliates.

“Third Party” means a Person other than LCB and NextCure and their respective

1.118

“U.S.”  means  the  United  States  of  America,  its  territories  and  possessions,

including Puerto Rico.

ARTICLE 2
Governance

2.1

Governance Overview.  As set forth more fully below, the Parties agree that a
joint  steering  committee  (“Joint  Steering  Committee”  or  “JSC”)  shall  manage  the  overall
coordination,  communication  and  oversight  of  all  of  the  Parties’  Research  Program  and  Co-
Development  Plan  activities  under  this  Agreement,  while  the  day-to-day  aspects  and  the
implementation of the Research Plan(s) and the Research Program activities shall be managed by
a dedicated joint project team (“Joint Project Team” or “JPT”). In conjunction with completion of
a  Research  Program,  the  Parties  will  establish  a  joint  development  team  (“Joint  Development
Team” or “JDT”) to manage on behalf of the JSC the day-to-day aspects and the implementation
of the Co-Development Plan(s) and the Development activities to advance the Co-Development
Products. JSC, JPT and JDT meetings, presentations, minutes and all documentation shall be in
English.

2.2

Joint Steering Committee.  

(a)

Formation  and  Purpose.    In  accordance  with  this  Section  2.2,  the  Parties
agree to establish and convene a JSC promptly and no later than within sixty (60) days after the
Effective  Date.   The  JSC  shall  consist  of  an  equal  number  of  representatives  from  each  Party
and operate by the procedures in accordance with this Section 2.2. During the Term, the purpose
of the JSC shall be to provide a forum for the coordination, communication and oversight of the
Parties’ activities in furtherance of the Research Plans and Co-Development Plans.

(b)

JSC Responsibilities.  The JSC’s primary responsibilities with respect to the

Research Programs shall be to:

(i)

facilitate the exchange of Information between the Parties with respect to

the Research Programs and Co-Development Products;

(ii)

review, discuss and approve the Research Plans for each Research Program

Target, and all amendments and updates thereto;

(iii)

review, discuss and approve the Co-Development Plans, including the

corresponding Co-Development Budgets, and all amendments and updates thereto;

(iv) monitor, review, discuss and coordinate the overall progress of each

Research Product under its Research Plan;

(v) monitor, review, discuss and coordinate the overall progress of each Co-

Development Product under the Co-Development Plan;

 
(vi)

serve as a forum to discuss the Parties’ efforts to coordinate protection of

each Party’s respective Intellectual Property Right related to this Agreement (overall IP
strategy);

(vii)
or Development matters;

serve as the first forum to hear and resolve disputes in respect of research

(viii) IP discussions (day to day management, strategy alignment)

(ix)

perform such other functions as appropriate to further the purposes of the

Development of Research Product or Co-Development Product, as determined by the
Parties in writing.

(c)

JSC  Decisions  and  Actions.    The  Parties  shall  use  good  faith  efforts  to
achieve consensus regarding any actions.  If the JSC fails to reach agreement on a matter before
it  for  decision,  CEOs  or  other  designated  senior  executives  delegated  with  authority  of  each
Party shall confer and attempt to resolve such matter in good faith. Absent final agreement by
the  CEOs  or  other  designated  senior  executives  of  NextCure  and  LCB  to  resolve  an  issue
deadlocked before the JSC or a subcommittee, (i) acting in good faith NextCure will have final
tie-breaking decision authority with respect to any deadlocked issue to the extent it is in regard
to  IND  submission,  clinical  trials,  and/or  Antibody  intermediate  CMC/manufacturing,  and  (ii)
acting  in  good  faith  LCB  will  have  final  tie-breaking  decision  authority  with  respect  to  any
deadlocked issue to the extent it is in regard to the CMC/manufacturing for ADC drug product
and drug substance (i.e., excepting Antibody intermediate manufacturing.  All other deadlocked
issues not resolved by the CEOs or other designated senior executives shall be subject to dispute
resolution  in  accord  with  Article  12.    Notwithstanding  the  foregoing  and  for  clarity,  neither
Party  shall  be  able  to  use  the  above  tie-breaking  authority  to  materially  expand  the  approved
budget  for  a  Co-Development  Program,  to  select  Co-Development  Products,  or  to  select
Research Targets.

(d)

JSC  Membership.    Within  thirty  (30)  days  after  the  Effective  Date,  each
Party shall designate at minimum two (2) representatives for the JSC.  Each representative shall
have  the  appropriate  level  of  experience  in  the  subject  area  of  the  JSC,  and  at  least  one  (1)
representative shall have sufficient seniority within the applicable Party’s organization to have
the necessary decision-making authority in order for the JSC to fulfill its responsibilities.  Either
Party  may  designate  substitutes  for  its  JSC  representatives  if  one  (1)  or  more  of  such  Party’s
designated representatives is unable to be present at a meeting.  From time to time each Party
may  replace  its  JSC  representatives  by  written  notice  to  the  other  Party  specifying  the  prior
representative(s) and their replacement(s).

(e)

Alliance Manager.  Promptly after the Effective Date, each Party will appoint

a person who will oversee interactions between the Parties between meetings of the

committees  and  teams  established  hereunder  (each,  an  “Alliance  Manager”).  The  Alliance
Manager will have the right to attend all meetings of the JSC, the JPT and JDT subcommittees
and  working  teams  established  hereunder,  at  such  meetings.  Each  Party  may  in  its  sole
discretion replace its Alliance Manager at any time by notice in writing to the other Party.  The
Alliance Manager (or his or her designee) shall: (1) prepare and circulate an agenda reasonably
in  advance  of  each  upcoming  meeting;  and  (2)  prepare  and  issue  minutes  of  the  JSC  meeting
within  thirty  (30)  days  thereafter.    Such  minutes  shall  not  be  finalized  until  each  JSC
representative reviews and approves such minutes in writing; provided that any minutes shall be
deemed  approved  unless  a  JSC  representative  objects  to  the  accuracy  of  such  minutes  within
fifteen (15) days after the circulation of the minutes.  

(f)

Meetings.

(i) Timing  and  Frequency.  Unless  otherwise  agreed  by  the  Parties,  the  JSC
shall meet at least once each Calendar Quarter. Additional meetings of the JSC may be held
with the consent of each Party (such consent not to be unreasonably withheld, delayed or
conditioned), as required under this Agreement.

(ii) Meeting Procedures.  The JSC may meet either (i) in person at either Party’s
facilities or at such locations as the Parties may otherwise agree; or (ii) by audio or video
teleconference.    Each  Party  shall  be  responsible  for  all  of  its  own  expenses  incurred  in
connection with participating in the JSC, including all travel and lodging.

(g)

Non-Member  Participation.    Additional  non-members  of  the  JSC  having
relevant experience in certain areas, such as IP, may from time to time be invited to participate
in a JSC meeting, provided that such participants shall have no voting rights or powers.  Non-
member participants who are not employees of a Party or its Affiliates shall only be allowed to
attend if: (i) the other Party’s representatives have consented to the attendance (such consent not
to be unreasonably withheld, delayed or conditioned); and (ii) such non-member participant is
subject to and agrees to confidentiality and non-use obligations at least as restrictive as those set
forth  in  this  Agreement  and  intellectual  property  ownership  and  assignment  provisions
consistent with the obligations of the Parties under this Agreement.

2.3 Joint Project Team.

(a)

Formation and Role.  With respect to each Research Plan the Parties through
the  JSC  shall  establish  a  joint  project  team  (the  “JPT”)  and  such  JPT  will  coordinate  and
manage  the  day-to-day  aspects  and  the  implementation  of  the  Research  Programs  through  the
development  of  Research  Plans.  For  that  purpose  and  to  the  extent  reasonably  necessary,  the
JPT will:

(i)
to the Research Plans;

facilitate communications and discussions between the Parties with respect

(ii) monitor and manage all activities related to the Research Plans;

(iii)

exchange information and R&D data developed pursuant to the Research

Plans;

(iv)

propose, review, and discuss updates and amendments to the Research

Plans; and

(v)

submit amendments to the Research Plans to the JSC for review and

approval.

The JPT shall have no decision-making authority with respect to the Research Plans.

(b)

Members.    Each  Party  through  the  JSC  shall  appoint  one  or  more
representatives to the JPT. Each Party may replace its representative(s) at any time upon written
notice  to  the  other  Party;  provided  that  each  representative  shall  be  an  employee  of  the
applicable Party or its Affiliate having sufficient experience and responsibility within such Party
to make decisions arising within the scope of the JPT’s responsibilities. Each Party’s Alliance
Manager  will  convene  and  propose  agenda  for  the  meetings  of  the  JPT  and  to  ensure  the
preparation  of  meeting  minutes,  but  Alliance  Managers  shall  have  no  additional  powers  or
rights beyond those held by other JPT representatives.

(c)

Meetings.  The  JPT  shall  meet  at  least  every  month,  unless  the  Parties
mutually agree in writing to a different frequency for such meetings. Either Party may also call
a  special  meeting  of  the  JPT  (by  videoconference  or  teleconference)  by  at  least  ten  (10)
Business  Days’  prior  written  notice  to  the  other  Party,  and  such  Party  shall  provide  the  other
members,  no  later  than  ten  (10)  Business  Days  prior  to  the  special  meeting,  with  materials
reasonably  adequate  to  enable  informed  discussion  or  decision-making,  as  applicable.  Each
Party  shall  bear  the  expense  of  its  respective  JPT  members’  participation  in  JPT  meetings.
Meetings  of  the  JPT  shall  be  effective  only  if  at  least  one  representative  from  each  Party  is
present or participating in such meeting. The Alliance Managers of both Parties shall jointly be
responsible for preparing reasonably detailed written minutes of all JPT meetings that reflect all
material  decisions  made  at  such  meetings.  The  Alliance  Managers  shall  send  draft  meeting
minutes to each member of the JPT for review and approval within ten (10) Business Days after
each JPT meeting. Such minutes shall be deemed approved unless one or more members of the
JPT object to the accuracy of such minutes within ten (10) Business Days of receipt.

(d)

Non-Member  Participation.    Additional  non-members  of  the  JPT  having
relevant experience in certain areas, such as IP, may from time to time be invited to participate
in a JPT meeting, provided that such participants shall have no voting rights or powers.  Non-

member participants who are not employees of a Party or its Affiliates shall only be allowed to
attend if: (i) the other Party’s representatives have consented to the attendance (such consent not
to be unreasonably withheld, delayed or conditioned); and (ii) such non-member participant is
subject to and agrees to confidentiality and non-use obligations at least as restrictive as those set
forth  in  this  Agreement  and  intellectual  property  ownership  and  assignment  provisions
consistent with the obligations of the Parties under this Agreement.

2.4 Joint Development Team.

(a)

Formation  and  Role.    Within  thirty  (30)  days  of  selection  of  a  Co-
Development Product in accord with Section 3.4(f), the Parties through the JSC shall establish a
joint development team (the “JDT”) and such JDT will coordinate and manage the day-to-day
aspects and the implementation of the Co-Development Plans. For that purpose and to the extent
reasonably necessary, the JDT will:

(i)

facilitate communications and discussions between the Parties with respect

to the Co-Development Plans;

(ii) monitor and manage all activities related to the Co-Development Plans;

(iii)
Development Plans;

exchange information and R&D data developed pursuant to the Co-

(iv)
Development Plans;

propose, review, and discuss updates and amendments to the Co-

(v)

submit amendments to the Co-Development Plans to the JSC for review

and approval;

(vi) CMC strategy, including choice of CMOs; and

(vii) perform such other functions as appropriate to further the co-development
of each respective Co-Development Product as determined by the Parties in writing from
time to time.

The  JDT  shall  have  no  decision-making  authority  with  respect  to  modifying  the  Co-
Development Plans and respective Co-Development Budgets, but may refer recommendations
to the JSC for consideration and action.

(b)

Members.  Each Party shall appoint one or more representatives to the JDT.
Each Party may replace its representative(s) at any time upon written notice to the other Party;
provided  that  each  representative  shall  be  an  employee  of  the  applicable  Party  or  its  Affiliate
having  sufficient  experience  and  responsibility  within  such  Party  to  make  decisions  arising
within the scope of the JDT’s responsibilities.  The Alliance Managers shall convene

and  propose  agenda  for  the  meetings  of  the  JDT  and  to  ensure  the  preparation  of  meeting
minutes, but that Alliance Managers shall have no additional powers or rights beyond those held
by other JDT representatives.

(c)

Meetings.  The  JDT  shall  meet  at  least  every  month,  unless  the  Parties
mutually agree in writing to a different frequency for such meetings. Either Party may also call
a  special  meeting  of  the  JDT  (by  videoconference  or  teleconference)  by  at  least  ten  (10)
Business  Days’  prior  written  notice  to  the  other  Party,  and  such  Party  shall  provide  the  other
members,  no  later  than  ten  (10)  Business  Days  prior  to  the  special  meeting,  with  materials
reasonably  adequate  to  enable  informed  discussion  or  decision-making,  as  applicable.  Each
Party  shall  bear  the  expense  of  its  respective  JDT  members’  participation  in  JDT  meetings.
Meetings  of  the  JDT  shall  be  effective  only  if  at  least  one  representative  from  each  Party  is
present or participating in such meeting. The Alliance Managers of both Parties shall be jointly
responsible for preparing reasonably detailed written minutes of all JDT meetings that reflect all
material  decisions  made  at  such  meetings.  The  Alliance  Manager  shall  send  draft  meeting
minutes to each member of the JDT for review and approval within ten (10) Business Days after
each JDT meeting. Such minutes shall be deemed approved unless one or more members of the
JDT object to the accuracy of such minutes within ten (10) Business Days of receipt.

(d)

Non-Member Participation.       Additional  non-members  of  the  JDT  having
relevant experience in certain areas, such as IP, may from time to time be invited to participate
in a JDT meeting, provided that such participants shall have no voting rights or powers.  Non-
member participants who are not employees of a Party or its Affiliates shall only be allowed to
attend if: (i) the other Party’s representatives have consented to the attendance (such consent not
to be unreasonably withheld, delayed or conditioned); and (ii) such non-member participant is
subject to and agrees to confidentiality and non-use obligations at least as restrictive as those set
forth  in  this  Agreement  and  intellectual  property  ownership  and  assignment  provisions
consistent with the obligations of the Parties under this Agreement.

ARTICLE 3
Research program

3.1

Purpose.    Each  Research  Product  will  be  researched  in  accordance  with  a
Research  Plan  which  would  define  the  respective  activities  of  the  Research  Program  (the
“Research  Period”)  for  each  Research  Program  Target.  The  terms  of  this  Section  3  shall  only
apply to the Parties’ rights and obligations under this Agreement with respect to the Research
Program.

3.2

Licenses During the Research Program.

 
(a)

License  to  NextCure.    During  the  Research  Program  with  respect  to  each
Research  Program  Target,  LCB  hereby  grants  to  NextCure,  and  NextCure  hereby  accepts,  a
limited,  non-exclusive,  non-transferable,  non-sublicensable  (other  than  to  Affiliates  and/or
Subcontractors acting on behalf of NextCure), royalty-free license, under the LCB Technology
for use in the Field in the Territory solely to perform research and development, and to perform
its obligations under the Research Plan.

(b)

License to LCB. During the Research Program with respect to each Research
Program  Target,  NextCure  hereby  grants  to  LCB,  and  LCB  hereby  accepts,  a  limited,  non-
exclusive,  non-transferable,  non-sublicensable  (other  than  to  Affiliates  and/or  Subcontractors
acting  on  behalf  of  LCB),  royalty-free  license,  under  the  NextCure  Technology  for  use  in  the
Field in the Territory solely to perform research and development and to perform its obligations
under the Research Plan.

(c)

No  Implied  Licenses.    No  license  or  other  right  is  or  shall  be  created  or
granted hereunder during the Research Program with respect to any Research Program Target by
implication, estoppel, or otherwise.  All licenses and rights during the Research Program are or
shall be granted only as expressly provided in this Agreement.  All rights not expressly granted
by a Party under this Agreement are reserved by such Party and may not be used by the other
Party for any purpose.

(d)

Expiration of Research Licenses.  The licenses granted to each Party during
the  Research  Program  with  respect  to  each  Research  Program  Target  shall  terminate  upon  the
earlier of (i) the designation of such Research Program Target as Co-Development Target, or (ii)
the  designation  of  such  Research  Program  Target  as  a  Terminated  Target  in  accordance  with
Article 11.

3.3

Nomination  and  Selection  of  Research  Program  Targets.    The  Research
Program  shall  consist  of  Research  Plans  involving  up  to  three  (3)  Research  Program  Targets.
The  Parties  will  initially  develop  a  Research  Program  against  B7-H4  (the  “First  Research
Program Target”) utilizing NextCure Technology encompassing a B7-H4 antibody, and have the
option as set forth below to decide at the JSC to develop two (2) additional Research Programs
by mutual consent between the Parties.  Each Party can submit additional targets to the JSC for
consideration and potential adoption as a Research Program Target during the twenty-four (24)
month period after the Effective Date.  The second and third Research Program targets will be
selected only by mutual agreement of the Parties at the JSC, at which time the JSC will draft
and adopt by mutual agreement of the Parties a Research Plan for the respective new Research
Program  Target  similar  in  form  and  content  to  the  initial  Research  Plan  attached  hereto  as
Exhibit A.  

3.4

Research Plans and Research Activities.

(a)

Creation  of  Additional  Research  Plans.  As  of  the  Effective  Date,  the
Research  Program  consists  of  the  Research  Plan  for  the  First  Research  Program  Target  (the
“Initial Research Plan”) which is attached to this Agreement in Exhibit A in an initial version.
  Subject  to  Section  3.3,  the  JPT  will  create  and  update  Research  Plans  for  each  Research
Program Target and submit such Research Plans to the JSC for approval.

(b)

Initiation of Research Activities.  The Parties shall begin activities under the
Initial Research Plan promptly after the Effective Date.  With respect to the optional second and
third Research Program Targets, the Parties shall begin activities under the applicable Research
Plan promptly as provided in the applicable Research Plan.

(c)

Performance  Obligations.    With  respect  to  each  Research  Plan,  LCB  and
NextCure shall each use Commercially Reasonable Efforts to execute and perform the activities
assigned  to  it  and  cooperate  with  the  other  Party  in  the  performance  of  such  activities.    Each
Party  shall  conduct  the  activities  assigned  to  it  under  the  Research  Plan  in  a  good  scientific
manner  consistent  with  industry  standards  and  in  compliance  in  all  material  respects  with
Applicable  Law,  including  applicable  national  and  international  (e.g.,  ICH,  GCP,  GLP,  and
GMP) guidelines.  

(d)

Changes to a Research Plan. The Parties recognize that a Research Plan may
need adaptation as the research proceeds and additional scientific results are obtained.  Should
such results reasonably necessitate a material change in the scope or direction of the applicable
Research  Plan,  the  Parties  would  seek  to  mutually  agree  upon  changes  that  are  commercially
reasonable  and  objectively  take  into  account  technical  probabilities  of  success.  The  JPT  can
recommend  to  the  JSC  changes  in  Research  Plan  and  the  JSC  will  make  final  decision  on
changing the Research Plan.

(e)

Disclosure of Data and Results.  On an ongoing basis during the Term, the
Parties shall disclose to each other all Results and Know-How relating to the LCB Technology
and  NextCure  Technology  respectively,  Research  Product  or  Co-Development  Product
generated by or on behalf of the Parties or its respective Affiliates or Sublicensees, in each case,
in  the  performance  of  any  activities  under  this  Agreement  during  the  Term.  For  clarity,  LCB
will be entitled to use such Results and Know-How for internal research or Development into
LCB Platform Improvement Technology. In no case shall LCB share such Results and Know-
How  specific  to  NextCure’s  target,  NextCure’s  Materials,  or  NextCure’s  Confidential
Information  with  Third  Parties  without  prior  written  consent  of  NextCure.  NextCure  will  be
entitled to use such Results and Know-How for internal research or Development of NextCure
Platform  Improvement  Technology,  unless  specifically  authorized  by  a  provision  in  this
Agreement.

(f)

Designation of Co-Development Product.  Upon successful completion of a
Research Plan, or as the Parties may otherwise mutually agree after due discussion at the JSC,
the Parties may designate a Research Product as a Co-Development Product in the JSC meeting
in  accordance  with  Section  2.2  if  they  jointly  conclude  that,  based  upon  the  data  and  results
generated  under  the  Research  Plan,  it  would  be  commercially  reasonable  to  pursue
Development of a particular Research Product.

(g)

Early  Termination  of  Research  Plan.    In  the  event  the  activities  under  a
Research  Plan  are  terminated  by  the  JSC  for  any  reason,  the  applicable  Research  Program
Target shall be deemed to be a Terminated Target and the applicable Research Program would
become a Terminated Research Program.

3.5 Research Program Expenses.

(a)

LCB Research Expenses.  LCB shall be responsible for costs associated with
activities  assigned  to  LCB  as  outlined  in  the  Research  Plan.  LCB  shall  use  Commercially
Reasonable Efforts to complete the activities assigned to it under each such Research Plan.

(b)

NextCure  Research  Expenses.  NextCure  shall  be  responsible  for  costs
associated with activities assigned to NextCure as outlined in the Research Plan. NextCure shall
use Commercially Reasonable Efforts to complete the activities assigned to it under each such
Research Plan.

3.6

Materials Transfer.    In  order  to  facilitate  the  activities  contemplated  under  the
Research  Program,  including  any  Research  Plan,  either  Party  may  provide  to  the  other  Party
certain  biological  materials  or  chemical  compounds  Controlled  by  the  supplying  Party
(collectively,  “Materials”)  for  use  by  the  other  Party  in  furtherance  of  the  Research  Program.
 Except as otherwise provided for under this Agreement, all such Materials with the exception of
Test Materials delivered  to  the  other  Party  will  remain  the  sole  property  of  the supplying Party.
  The  Test  Materials  shall  be  jointly  owned  by  the  Parties.   All  Materials  will  be  used  only  in
furtherance of the activities conducted in accordance with the Research Program, will not be used
or delivered to or for the benefit of any Third Party (except for Subcontractors in furtherance of
the Research Program), without the prior written consent of the other Party (in the case of the Test
Materials)  or  the  supplying  Party  (in  the  case  of  all  other  Materials),  and  will  be  used  in
compliance with Applicable Law.  All Materials supplied under this Agreement must be used with
prudence and appropriate caution in any experimental work because not all of their characteristics
may be known. The supplying Party will provide the other Party the most current material safety
data sheet for the Materials upon transfer of any Materials. Except as expressly set forth in this
Agreement,  THE  MATERIALS  ARE  PROVIDED  “AS  IS”  AND  WITHOUT  ANY
REPRESENTATION  OR  WARRANTY,  EXPRESS  OR  IMPLIED,  INCLUDING  ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY

PARTICULAR  PURPOSE  OR  ANY  WARRANTY  THAT  THE  USE  OF  THE  MATERIALS
WILL  NOT  INFRINGE  OR  VIOLATE  ANY  PATENT  OR  OTHER  PROPRIETARY  RIGHTS
OF ANY THIRD PARTY. Notwithstanding the foregoing, the Materials supplied by either Party
shall comply with the technical specifications and quality standards mutually agreed by the Parties
or  standards  representing  industry  norm.  Materials  supplied  under  the  Agreement  shall  be
supplied in accordance with the Research Plan and any agreed supply schedule.

ARTICLE 4
Co-Development  

4.1

  Co-Development  Plan.    Upon  designation  of  Co-Development  Product  in
accordance with Section 3.4(f), both Parties shall jointly discuss and agree to a Co-Development
Plan for each Research Program on a 50:50 cost-sharing basis. The cost-sharing would begin from
the designation of a Co-Development Product.

4.2

Development Activities and Cost.  As set forth in the Co-Development Plan for
each  Co-Development  Program,  NextCure  shall  perform  activities  related  to  the  process
development  for  manufacturing  of  CaaX-tagged  Antibody  to  be  conjugated  using  LCB
Technology.  Both  parties  will  share  on  a  50:50  basis  all  development  costs,  including  but  not
limited  to  costs  for  pre-clinical  activities,  CMC  work  including  raw  materials,  cGMP
manufacturing,  QA/QC,  stability  studies,  consultant  costs,  legal  and  regulatory  expenses,  and
other  external  costs  directly  related  to  the  CMC  activities  required  to  support  the  Development
Program, GLP toxicology studies, IND filing, clinical and commercial development as part of the
Co-Development  Plan.  These  activities  will  be  coordinated  by  the  JSC  and  JDT,  provided  that
NextCure  will 
the
CMC/manufacturing  for  ADC  drug  product  and  drug  substance  except  for  the  Antibody
intermediate  manufacturing.  For  each  Co-Development  Product  a  Co-Development  Budget
should be generated among Parties to set forth the anticipated expenses associated with the Co-
Development Plan.

the  IND  submission  and  clinical 

trials  and  LCB  will 

lead 

lead 

4.3

Cost Distribution Mechanism. The Parties shall calculate and notify each other
of the Co-Development Costs as soon as reasonably practicable following the Designation of Co-
Development  Product  in  accordance  with  Section  3.4(f)  and  thereafter  on  a  continuing  basis
throughout the Phase 1 Trials. LCB shall provide an itemised breakdown of the Co-Development
Costs  related  to  CMC/manufacturing  for  ADC  drug  product  and  drug  substance  except  for  the
Antibody  drug  substance  manufacturing  and  shall  provide  a  quarterly  invoice  to  NextCure  for
50%  of  LCB’s  Development  Costs,  and  NextCure  shall  provide  an  itemised  breakdown  of  the
development costs related to Antibody drug substance manufacturing, GLP toxicology studies and
Phase 1 Trials and shall provide a quarterly invoice to LCB for 50% of NextCure’s

 
Development Costs.  The Parties shall offset the two quarterly invoices against one another such
that  the  only  the  Party  receiving  the  invoice  with  the  higher  amount  due  for  that  quarter  shall
make a payment to the other Party, paying the net balance due (after offsetting) to the other Party
within 30 days of receipt the invoices. Such costs under this Section 4.3 shall be determined using
a  pre-agreed  FTE  Rate  by  the  Parties  as  set  forth  in  the  respective  Co-Development  Budget,
which FTE Rate will be revisited and revised by the Parties annually.

4.4

Combination  Product.    The  Parties  may  jointly  decide  to  incorporate  the  Co-
Development  Product  into  a  Combination  Product  through  the  JSC,  in  which  case  the
development  of  such  Combination  Product  would  be  added  to  the  respective  Co-Development
Plan and Co-Development Budget and would be jointly funded by the Parties. However, the JSC
may alternatively decide to allow a Combination Product to be developed by one Party outside of
the Co-Development Plan (provided the Party seeking to perform the combination has control or
has sought the necessary licenses to perform the combination), and such developing Party in such
cases would develop the Combination Product at such Party’s own expense. The other Party, to
the extent it remains  active  in  the  Co-Development  Plan,  in  such  cases  would retain a financial
interest in subsequent profits of the Combination Product based on the formula P=A*(B/(B+C)),
where P is the proportion of gross profits from the Combination Product that are shareable under
this subsection, A is the gross profits from the Combination Product, B is the market price per unit
of the incorporated Co-Development Product (where each Party owns 50%) when sold alone, and
where  C  is  market  price  per  unit  of  the  combination  agent  when  sold  alone.    In  this  case,  any
profit payments P actually received in association with the combination product shall thereafter be
divided equally between the Parties. Notwithstanding the above, the Party seeking to perform the
combination  shall  seek  the  approval  from  the  other  Party  to  develop  the  Combination  Product,
such approval not to be unreasonably withheld.

4.5

Dispute Resolution for Development Cost.  If there is any dispute regarding the
calculation or distribution of the Development Cost, Parties shall first submit the issue to the JSC
to  resolve  in  good  faith.  If  the  Parties  fail  to  reach  amicable  solution  in  the  JSC,  Parties  shall
provide to other Parties with the actual detailed accounting records of expenditure related to this
Agreement. Based on such accounting records, Parties shall finalize the expenditure upon mutual
consent  and  adjust  the  expenditure  according  to  the  agreed-upon  rate.  If  Parties  fail  to  reach  a
mutual  consent,  upon  the  written  request  of  a  dissenting  Party,  other  Parties  shall  permit  an
independent  certified  public  accounting  firm  of  national  recognized  standing  selected  by  the
dissenting Party and reasonably acceptable to the other Parties, at the dissenting Party's expense, to
have  access  during  normal  business  hours  to  review  the  records  of  the  other  Parties  as  may  be
reasonably  necessary  to  verify  the  accuracy  of  the  accounting  records  provided  hereunder.  The
accounting  firm  shall  disclose  to  Parties  whether  the  accounting  records  are  correct  or  incorrect
and the amount of any discrepancy. If such accounting firm correctly identifies a discrepancy made
during such period, the appropriate Party shall pay the other Party the amount of the discrepancy

within  thirty  (30)  days  of  the  date  all  the  Parties  have  received  such  accounting  firm's  written
report.  The  fees  charged  by  such  accounting  firm  shall  be  first  paid  by  the  dissenting  Party  as
provided above; however, if such audit uncovers a discrepancy in the accounting records for more
than five percent (5%) of the total costs, then the fees of such accounting firm shall be paid by the
Party with such discrepancy.

4.6 Manufacturing and Supply

(a)

LCB  and  NextCure  will  be  jointly  responsible  for  the  manufacture  of  Co-
Development  Product,  provided  that,  subject  to  the  cost  sharing  set  forth  under  Section  4.2,  (i)
NextCure will be solely responsible for producing unconjugated Antibody drug substance for the
Co-Development  Product,  and  (ii)  LCB  will  be  solely  responsible  for  producing  linker-payload,
FTase enzyme, and isoprenoid (the “LCB Common Components”).

(b)

Any  costs  assessed  by  LCB  and  NextCure  to  provide  drug  substance  of  LCB
Common Components and Antibody drug substance respectively shall be calculated based on one
hundred  percent  (100%)  of  its  fully  burdened  manufacturing  cost  (without  any  markup)  in
accordance with Co-Development Budget to be determined in the JSC. To the extent relevant for a
given Party, each Party shall provide the other Party with rolling and updated estimates of its fully
burdened  costs,  including  FTE  Rates  and  third-party  expenses  that  are  being  applied,  on  no  less
frequent than a quarterly basis.

4.7

Manufacturing Agreements. LCB and NextCure, through the JSC, shall select a
contract  development  and  manufacturing  organization  (“CDMO”)  for  manufacturing  of  the  Co-
Development Product. Notwithstanding the foregoing, the Parties shall provide documents or other
information that the Parties have created or processes that are necessary to support manufacturing
or testing of Co-Development Product and also provide technology transfer assistance and supply
of  any  materials  needed  for  sample  production  for  IND-enabling  studies  to  a  CDMO  for
completion of GMP production for Co-Development Product for subsequent clinical trials.

4.8

Quality Agreements. Both Parties shall discuss, review and negotiate in good faith
each  Quality  Agreement  generated  one  Party  that  conducts  Manufacturing  or  between  one  Party
and  corresponding  Third-Party  CDMO/CRO  for  materials  subject  to  each  Quality  Agreement
including  Antibody  and  ADC  drugs  in  accordance  with  Section  4.2.  One  Party  shall  not
unreasonably  object  to  the  contracting  Party  to  enter  into  such  Quality  Agreement  with  a  Third-
Party manufacturer.

4.9

Pharmacovigilance Agreement. Parties shall negotiate in good faith and enter into
a Pharmacovigilance Agreement no later than sixty (60) days before starting a Phase I trial within
the  Territory.  The  Pharmacovigilance  Agreement  shall  contain  such  terms  as  are  reasonable  and
customary for arrangements of this type and shall in all events include such terms as are necessary

to ensure that both Parties are able to comply with applicable Laws pertaining to adverse events
and safety reporting related to any Co-Development Products and Co-Commercialization Products
and provide that there shall be one global safety database maintained by NextCure or its designee
and  accessible  to  both  Parties.  The  JSC  shall  determine  standard  operating  procedures  by  which
the Parties shall have access to such global safety database.

ARTICLE 5
Commercialization

5.1

Commercialization  Agreement.  No  later  than  sixty  (60)  days  prior  to  the
commencement  of  any  pivotal  clinical  trial  for  a  Co-Development  Product,  the  Parties  shall
negotiate  in  good  faith  and  enter  into  a  commercialization  agreement  consistent  with  the
provisions of Articles 5 and 7 and setting forth the mechanics under which the Parties shall share
on a 50:50 basis all commercial gross profits (calculated as net sales less costs of goods) from
commercialization of any resulting Co-Commercialization Product and all Sublicensing Revenue
(“Commercialization  Agreement”).    The  Parties  through  JSC  shall  discuss  detailed  activities
the  marketing,  promotion,  sales,  distribution  and  division  of
undertaken  relating 
responsibilities as described in Section 5.

to 

5.2

Commercialization Plan and Budget. NextCure and LCB shall jointly prepare
an initial Global Brand Plan for each Product not later than one (1) year prior to the anticipated
Regulatory Approval of the applicable Co-Development Product in the Territory. For each Co-
Development Product, NextCure and LCB shall prepare an initial draft Commercialization Plan,
Commercialization Budget and Access and Pricing Plan not later than one (1) year prior to the
anticipated  Regulatory  Approval  of  the  applicable  Co-Development  Product  in  the  Territory.
Thereafter,  the  Parties  will  continue  to  discuss  and  refine  such  initial  draft  Commercialization
Plan, Commercialization Budget and Access and Pricing Plan. Thereafter, the Global Brand Plan,
Commercialization  Plan,  Commercialization  Budget  and  Access  and  Pricing  Plan  for  each  Co-
Development Product will be updated annually and submitted to the JSC for approval.

5.3

Commercial Lead. For each Co-Development Product, NextCure shall oversee
and be responsible for commercialization activities (including sales, marketing, and access and
reimbursement) with respect to all indications for such Product in the Territory (in such capacity,
“Commercial  Lead”).  Except  as  expressly  set  forth  herein,  only  the  Commercial  Lead  (or  the
authorized person of the Commercial Lead) is authorized to sell Products in the Territory, and the
Commercial Lead will have the sole right, in its discretion, to take orders for and return of, issue
credits  for,  sell  and  book  sales  for  Co-Development  Products  in  the  Territory.  The  non-
Commercial  Lead  (LCB)  will  promptly  forward  to  the  Commercial  Lead  all  orders  for,  and
requests to order, Co-Development Products in the Territory.

 
5.4

Allocation  of  Commercial  Responsibility.  The  JSC  will  allocate  commercial
activities  (including  pricing  that  is  above  the  Applicable  Retail  Baseline  Price,  promotion,
marketing access and reimbursement) to both NextCure and LCB on a Product-by-Product basis
and activity-specific basis in accordance with the Commercialization Plan and this Article 5.

5.5

Training.  The  JSC  will  establish  a  process  by  which  the  Parties  will  review,
comment on and approve training materials and programs and training of the Parties’ marketing
forces for commercialization of the Co-Development Products in the Territory will be conducted
using only training materials and programs approved in accordance with such process.

5.6

Information  Concerning  Co-Development  Products.  Each  Party  will  ensure
that no claims or representations in respect of a Co-Development Product in the Territory of the
characteristics  thereof  are  made  by  or  on  behalf  of  it  or  its  Affiliates  (by  marketing  force
members or otherwise) that have not been approved by either Party and neither Party will make
any  claim  or  representation  in  the  Territory  that  does  not  represent  an  accurate  summary  or
explanation  of  the  labelling  of  such  Co-Development  Product.  Notwithstanding  the  foregoing,
either  Party  shall  be  permitted  to  engage  in  scientific  exchange  with  respect  to  a  Co-
Development Product in the Territory.

5.7

Promotional Materials. Both the Parties will review, comment on, and approve
all written sales promotion and advertising materials relating to a Co-Development Product for
use  in  the  Territory,  and  other  media  and  materials  used  to  promote  the  Co-Development
Products or educate the public regarding and indication treated with a Co-Development Product
in  the  Territory.  Both  Parties  shall  together  prepare,  review  such  promotional  and  advertising
materials based on a process established by the JSC.

5.8

Sales  Force  and  Other  Personnel  Audit.  Both  Parties  will  permit  access  to
each other on records of Sales Force Costs and Other Personnel Costs and activities maintained
by  NextCure  and  LCB,  and  permit  the  other  Party  to  audit  such  records,  provided  that  such
audits may not be performed by either Party more than once per calendar year and will be at the
cost of the Party requesting such audit. However, if an audit reveals an overstatement of Sales
Force Costs or Other Personnel Costs of greater than five percent (5%) of the correct amount for
the  audited  period,  then  the  audited  Party  will  pay  the  reasonable  out-of-pocket  cost  of  such
inspection and audit.

5.9

Commercial  Reporting.  Both  LCB  and  NextCure  shall  provide  twice  annual
reports,  in  the  form  set  forth  in  the  Sales  Force  and  Other  Personnel  Schedule  and  conduct  an
annual  in-person  review  by  each  other  company’s  Head  of  Commercial  to  discuss  Sales  Force
and  Other  Personnel  efforts  and  coordinate  Sales  Force  and  Other  Personnel  efforts  in  the
Territory with global sales efforts. Notwithstanding the foregoing, the Parties may, by mutual

written agreement, modify the timing, frequency or required content of the reports contemplated
by this Section 5.

5.10

Records; Audit Right. LCB and NextCure will maintain complete and accurate
records  of  its  Sales  Force  Costs  and  other  Commercialization  and  Related  Costs  and  activities
related to the Co-Development Products in the CRM (customer relationship management) system
and in a suitable enterprise reporting package (ERP) in order to permit both companies to audit
each  other’s  Sales  Force  Costs  and  other  Commercialization  and  Related  Costs  and  activities
related to Co-Development Products.

5.11

Calculation  of  Sales  Force  Costs  and  Other  Personnel  Costs.  Sales  Force
Costs  and  other  Commercialization  and  Related  Costs  arising  from  collaboration  activities
performed  by  LCB  and  NextCure  or  any  of  its  Affiliates  in  the  Territory  will  be  determined
pursuant  to  the  approved  Commercialization  Plan  and  Commercialization  Budget  and  by
allocation  of  proportion  of  Sales  Force  and  Other  Personnel  activities  directed  to  Co-
Development Products.

ARTICLE 6
LICENSES AND OBLIGATIONS DURING CO-DEVELOPMENT

6.1
Licenses  After  Designation  of  Co-Development  Product.    Immediately  upon  the
designation  of  Co-Development  Product  for  a  Research  Program  Target  in  accordance  with
Section  3.4(f),  the  following  licenses  as  to  both  Parties  shall  be  deemed  effective  and  shall
supersede and extinguish the licenses granted under Section 3.2 with respect to such Research
Product.

(a)

License to NextCure. LCB hereby grants to NextCure, and NextCure hereby
accepts, a co-exclusive license (with LCB, which retains rights subject to Section 6.2), with the
right  to  grant  sublicenses  to  Affiliates  and  Third  Parties  (subject  to  Section  6.2),  through
multiple tiers, under the LCB Technology, to Exploit the Co-Development Products in the Field
in the Territory (the “NextCure License”).

(b)

License to LCB.  NextCure hereby grants to LCB, and LCB hereby accepts, a
co-exclusive license (with NextCure, which retains rights subject to Section 6.2), with the right
to  grant  sublicenses  to  Affiliates  and  Third  Parties  (subject  to  Section  6.2),  through  multiple
tiers, under the NextCure Technology, to Exploit the Co-Development Products in the Field in
the Territory (the “LCB License”).

(c)

Subcontracting.  The Parties will have the right to engage Subcontractors to
exercise its rights or perform its obligations under this Agreement (which includes the right to
grant  limited  Sublicenses  to  such  Subcontractors  to  the  extent  reasonably  necessary  for  such
Subcontractors to perform their approved duties and tasks), including any activities set forth in

 
the Co-Development Plan; provided that any such Subcontractor is required to comply with the
terms  of  this  Agreement  that  are  applicable  to  such  Subcontractor  and  quality  and  regulatory
standards in the any relevant markets or jurisdictions and, in the case of a CMO, the Parties will
discuss in the JDT about a potential CMO to be engaged by each Party.  

(d)

No  Implied  Licenses.  No  license  or  other  right  is  or  shall  be  created  or
granted under this Agreement after the designation of Co-Development Product by implication,
estoppel, or otherwise.  All licenses and rights after the effective date of the designation of Co-
Development  Product  and  during  the  remainder  of  the  Term  are  or  shall  be  granted  only  as
expressly  provided  in  this  Agreement.   All  rights  not  expressly  granted  by  a  Party  under  this
Agreement are reserved by such Party and may not be used by the other Party for any purpose.

6.2

Exclusivity.  

(a)

Exclusivity  Covenant.  Upon  the  Parties  designation  of  Co-Development
Product, the Parties shall continue to collaborate exclusively in the Field and with respect to the
Co-Development Targets with the other Party, for the remainder of the Term and for as long as
the  Parties,  either  by  themselves  or  through  Affiliates  and/or  sublicensees,  is  Developing  or
Exploiting a Co-Development Product Directed to a Co-Development Target in the Field in the
Territory.    For  purposes  of  this  Section  6.2,  “collaborate  exclusively”  means  that  the  Parties
shall not, either directly or indirectly, itself or through its collaborators, partners or contractors,
Exploit  ADC  products  Directed  to  any  Co-Development  Targets  in  the  Field  in  Territory.  All
exclusivity  obligations  hereunder  are  terminated  when  either  a  Research  Program  Target  or  a
Co-Development Target becomes a Terminated Target.

(b)

Acquisition  by  Third  Parties.  If  a  Party  undergoes  a  change  of  control
(whether  such  transaction  occurs  by  way  of  a  sale  of  assets,  merger,  consolidation,  or  similar
transaction) with a Third Party that is (either directly or through an Affiliate, or in collaboration
with  a  Third  Party)  performing  competitive  activities,  including  with  respect  to  one  or  more
Competitive Products (i.e. other ADCs against Research Target or Co-Development Target), in
the  Territory  at  the  closing  of  such  change  of  control  transaction,  such  Party  will  not  be  in
breach  of  the  restrictions  set  forth  in  Section  6.2(a)  due  to  such  change  of  control  with  such
Third Party and such Third Party may continue to perform the applicable competitive activities,
including with respect to such Competitive Products, after such change of control transaction; as
long  as  (i)  no  Research  Program  Technology,  LCB  Technology,  NextCure  Technology,  or  the
other Party’s Confidential Information is used by or on behalf of such Party or its Affiliates in
connection  with  any  Exploitation  of  the  Competitive  Product  except  unaided  retained
knowledge  of  the  personnel  involved  in  such  activities  without  reference  to  such  Intellectual
Property  Rights  or  Confidential  Information;  and  (ii)  such  Party  and  its  Affiliates  institutes
commercially reasonable technical and administrative safeguards to ensure the requirements set
forth in the foregoing clause (i) are met, including by creating “firewalls” between the personnel

working on such Competitive Products and the personnel working on any Research Products or
Co-Development  Products  or  having  access  to  data  from  activities  performed  under  this
Agreement or Confidential Information of the other Party. Each Party shall be responsible for
its,  its  Affiliates’  (including  in  the  case  of  the  Party  undergoing  the  change  of  control,  the
acquirer and its affiliates) and their personnel’s compliance with this Section 6.2(b).

(c)

Acquisition  of  Third  Parties.    If  a  Party  or  any  of  its  Affiliates  merges  or
consolidates with, or otherwise acquires a Third Party (whether such transaction occurs by way
of  a  sale  of  assets,  merger,  consolidation,  or  similar  transaction)  and  at  such  time  such  Third
Party is performing competitive activities with respect to one or more Competitive Products, or
is engaged in activities that would otherwise constitute a breach of Section 6.2(a) (Exclusivity
Covenant), then, unless the Parties agree otherwise in writing, such Party will not be in breach
of Section 6.2(a) and the Party or any of its Affiliates may continue to perform the applicable
Competitive Activities, if it does one of following within 12 months following such acquisition:
(i)  divest,  or  cause  its  relevant  Affiliates  to  divest,  whether  by  sale,  assignment,  exclusive
license  or  otherwise,  its  interest  in  such  Competitive  Products;  (ii)  terminate  any  further
Competitive  Activities  with  respect  to  such  Competitive  Products.  If  such  Party  selects  either
option (i) or (ii) above, then until the divestiture or termination is complete, it will ensure that
(A) no Research Program Technology, LCB Technology, or NextCure Technology or the other
Party's  Confidential  Information  is  used  by  or  on  behalf  of  such  Party  or  its  Affiliates  in
connection  with  any  Exploitation  of  the  Competitive  Product  except  unaided  retained
knowledge  of  the  personnel  involved  in  such  activities  without  reference  to  such  Intellectual
Property  Rights  or  Confidential  Information,  and  (B)  such  Party  and  its  Affiliates  institutes
commercially reasonable technical and administrative safeguards to ensure the requirements set
forth  in  the  foregoing  clause  (A)  are  met,  including  by  creating  "firewalls"  between  the
personnel working on such Competitive Products and the personnel working on any Research
Product or Co-Development Product or having access to data from activities performed under
this Agreement or Confidential Information of the other Party. Each Party shall be responsible
for its, its Affiliates' and their personnel's compliance with this Section 6.2(c).

ARTICLE 7
Consideration

7.1

Target Exclusivity Fee.  NextCure  shall  make  a  payment  [***]  within  30  days
upon execution of this Agreement for the development of First Research Program during the Term
of the Agreement. The Target Exclusivity Fee will be reinvested by LCB at the beginning of the
Co-Development  as  a  credit  that  would  be  applied  in  LCB’s  favor  toward  any  quarterly  Co-
Development  invoices  that  would  be  generated  by  the  Parties  until  the  credit  is  exhausted.  For
additional Research Targets nominated by the Parties in accordance with Section 3.3, NextCure

 
shall pay a Target Exclusivity Fee to LCB for each additional Research Program and the Target
Exclusivity Fee will be reinvested by LCB and applied as an invoice credit in similar fashion. In
the event that LCB decides to terminate the Co-Development Plan and/or co-commercialization
on a Co-Development Product before the credit for the Target Exclusivity Fee paid by NextCure
has been fully exhausted, LCB shall reimburse the remaining credit amount to NextCure within
30 days of termination. However, if both Parties jointly decide, or if NextCure alone decides, to
terminate the Co-Development Plan and/or co-commercialization on a Co-Development Product,
the Target Exclusivity Fee shall not be reimbursable.

7.2

Sublicensing and Revenue Sharing.  

(a)

If  either  Party  terminates  the  Agreement  or  Co-Development  and  Co-
Commercialization on a Product per Product basis, the Developing Party shall pay development
and  commercial  milestone  and  royalty  payments  to  the  Terminating  Party  for  each  Co-
Development  Product  including  the  B7-H4  ADC  Program  as  specified  in  Exhibit  B  and  the
Developing Party shall take the lead and shall have the right to sublicense to a Third Party. In the
event that both Parties do not continue Co-Development and Co-Commercialization for any Co-
Development  Product,  both  Parties  shall  have  the  right  to  Sublicense  such  Co-Development
Product  to  a  Third  Party.  The  Parties  shall  decide  through  JSC  which  Party  shall  take  a  lead  in
such  sublicensing  discussions  and  sublicensing  shall  be  subject  to  the  provisions  set  forth  in
Section 7.2(b).

(b)

Solely in the event that both Parties are both no longer engaged in Co-

Development or Co-Commercialization of a respective Co-Development Product, the Parties shall 
pay to each other the percentage of all Sublicense Revenues as set out below based on the 
Sublicence Revenue sums one Party actually receives in connection with any Sublicence or any 
assignment of rights to such Co-Development Product.  The sublicensing Party shall pay to the 
other Party its share of Sublicense Revenues within 30 days after receipt of payment by 
sublicensing Party from the Sublicensee. 

All Sublicense Revenues with
respect to a Co-Development
Product

NextCure

50%

LCB

50%

(c)

In  the  event  that  a  Party  granted  authority  by  the  JSC  under  Section  7.2(a)  to
lead sublicensing discussions proposes to grant a Sublicense of Co-Development Product in the
Field in accord with subsections (a) and (b) above, such Party shall:

(1)

notify the other Party of the existence of such Sublicense discussion

with financial terms in advance of signing such Sublicence agreements, decide on the Party

who would be responsible for leading sublicensing discussions and obtain a written approval
from the other Party;

(2)

negotiate  suitable  equivalent  obligations  on  the  Sublicensee  as  have
been placed under the terms of this Agreement, including an obligation to use Commercially
Reasonable  Efforts  and  to  undertake  them  to  equivalent  obligations  to  develop  and
Commercialise the Co-Development Product;

(3)

share  an  unredacted  copy  of  such  Sublicence  term  sheets  and  draft
agreements with the other Party, and within thirty (30) days after execution, provide a copy of
each Sublicence to the other Party.

(d)

The Parties acknowledges that the grant of any Sublicense under any provision
of this Agreement shall not relieve the Parties of its obligations under this Agreement, except to
the extent they are satisfactorily performed by any such Sublicensee and will remain responsible
for any work allocated to a Subcontractor to the same extent as if it had done such work itself.  

(e)

The  Parties  shall  procure  that  any  Sublicense  shall  terminate  upon  the

termination of this Agreement.

7.3 Taxes.

(a)

Cooperation and Coordination.  The Parties acknowledge and agree that it
is their mutual objective and intent to appropriately calculate, to the extent feasible and legal,
taxes payable with respect to their collaborative efforts under this Agreement and that they shall
use all commercially reasonable efforts to cooperate and coordinate with each other to achieve
such objective.  Each Party shall provide the other Party with reasonable assistance to enable the
elimination, reduction or recovery, as permitted by Applicable Law, of withholding taxes, value
added  taxes  or  similar  taxes,  resulting  from  payments  made  under  this  Agreement,  such
elimination, reduction or recovery (as applicable) to be for the benefit of the Party bearing the
economic burden of such withholding tax, value added tax or similar tax.  

(b)

VAT.    Unless  otherwise  stated,  any  consideration  payable  under  this
Agreement shall be exclusive of value added tax, sales tax or any similar tax (“VAT”). If a Party
makes  a  supply  pursuant  to  this  Agreement,  and  VAT  is  payable  on  that  supply,  the
consideration for the supply (VAT exclusive consideration) is increased by an amount equal to
the VAT exclusive consideration multiplied by the rate of VAT prevailing at the time the supply
is made (additional VAT amount). VAT (if any) will become due and payable upon presentation
of a valid VAT invoice (or, where there is no provision in the legislation for the jurisdiction

concerned  that  a  VAT  invoice  is  required  to  be  issued,  a  written  demand  containing  such
information as is customary in that jurisdiction).

(c)

Withholding Taxes.

If Applicable Law requires that taxes be deducted
and  withheld  from  a  payment  made  pursuant  to  this  Section  7,  the  remitting  Party  shall:  (1)
deduct those taxes from the payment for the account of the other Party; (2) timely pay the taxes
to the proper taxing authority; and (3) promptly following that payment send to the other Party
evidence  of  the  obligation,  together  with  an  official  tax  receipt  or  other  proof  of  payment
sufficient to enable the other Party to claim such payment of taxes.  To the extent that a Party
making a payment to the other Party determines that a withholding tax will apply to a payment,
such remitting Party shall inform the other Party of such withholding tax promptly after making
this  determination  in  advance  of  the  payment  being  made  to  allow  the  Parties  to  cooperate
timely  and  in  good  faith  to  eliminate  or  reduce  such  withholding,  to  the  extent  reasonably
feasible, in advance of such payment being made.

(d)

Tax  Residence  Certificate.    A  Party  receiving  a  payment  pursuant  to  this
Section 6 shall provide the remitting Party appropriate certification required by Applicable Law
that such Party is a tax resident of that jurisdiction, if such receiving Party wishes to claim the
benefits of an income tax treaty to which that jurisdiction is a party.  Upon the receipt thereof,
any deduction and withholding of taxes shall be made at the appropriate treaty tax rate.

(e)

Assessment.    Either  Party  may,  at  its  own  expense,  protest  any  assessment,
proposed assessment, or other claim by any Governmental Authority for any additional amount
of  taxes,  interest  or  penalties  or  seek  a  refund  of  such  amounts  paid  if  permitted  to  do  so  by
Applicable  Law.    The  Parties  shall  reasonably  cooperate  with  each  other  in  any  protest  by
providing records and such additional information as may reasonably be necessary for a Party to
pursue such protest.

7.4

Audit.    The  Parties  shall  maintain  complete  and  accurate  records  in  sufficient
detail to permit the other Party to confirm the accuracy of the payments under this Agreement.
 Upon reasonable prior notice, but not more than once per Calendar Year, such records shall be
available  during  regular  business  hours  for  a  period  of  three  (3)  years  from  the  end  of  the
Calendar Year to which they pertain for examination at the expense of requesting Party by an
independent  certified  public  accountant  selected  by  the  requesting  Party  and  reasonably
acceptable  to  the  other  Party,  for  the  sole  purpose  of  verifying  the  accuracy  of  the  financial
reports  and  correctness  of  the  payments  furnished  pursuant  to  this  Agreement.      In  case  the
accountant identifies amounts owed but unpaid, and in case this is not explained and disproven
by the other Party’s records and accountants within 15 days, any such amounts identified to be
owed  but  unpaid  shall  be  paid  within  forty-five  (45)  days  from  the  accountant’s  report.   Any
amounts  shown  to  have  been  overpaid  shall  be  refunded  within  thirty  (30)  days  from  the
accountant’s report.  Requesting Party shall bear the full cost of such audit unless such audit

discloses an underpayment of more than five percent (5%) of the amount due, in which case the
audited Party shall bear the cost of such audit.  The audit rights in this Section 6.4 shall survive
the Term for two (2) years.  

7.5

Late Payment.   All  payments  due  to  a  Party  hereunder  shall  be  made  in  U.S.
Dollars  by  wire  transfer  of  immediately  available  funds  into  an  account  designated  by  the
receiving Party.  If a Party does not receive payment of any sum due to it on or before the due
date,  simple  interest  shall  thereafter  accrue  on  the  sum  due  to  such  Party  until  the  date  of
payment at the per annum rate of two percent (2%) over the then-current prime rate quoted by
Citibank  in  New  York  City  or  the  maximum  rate  allowable  by  Applicable  Law,  whichever  is
lower.

7.6

Currencies.  All calculations and invoices under this Agreement shall be made
in U.S. Dollars, and when conversion of amounts to and/or from any other currency is required,
such  conversion  shall  be  calculated  using  an  exchange  rate  equal  to  the  rate  of  exchange
published in the Wall Street Journal on the last business day of the applicable calendar quarter
for which the invoice is made and/or for which the payment is due (as applicable).

ARTICLE 8
INTELLECTUAL PROPERTY MATTERS

8.1

Ownership of Inventions.  Inventorship of Research Program Technology, LCB
Platform Improvement Technology, NextCure Platform Improvement Technology and any other
Inventions  shall  be  determined  in  accordance  with  applicable  patent  laws.  Ownership  of
Research  Program  Technology,  LCB  Platform  Improvement  Technology,  and  NextCure
Platform Improvement Technology, irrespective of inventorship, as between LCB and NextCure
shall be as follows:

(a)

LCB Platform Improvement Technology. Subject to any licenses granted by
LCB  in  this  Agreement,  LCB  shall  own  and  retain  all  right,  title  and  interest  in  and  to  LCB
Platform  Improvement  Technology,  including  but  not  limited  to  any  LCB  Platform
Improvement Technology generated or arising from the Research Program.  For the avoidance
of doubt, LCB Platform Improvement Technology shall not include any NextCure Technology
or  Research  Program  Technology.  NextCure  hereby  assigns  all  right  and  title  in  and  to  such
LCB Platform Improvement Technology to LCB.

(b)

NextCure  Platform  Improvement  Technology.  Subject  to  any  licenses
granted  by  NextCure  in  this  Agreement,  NextCure  shall  own  and  retain  all  right,  title,  and
interest in and to NextCure Platform Improvement Technology, including but not limited to any
NextCure Platform Improvement Technology generated or arising from the Research Program.

 
For the avoidance of doubt, NextCure Platform Improvement Technology shall not include any
LCB Technology or Research Program Technology. LCB hereby assigns all right and title in and
to such NextCure Platform Improvement Technology to NextCure.

(c)

Research Program Technology.  The Parties shall jointly own and retain the
right,  title  and  interest  in  and  to  any  Inventions,  Patents  and  Know-How  pertaining  to  (i)  a
Research Product and/or a Co-Development Product invented during the conduct of a Research
Program by LCB (including its Affiliates and/or Subcontractors) and/or by NextCure (including
its  Affiliates  and/or  Subcontractors),  (ii)  the  manufacture  of  a  Co-Development  Product
invented during the conduct of a Research Program or Co-Development Plan by LCB and/or by
NextCure (including by their respective Affiliates and/or Subcontractors), and (iii) a Research
Program Target to the extent jointly invented during the conduct of a Research Program by both
LCB and NextCure (including by their respective Affiliates and/or Subcontractors) (collectively,
the  “Research  Program  Technology”).  The  preceding  shall  include  the  right  to  file
applications for Research Program Patents pertaining to the Research Program Technology, and
further including but not limited to any Research Program Patents that claim substance of matter
of  a  Co-Development  Product.    Research  Program  Patents  will  be  co-owned  and  filed  in  the
names of both NextCure and LCB as joint applicants. For the avoidance of doubt, the Research
Program  Technology  shall  not  include  any  LCB  Platform  Improvement  Technology  or
NextCure Platform Improvement Technology.  

(d)

Other Inventions. Subject to Sections 8.1(a) through 8.1(c) above, ownership

of any other Invention shall follow inventorship.

8.2

Disclosure  and  Assignment.    Each  Party  will  promptly  disclose  to  the  other
Party  any  LCB  Platform  Improvement  Technology,  NextCure  Platform  Improvement
Technology,  Research  Program  Technology  or  Joint  IP  developed,  created,  conceived,  or
reduced to practice by or on behalf of such Party during the Term.  Each Party will obligate any
of  its  employees,  Sublicensees,  and  Third  Party  contractors  to  assign  all  LCB  Platform
Improvement  Technology  or  NextCure  Platform  Improvement  Technology,  Research  Program
Technology and Research Program Patents to such Party so that each Party can comply with its
obligations under the Section 8.1, and each Party will promptly obtain such assignment.

8.3

Prosecution of Patents.

(a)

Platform Improvement Patents.  LCB shall have the sole right and authority
to prepare, file, prosecute and maintain the LCB Platform Improvement Patents on a worldwide
basis  at  LCB’s  expense.  NextCure  shall  have  the  sole  right  and  authority  to  prepare,  file,
prosecute  and  maintain  the  NextCure  Platform  Improvement  Patents  on  a  worldwide  basis  at
NextCure’s expense.

(b)

Research  Program  Patents. 

  The  filing,  prosecution,  maintenance,
enforcement,  and  defense  of  Research  Program  Patents  shall  be  at  the  discretion,  shared  cost
and  shared  responsibility  of  both  NextCure  and  LCB,  through  the  use  of  counsel  selected  by
NextCure  reasonably  acceptable  to  LCB.    NextCure  shall  keep  LCB  informed  regarding  the
filing,  prosecution,  maintenance,  defense,  and  enforcement  of  the  Research  Program  Patents,
including  by  providing  LCB  with  a  copy  of  any  material  communications  to  and  from  any
relevant authority and by providing LCB drafts of any material submissions or responses to be
made to such authorities sufficiently in advance of submitting such submissions or responses so
as  to  allow  for  a  reasonable  opportunity  for  LCB  to  review  and  comment  thereon.    NextCure
shall consider in good faith the requests and suggestions of LCB with respect to such drafts and
with  respect  to  strategies  for  filing,  prosecuting,  enforcing  and  defending  such  Research
Program  Patents.  In  the  event  if  one  of  the  Parties  opts  out  of  the  Co-Development  and  Co-
Commercialization,  the  Developing  Party  shall  lead  the  filing,  prosecuting,  enforcing,  and
defending such Research Program Patents and will deduct the cost associated with such efforts
from the milestone and royalty payments to be paid to the Terminating Party. The Terminating
Party shall not unduly delay in providing responses to the lead Party to file, prosecute, enforce
and defend such a Research Program Patent.  

8.4

Cooperation  in  Prosecution.    Each  Party  shall  provide  the  other  Party  all
reasonable assistance and cooperation in the Patent prosecution and validation efforts provided
above  and  in  this  Section  8.4,  including  providing  any  necessary  powers  of  attorney,
assignments and executing any other required documents or instruments for such prosecution, as
well as further actions as set forth below.  Such assistance and cooperation shall include making
a Party’s inventors and other scientific advisors reasonably available to assist the other Party’s
Patent preparation, filing, prosecution and maintenance efforts.  

8.5

Infringement of Patents by Third Parties.  

(a)

Notification.  Each Party shall promptly notify the other Party in writing if it
becomes aware of an infringement of any LCB Patent, Research Program Patent or NextCure
Patent,  and  shall  provide  all  information  in  such  Party’s  possession  or  control  demonstrating
such infringement.  

(b)

Infringement  of  a  LCB  Patent.    For  any  and  all  infringement  of  any  LCB
Patent  by  a  product  competing  with  a  Co-Development  Product,  LCB  shall  have  the  sole  and
exclusive  right,  but  not  the  obligation,  to  bring,  at  LCB’s  expense  and  in  its  sole  control,  an
appropriate  suit  or  other  action  against  any  person  or  entity  engaged  in  such  infringement  of
such LCB Patent and to retain one hundred percent (100%) of any recovery in connection with
such suit or other action (after reimbursing NextCure for its expenses (if any) in connection with
its assistance provided by NextCure).  Without limiting the foregoing, LCB shall keep NextCure
reasonably informed of such infringement action to the extent such action may

reasonably  be  expected  to  impact  the  scope  of  LCB’s  Patents  as  they  relate  to  any  Research
Product or Co-Development Product.

(c)

Infringement  of  a  NextCure  Patent.    For  any  and  all  infringement  of  any
NextCure Patent by a product competing with a Co-Development Product, NextCure shall have
the sole and exclusive right, but not the obligation, to bring, at NextCure’s expense and in its
sole  control,  an  appropriate  suit  or  other  action  against  any  person  or  entity  engaged  in  such
infringement  of  such  NextCure  Patent  and  to  retain  one  hundred  percent  (100%)  of  any
recovery in connection with such suit or other action (after reimbursing LCB for its expenses (if
any)  in  connection  with  its  assistance  provided  by  LCB).    Without  limiting  the  foregoing,
NextCure shall keep LCB reasonably informed of such infringement action to the extent such
action may reasonably be expected to impact the scope of NextCure’s Patents as they relate to
any Research Product or Co-Development Product.

(d)

Infringement of a Research Program Patent.  For any and all infringement
of any Research Program Patent, each Party shall have the first right, but not the obligation, to
bring, at its expense and in its sole control, an appropriate suit or other action against any person
or  entity  engaged  in  such  infringement  of  such  Research  Program  Patent  and  to  retain  one
hundred  percent  (100%)  of  any  recovery  in  connection  with  such  suit  or  other  action  (after
reimbursing the other Party for its expenses (if any) in connection with its assistance provided
by  the  other  Party).  The  Parties  shall  decide  in  good  faith  which  Party  shall  bring  such  suit.
Without limiting the foregoing, the Party shall keep the other Party reasonably informed of such
infringement action to the extent such action may reasonably be expected to impact the scope of
the other Party’s portion of Research Program Patents as they relate to any Research Product or
Co-Development Product.

8.6

Infringement of Third Party Rights in the Territory.

(a)

Notice.    If  any  Co-Development  Product  becomes  the  subject  of  a  Third
Party’s  claim  or  assertion  of  infringement  of  a  Patent  granted  by  a  jurisdiction  within  the
Territory, the Party first having notice of the claim or assertion shall promptly notify the other
Party.

(b)

Defense; Settlement; Licenses.  Each Party shall have the right, but not the
obligation, to defend or enter into any settlement of any such Third Party claim or assertion of
infringement of a Patent as described in Section 8.6(a) above, at its expense. The Parties shall
decide in good faith which Party shall defend or enter into such settlement. The other Party shall
reasonably cooperate with such Party conducting the defense of the claim or assertion, including
if required to conduct such defense, furnishing a power of attorney.

ARTICLE 9
REPRESENTATIONS AND WARRANTIES

9.1

Mutual  Representations,  Warranties  and  Covenants.    Each  of  the  Parties
hereby represents and warrants to the other Party as of the Effective Date and hereinafter, as set
forth below, covenants that:

(a)

Organization.    It  is  a  corporation  duly  organized,  validly  existing,  and  in
good standing under the laws of the jurisdiction of its organization, and has all requisite power
and authority, corporate or otherwise, to execute, deliver, and perform this Agreement.

(b)

Binding Agreement.  This Agreement is a legal and valid obligation binding
upon  such  Party  and  enforceable  in  accordance  with  its  terms,  subject  to  the  effects  of
bankruptcy,  insolvency,  or  other  laws  of  general  application  affecting  the  enforcement  of
creditor rights, judicial principles affecting the availability of specific performance, and general
principles of equity (whether enforceability is considered a proceeding at law or equity).  

(c)

Authorization.  The execution, delivery, and performance of this Agreement
by such Party have been duly authorized by all necessary corporate action and do not conflict
with any agreement, instrument, or understanding, oral or written, to which it is a party or by
which  it  is  bound,  nor  violate  any  Applicable  Law  or  any  order,  writ,  judgment,  injunction,
decree, determination, or award of any court or governmental body, or administrative or other
agency presently in effect applicable to such Party.

(d)

No  Further  Approval.    It  is  not  aware  of  any  government  authorization,
consent, approval, license, exemption of or filing or registration with any court or governmental
department, commission,  board,  bureau,  agency  or  instrumentality,  domestic  or foreign, under
any  Applicable  Law,  currently  in  effect,  necessary  for,  or  in  connection  with,  the  transactions
contemplated by this Agreement or any other agreement or instrument executed in connection
herewith,  or  for  the  performance  by  it  of  its  obligations  under  this  Agreement  and  such  other
agreements  (save  for  Regulatory  Approvals  and  similar  authorizations  from  Governmental
Authorities necessary for the Exploitation of the LCB Technology as contemplated hereunder).

(e)

No  Inconsistent  Obligations.    Neither  Party  is  under  any  obligation,
contractual  or  otherwise,  to  any  Person  or  other  entity  that  conflicts  with  or  is  inconsistent  in
any  material  respect  with  the  terms  of  this  Agreement,  or  that  would  impede  the  diligent  and
complete fulfillment of its obligations hereunder.

(f)

No  Debarment.    Neither  Party  nor  any  of  its  respective  Affiliates  has  been
debarred  by  the  FDA,  is  subject  to  any  similar  sanction  of  other  Governmental  Authorities  in
the Territory, and, to its Knowledge, neither Party nor any of its respective Affiliates has used, is
using, or will engage, in any capacity, in connection with this Agreement or any ancillary

 
agreements (if any), any Person who either has been debarred by such a Regulatory Authority,
or  is  the  subject  of  a  conviction  described  in  Section  306  of  the  FFDCA.      Each  Party  shall
inform  the  other  Party  in  writing  promptly  if  it  or  any  Person  engaged  by  it  or  any  of  its
Affiliates who is performing services under this Agreement or any ancillary agreements (if any)
is debarred or is the subject of a conviction described in Section 306 of the FFDCA, or if any
action,  suit,  claim,  investigation  or  legal  or  administrative  proceeding  is  pending  or,  to  such
Party’s Knowledge, is threatened, relating to the debarment or conviction of such Party, any of
its Affiliates or any such Person performing services hereunder or thereunder.  

(g)

Transparency Reporting.    Each  Party  shall  be  responsible  for  tracking  and
reporting  transfers  of  value  initiated  and  controlled  by  its  and  its  Affiliates’  employees,
contractors, and agents pursuant to the requirements of the transparency or marketing reporting
laws  of  any  Governmental  Authority  in  the  Territory,  including  Section  6002  of  the  ACA,
commonly referred to as the “Sunshine Act.”

9.2

Additional  Representations  and  Warranties  of  LCB.    LCB  represents  and
warrants  as  of  the  Effective  Date  and  hereinafter,  as  set  forth  below,  covenants  to  NextCure
that:

(a)

LCB has all rights necessary to grant the licenses under the LCB Technology
and  rights  of  cross-reference  under  Regulatory  Materials,  in  each  case,  existing  as  of  the
Effective Date that it grants to NextCure in this Agreement.  

(b)

LCB is the sole and exclusive owner of the entire right, title and interest in the
LCB Patents reasonably applicable to the Research Program Targets free of any encumbrance,
lien, or claim of ownership by any Third Party.  

(c)

There is no actual, LCB has not received notice of and to LCB’s Knowledge
there is no threatened infringement or misappropriation of LCB Technology by any Person in
the Territory as of the Effective Date.

9.3 Additional Representations and Warranties of NextCure.  NextCure represents
and warrants as of the Effective Date and hereinafter, as set forth below, covenants to LCB that:

(a)

NextCure  has  all  rights  necessary  to  grant  the  licenses  under  the  NextCure
Technology and rights of cross-reference under Regulatory Materials, in each case, existing as
of the Effective Date that it grants to LCB in this Agreement.  

(b)

NextCure is the sole and exclusive owner of the entire right, title and interest
in  the  NextCure  Patents  reasonably  applicable  to  the  Research  Program  Targets  free  of  any
encumbrance, lien, or claim of ownership by any Third Party.  

(c)

There  is  no  actual,  NextCure  has  not  received  notice  of  and  to  NextCure’s
Knowledge there is no threatened infringement or misappropriation of NextCure Technology by
any Person in the Territory as of the Effective Date.

9.4

No  Other  Representations  or  Warranties.    EXCEPT  AS  EXPRESSLY  SET
FORTH  IN  THIS  ARTICLE  9,  THE  PARTIES  MAKE  NO  REPRESENTATIONS  OR
WARRANTIES  OF  ANY  KIND  WHATSOEVER,  EITHER  EXPRESS  OR  IMPLIED,
WRITTEN OR ORAL, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR
OTHERWISE,  AND  EACH  PARTY  SPECIFICALLY  DISCLAIMS  ANY  OTHER
WARRANTIES,  INCLUDING  ANY  EXPRESS  OR  IMPLIED  WARRANTY  OF  QUALITY,
MERCHANTABILITY,  FITNESS  FOR  A  PARTICULAR  PURPOSE,  OR  WARRANTY  OF
NON-INFRINGEMENT OR AS TO THE VALIDITY OF ANY PATENTS.

ARTICLE 10
Confidentiality

10.1

Nondisclosure.  Each Party agrees that, during the Term and for a period of ten
(10) years thereafter, a Party (the “Receiving Party”)  receiving Confidential  Information  of  the
other  Party  (the  “Disclosing  Party”)  shall  (a)  maintain  in  confidence  such  Confidential
Information using not less than the efforts such Receiving Party uses to maintain in confidence
its own confidential or proprietary Information of similar kind and value, (b) not disclose such
Confidential Information to any Third Party without the prior written consent of the Disclosing
Party,  except  for  disclosures  expressly  permitted  below,  and  (c)  not  use  such  Confidential
Information for any purpose except those permitted by this Agreement (it being understood that
this Section 9.1 shall not create or imply any rights or licenses not expressly granted under this
Agreement).    Notwithstanding  anything  to  the  contrary  in  the  foregoing,  the  obligations  of
confidentiality and non-use with respect to any trade secret within such Confidential Information
shall  survive  such  ten  (10)  year  period  for  so  long  as  such  Confidential  Information  remains
protected as a trade secret under Applicable Law.

10.2

Exceptions.  The obligations in Section 10.1 shall not apply with respect to any
portion  of  the  Confidential  Information  that  the  Receiving  Party  can  show  by  competent
written evidence:

(a)

is  publicly  disclosed  by  the  Disclosing  Party,  either  before  or  after  it  is

disclosed to the Receiving Party hereunder;

(b)

is known to the Receiving Party or any of its Affiliates, without any obligation

to keep it confidential or any restriction on its use, prior to disclosure by the Disclosing Party;

 
(c)

is subsequently disclosed to the Receiving Party or any of its Affiliates on a
non-confidential basis by a Third Party that, to the Receiving Party’s Knowledge, is not bound
by a similar duty of confidentiality or restriction on its use;

(d)

is now, or hereafter becomes, through no act or failure to act on the part of the
Receiving Party or any of its Affiliates, generally known or available, either before or after it is
disclosed to the Receiving Party;

(e)

is  independently  discovered  or  developed  by  or  on  behalf  of  the  Receiving
Party  or  any  of  its  Affiliates  without  the  use  of  Confidential  Information  belonging  to  the
Disclosing Party; or

(f)

is  the  subject  of  written  permission  to  disclose  provided  by  the  Disclosing

Party.

10.3

Authorized  Disclosure.    The  Receiving  Party  may  disclose  Confidential
Information belonging to the Disclosing Party only to the extent such disclosure is reasonably
necessary in the following instances:

(a)

filing or prosecuting Patents as permitted by this Agreement, provided that no

Confidential Information that can be demonstrated as protected as a trade secret is disclosed;

(b)

preparing and submitting Regulatory Materials and obtaining and maintaining

Regulatory Approvals as permitted by this Agreement;

(c)

prosecuting  or  defending  litigation,  including  responding  to  a  subpoena  in  a

Third-Party litigation;

(d)

complying with Applicable Law or court or administrative orders; or

(e)

in  communications  with  existing  or  bona  fide  prospective  acquirers,  merger
partners, lenders or investors, and consultants and advisors of the Receiving Party in connection
with  transactions  or  bona  fide  prospective  transactions  with  the  foregoing,  in  each  case  on  a
“need-to-know”  basis  and  under  appropriate  confidentiality  provisions  substantially  similar  to
those of this Agreement; and

(f)

to  its  Affiliates  and  Third  Parties  including  but  not  limited  to  collaborators,
sublicensees  or  prospective  sublicensees,  Subcontractors  or  prospective  subcontractors,
consultants, directors, agents and advisors on a “need-to-know” basis in order for the Receiving
Party to exercise its rights or fulfill its obligations under this Agreement, each of whom prior to
disclosure  must  be  bound  by  obligations  of  confidentiality  and  restrictions  on  use  of  such
Confidential Information that are substantially similar to those set forth in this Section 9;

provided,  however,  that,  the  Receiving  Party  shall  remain  responsible  for  any  failure  by  any
Person who receives Confidential Information pursuant to Section 10.3(e) or this Section 10.3(f)
to treat such Confidential Information as required under this ARTICLE 10.

(g)

If and whenever any Confidential Information is disclosed in accordance with
this Section 9.3, such disclosure shall not cause any such information to cease to be Confidential
Information  except  to  the  extent  that  such  disclosure  results  in  a  public  disclosure  of  such
information  (other  than  by  breach  of  this  Agreement).    Notwithstanding  the  foregoing,  in  the
event  a  Party  is  required  to  make  a  disclosure  of  the  other  Party’s  Confidential  Information
pursuant to clauses (a) through (e) of this Section 10.3, it will, except where impracticable, give
reasonable advance notice to the other Party of such disclosure and use not less than the same
efforts  to  secure  confidential  treatment  of  such  information  as  it  would  to  protect  its  own
confidential information from disclosure.

10.4

Terms of this Agreement.  The Parties acknowledge that this Agreement and all
of the respective terms of this Agreement shall be treated as Confidential Information of both
Parties subject to the provisions of Sections 10.3, 10.5 and 10.6.

10.5

Publicity.   Each Party agrees not to issue any other press release or other public
statement  disclosing  other  information  relating  to  this  Agreement  or  the  transactions
contemplated hereby that contains information not previously publicly disclosed in accordance
with this Section 10.5 without the prior written consent of the other Party.

10.6

Securities Filings.  Notwithstanding anything to the contrary in this ARTICLE
10, in the event either Party proposes to file with the Securities and Exchange Commission or
the securities regulators of any state or other jurisdiction a registration statement or any other
disclosure document that describes or refers to the terms and conditions of this Agreement or
any  related  agreements  between  the  Parties,  such  Party  shall  notify  the  other  Party  of  such
intention  and  shall  provide  the  other  Party  with  a  copy  of  relevant  portions  of  the  proposed
filing at least ten (10) Business Days prior to such filing (and any revisions to such portions of
the proposed filing a reasonable time prior to the filing thereof), including any exhibits thereto
that  refer  to  the  other  Party  or  the  terms  and  conditions  of  this  Agreement  or  any  related
Agreements  between  the  Parties.  The  Party  making  such  filing  shall  cooperate  in  good  faith
with  the  other  Party  to  obtain  confidential  treatment  of  the  terms  and  conditions  of  this
Agreement or any related Agreements between the Parties that the other Party requests be kept
confidential or otherwise  afforded  confidential  treatment  and  shall  only  disclose Confidential
Information that it is reasonably advised by outside counsel is legally required to be disclosed.
  No  such  notice  shall  be  required  if  the  description  of  or  reference  to  this  Agreement  or  a
related agreement between the Parties contained in the proposed filing has been included in any
previous  filing  made  by  the  either  Party  in  accordance  with  this  Section  10.6  or  otherwise
approved by the other Party. The Party making such filing shall not disclose any financial terms

of the Agreement or any other related agreements without express written consent of the other
Party.

10.7

Relationship  to  Confidentiality  Agreement.    This  Agreement  supersedes  the
Mutual  Confidential  Disclosure  Agreement  between  the  Parties,  as  amended,  dated  January
26, 2022; provided however, that all “Confidential Information” disclosed or received by the
Parties  and  their  Affiliates  thereunder  shall  be  deemed  Confidential  Information  hereunder
and shall be subject to the terms and conditions of this Agreement.

10.8

Equitable  Relief.    Given  the  nature  of  the  Confidential  Information  and  the
competitive damage that could result to a Party upon unauthorized disclosure, use or transfer
of  its  Confidential  Information  to  any  Third  Party,  the  Parties  agree  that  monetary  damages
may not be a sufficient remedy for any breach of this ARTICLE 10.  In addition to all other
remedies,  a  Party  shall  be  entitled  to  seek  specific  performance  and  injunctive  and  other
equitable relief as a remedy for any breach or threatened breach of this ARTICLE 10.  

10.9 Publications. Each Party shall ensure that any and all intended publications or
presentations  to  be  made  public,  in  case  they  include  the  other  Party’s  Confidential
Information, shall be subject to the approval of the other Party and shall be disclosed to the
other  Party  for  review  at  least  thirty  (30)  Days  prior  to  any  submission  or  other  public
disclosure  of  such  publication  or  presentation.  If  the  other  Party  determines  that  the
publication  contains  patentable  subject  matter,  the  publishing  Party  agrees  to  postpone
publication or presentation of such Presentation for an additional sixty (60) Days to permit the
filing  of  a  patent  application.  If  the  other  Party  determines  that  the  publication  contains
sensitive  information,  the  publishing  Party  will  take  comments  and  suggestions  of  the  other
Party  into  consideration.  In  any  case,  each  Party  shall  not  publish  any  publications  or
presentations  in  respect  of  Co-Development  Target  or  Co-Development  Product  without
express written consent of the other Party.

ARTICLE 11
Term and Termination

11.1 Term.    This  Agreement  shall  become  effective  as  of  the  Effective  Date  and,
unless earlier terminated pursuant to this ARTICLE 11, shall continue in full force and effect
as long as at least one of the Parties continues to Exploit the Products or Research Programs in
accordance with the terms and conditions of this Agreement (the “Term”).

11.2

Termination for Material Breach.  

 
(a)

Either Party (the “Non-Breaching Party”) may terminate this Agreement in its
entirety,  and/or  on  a  Co-Development  Target-by-Co-Development  Target  basis,  and/or  on  a
country-by-country  and/or  Product-by-Product  basis,  in  the  event  the  other  Party  (the
“Breaching Party”) has materially breached this Agreement with respect to a Co-Development
Target, and/or Product and/or country, and such material breach has not been cured within sixty
(60) days after receipt of written notice of such breach by the Breaching Party from the Non-
Breaching Party (the “Cure Period”).  The written notice describing the alleged material breach
shall provide sufficient detail to put the Breaching Party on notice of such material breach. Any
termination of this Agreement pursuant to this Section 11.2(a) shall become effective at the end
of the Cure Period, unless the Breaching Party has cured any such material breach prior to the
expiration of such Cure Period, or, if such material breach is not susceptible to cure within the
Cure Period, then, the Non-Breaching Party’s right of termination shall be suspended only if and
for so long as the Breaching Party has provided to the Non-Breaching Party a written plan that
is reasonably calculated to effect a cure of such material breach, such plan is accepted by the
Non-Breaching  Party  (such  acceptance  not  to  be  unreasonably  withheld,  conditioned,  or
delayed), and the Breaching Party commits to and carries out such plan as provided to the Non-
Breaching Party no later than one hundred fifty (150) days after written notice of said breach.
  The  right  of  either  Party  to  terminate  this  Agreement,  whether  in  part  or  in  its  entirety,  as
provided in this Section 11.2(a) shall not be affected in any way by such Party’s waiver of or
failure to take action with respect to any previous breach under this Agreement.  

(b)

If  the  Parties  reasonably  and  in  good  faith  disagree  as  to  whether  there  has
been  a  material  breach,  the  Party  that  disputes  whether  there  has  been  a  material  breach  may
contest  the  allegation  in  accordance  with  ARTICLE  12.    Notwithstanding  anything  to  the
contrary contained in Section 11.2(a), the Cure Period for any Dispute will be tolled from the
date that written notice was first provided to the Breaching Party by the Non-Breaching Party
through  the  resolution  of  such  Dispute  pursuant  to  ARTICLE  12,  and  it  is  understood  and
acknowledged  that,  during  the  pendency  of  a  Dispute  pursuant  this  Section  11.2(b),  all  of  the
terms and conditions of this Agreement shall remain in effect, and the Parties shall continue to
perform all of their respective obligations under this Agreement.  Any payments that are made
by  one  Party  to  the  other  Party  pursuant  to  this  Agreement  pending  resolution  of  the  Dispute
shall be promptly refunded if it is determined pursuant to ARTICLE 12 that such payments are
to be refunded by one Party to the other Party.  

11.3 Termination for Bankruptcy.  

(a)

Either  Party  may  terminate  this  Agreement  in  its  entirety  upon  providing
written  notice  to  the  other  Party  on  or  after  the  time  that  such  other  Party  makes  a  general
assignment for the benefit of creditors, files an insolvency petition in bankruptcy, petitions for
or  acquiesces  in  the  appointment  of  any  receiver,  trustee  or  similar  officer  to  liquidate  or
conserve its business or any substantial part of its assets, commences under the laws of any

jurisdiction any proceeding involving its insolvency, bankruptcy, reorganization, adjustment of
debt,  dissolution,  liquidation  or  any  other  similar  proceeding  for  the  release  of  financially
distressed debtors, or becomes a party to any proceeding or action of the type described above,
and such proceeding or action remains un-dismissed or un-stayed for a period of more than sixty
(60) days.

(b)

All rights and licenses granted under or pursuant to this Agreement are, and
shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11 of the United States
Code and other similar laws in any jurisdiction outside the U.S. (collectively, the “Bankruptcy
Laws”), licenses of rights to “intellectual property” as defined under the Bankruptcy Laws.  If a
case is commenced during the Term by or against a Party under Bankruptcy Laws then, unless
and until this Agreement is rejected as provided pursuant to such Bankruptcy Laws, such Party
(in  any  capacity,  including  debtor-in-possession)  and  its  successors  and  assigns  (including  a
Title 11 trustee) shall perform all of the obligations in this Agreement intended to be performed
by  such  Party.    If  a  case  is  commenced  during  the  Term  by  or  against  a  Party  under  the
Bankruptcy Laws, this Agreement is rejected as provided for under the Bankruptcy Laws, and
the non-bankrupt Party elects to retain its rights hereunder as provided for under the Bankruptcy
Laws, then the Party subject to such case under the Bankruptcy Laws (in any capacity, including
debtor-in-possession) and its successors and assigns (including a Title 11 trustee), shall provide
to the non-bankrupt Party copies of all Patents and Information necessary for the non-bankrupt
Party to prosecute, maintain and enjoy its rights under the terms of this Agreement.  All rights,
powers and remedies of the non-bankrupt Party as provided herein are in addition to and not in
substitution for any and all other rights, powers and remedies now or hereafter existing at law or
in equity (including the Bankruptcy Laws) in the event of the commencement of a case by or
against a Party under the Bankruptcy Laws.  In particular, it is the intention and understanding
of the Parties to this Agreement that the rights granted to the Parties under this Section 11.3 are
essential to the Parties’ respective businesses and the Parties acknowledge that damages are not
an adequate remedy.  The Parties acknowledge and agree that the payments made under Section
5.1  shall  not  (i)  constitute  royalties  within  the  meaning  of  Section  365(n)  of  the  U.S.
Bankruptcy Code or any analogous provisions in any other country or jurisdiction, or (ii) relate
to licenses of intellectual property hereunder.

11.4

Termination for Delayed or Abandoned Development. This Section 11.4 shall
not limit a Party’s right to terminate pursuant to Section 11.2 (Termination for Material Breach)
and  11.3  (Termination  for  Bankruptcy).  Each  Party  may  terminate  a  Co-Development  Target
and/or  Co-Development  Product  by  providing  notice  in  writing  to  the  other  Party  if  in  the
absence  of  Commercially  Reasonable  Efforts  or  any  force  majeure  event  such  other  Party
suspends or otherwise fails to conduct any Development activities for a corresponding Research
Program or Co-Development Product for twelve (12) consecutive months or more during the

Term,  such  notice  to  take  effect  with  respect  to  such  Co-Development  Target  and/or  Co-
Development  Product  sixty  (60)  calendar  days  from  the  other  Party’s  receipt  of  such  notice.
Additionally,  each  Party  may  terminate  a  Co-Development  Target  and/or  Co-Development
Product by providing notice in writing to the other Party if such other Party has first informed
such  Party  (e.g.,  at  a  committee  meeting  or  otherwise)  that  such  other  Party  will  not  be
participating  further  in  the  joint  funding  and/or  advancement  of  a  Co-Development  Target
and/or  Co-Development  Product,  such  notice  to  take  effect  with  respect  to  such  Co-
Development Produce and/or Co-Development Product immediately upon receipt.

11.5

Effects  of  Termination.    All  of  the  following  effects  of  termination  are  in
addition to the other rights and remedies that may be available to either of the Parties under this
Agreement  and  shall  not  be  construed  to  limit  any  such  rights  or  remedies.  In  the  event  this
Agreement  is  not  terminated  in  its  entirety,  but  rather  is  terminated  on  a  Co-Development
Target-by-Co-Development  Target  basis  (each  such  terminated  Co-Development  Target,  a
“Terminated Target”)  and/or  Product-by-Product  and/or  country-by-country  basis  with  respect
to  one  or  more  Products  (each  such  terminated  Product,  a  “Terminated  Product”),  then,
notwithstanding  anything  to  the  contrary  contained  in  Section  11.5(a),  the  consequences  of
termination  described  under  this  Section  11.5  shall  only  apply  to  the  Terminated  Target  or
Terminated Product, as the case may be, and this Agreement shall remain in full force and effect
in accordance with its terms with respect to all Products and all other Co-Development Targets
other than the Terminated Targets or Terminated Products, in all countries of the Territory.

(a)

Consequences  of  Termination  by  LCB  or  NextCure.    In  the  event  of
termination  of  this  Agreement  with  respect  to  any  Research  Program  Target  and/or  Co-
Development Target, Product and/or in its entirety by either Party:

(i)

Without  limiting  the  effect  that  such  termination  shall  have  on
any provisions of this Agreement, other than those provisions that this Agreement
expressly  provides  shall  survive  such  termination  and  subject  to  this  Section
11.5(a),  all  rights  and  licenses  granted  herein  to  either  Party  shall  terminate,  and
the Parties, except to the extent a Party is a Sole Developing Party for a particular
Terminated  Product  or  Terminated  Target,  shall  cease  any  and  all  Development,
Manufacturing,  and  commercialization  activities  with  respect  to  the  Terminated
Targets and/or Terminated Products in the Terminated Countries, as the case may
be, as soon as is reasonably practicable under Applicable Law; provided that such
licenses shall continue as necessary for the Parties to complete the orderly wind-
down  of  their  activities  under  this  Agreement  (including  to  enable  an  orderly
transition of materials, activities and responsibilities to a Sole Developing Party as
applicable)  in  accordance  with  Applicable  Law  and  as  otherwise  required  in
accordance with Section 11.5(a)(i);  

(ii)

Except  as  set  forth  in  Section  11.5(a)(iv)  below,  all  payment
obligations hereunder shall terminate, other than those that are accrued and unpaid
as of the effective date of such termination;

(iii)

All  exclusivity  obligations  hereunder  shall  terminate  with

respect to such Terminated Target or Terminated Products.

(iv)

After termination of the Agreement or any Research Programs
generated  under  the  Collaboration  under  Section  11.4  the  terminating  Party  may
choose to continue to Develop the Product or any Research Programs on its own
exclusively (such Party continuing Development thereafter being deemed a “Sole
Developing  Party”  with  respect  to  the  so-continued  Product  and/or  Research
Targets,  and  the  other  Party  thereafter  being  deemed  a  “Non-developing  Party”
with respect to such Product and/or Research Target). The Non-developing Party
shall  grant,  and  hereby  grants,  to  the  Sole  Developing  Party  in  each  case  an
exclusive license under its respective Patents and Know How (including its joint
share  of  rights  in  any  Research  Program  Technology)  that  are  necessary  or
reasonably useful to Develop, Manufacture, and Exploit the so-continued Product
and/or Research Target in the Field in the Territory (“Reversion Technology”)  in
accord  with  this  Section  11.5.  The  Non-developing  Party  shall  provide  access  to
know-how,  documentation,  materials  and  technology  transfer  with  respect  to  the
Reversion  Technology  to  support  development  of  such  Product  and  Research
Programs to the Sole Developing Party. In such cases, the Sole Developing Party
shall  pay  development  and  commercial  milestone  and  royalty  payments  to  the
Non-developing  Party  for  each  Research  Program,  including  the  B7-H4  ADC
Program,  as  specified  in  Exhibit  B.   The  Sole  Developing  Party  shall  provide  to
the Non-developing Party a report detailing the Sole Developing Party's material
efforts  and  progress  with  respect  to  the  Research  Program  and  the  so-continued
Products within sixty (60) days after January 1 of each Calendar Year. Each such
report  shall  describe,  among  other  matters,  those:  (A)  material  Development
activities initiated, currently in progress and completed during the Calendar Year,
and  (B)  material  Development  activities  planned  to  be  initiated  during  the  next
Calendar Year. Each Sole Developing Party will retain licenses granted under this
Section  11.5(a)(iv)  under  the  Reversion  Technology  from  the  Non-Developing
Party  as  reasonably  necessary  to  Develop,  Manufacture  and  Exploit  those
respective Products and Research Programs for so long as such Party continues to
Develop and Exploit such Products and Research Programs. Notwithstanding the
foregoing,  in  the  absence  of  Commercially  Reasonable  Efforts  or  any  force
majeure event, if the Sole Developing Party suspends or otherwise fails to conduct
any Development activities for a Research Program for twelve (12) consecutive

months or more, the Non-developing Party may terminate the Agreement and the
exclusive license granted in accordance with this Section 11.5(a)(iv) with a written
notice, with such notice to take effect with respect to such Research Program sixty
(60) calendar days from the Sole Developing Party's receipt of such notice.

(v)

For clarity, if a Research Program is terminated, this Agreement
shall continue to remain effective, unless all Research Programs generated under
the Agreement including all Co-Development Products are terminated and all Sole
Developing Parties cease to Develop, commercialize, and/or otherwise Exploit any
Terminated Targets and/or Terminated Products.

(vi)

Technology  Transfer  and  Inventory.  To  permit  the  Sole
Developing  Party  to  pursue  its  continuing  rights  under  Section  11.5(a)(iv)  and
upon  reasonable  request,  the  Non-developing  Party  shall  provide  to  such  Sole
Developing Party reasonable technology transfer assistance, including reasonably
requested documents or other information that the Parties have created concerning
the  Terminated  Targets  and  Terminated  Products  and  concerning  processes  or
Know  How  that  otherwise  are  reasonably  necessary  to  support  manufacturing  or
testing  of  relevant  Terminated  Targets  and  Terminated  Products.  Further,  upon
termination a Party may request to procure any unsold or unused inventory stocks
of  the  Co-Development  Products  from  the  other  Party.  Such  stocks  shall  be
provided at a transfer price to be negotiated by the Parties, with the proviso that
such price shall take into account any prior cost sharing between the Parties with
regard to the inventory prior to such termination.

(vii)

Return of Confidential Information. Subject to the rights of a
Sole  Developing  Party  granted  in  subparagraphs  (iv)  and  (vi)  above,  upon  any
termination of this Agreement, the Receiving Party shall return to the Disclosing
Party  or  otherwise  destroy  any  documents  or  other  materials  that  contain  the
Disclosing Party’s Confidential Information in relation to the Terminated Product
or  Terminated  Target,  including  all  copies  made,  and  make  no  further  use  or
disclosure  thereof.  The  Receiving  Party  may,  however,  keep  copies  of  the
Confidential Information of the Disclosing Party in its legal adviser’s files and in
internal IT backup systems solely for the purpose of enabling it to comply with the
provisions of this Agreement.

11.6

Remedies.  Notwithstanding anything to the contrary in this Agreement, except
as  otherwise  set  forth  in  this  Agreement,  termination  or  expiration  of  this  Agreement  shall  not
relieve  the  Parties  of  any  liability  or  obligation  which  accrued  hereunder  prior  to  the  effective
date of such termination or expiration, nor prejudice either Party’s right to obtain performance of
any obligation.  Each Party shall be free, pursuant to Section 11, to seek, without restriction

as to the number of times it may seek, damages, expenses and remedies that may be available to
it under Applicable Law or in equity and shall be entitled to offset the amount of any damages
and expenses obtained against the other Party in a final determination under Article 12, against
any amounts otherwise due to such other Party under this Agreement.

11.7

Survival.    In  the  event  of  termination  of  this  Agreement,  in  addition  to  the
provisions of this Agreement that continue in effect in accordance with their terms, the following
provisions of this Agreement shall survive: Articles 1, 7, 8, 9, 10, 11, 12 and 14 and Section 6.1
with respect to any Products being Developed and/or Exploited by a Sole Developing Party.

ARTICLE 12
Dispute Resolution

12.1

Disputes.  Any  dispute  between  the  Parties  arising  out  of  or  relating  to  the
Agreement,  including  any  non-contractual  disputes  or  claims  or  any  question  regarding  its
existence,  validity,  or  termination,  shall  be  resolved  by  binding  arbitration.    The  proceedings
shall be initiated by the service of a written notice of dispute by a Party on the other Party setting
out  details  of  the  dispute  and  the  reasons  why  the  Party  serving  the  notice  believes  that  the
dispute  has  arisen.  Upon  service  of  such  a  notice,  the  dispute  shall  be  referred  to  the  Senior
Officers  (or  their  respective  delegates),  who  shall  endeavour  to  resolve  the  dispute  amicably
(each acting reasonably and in good faith).

12.2

Arbitration. In the event that a dispute cannot be resolved to the satisfaction of
both Parties within 30 Days of referral to the Senior Officers (or their respective delegates), or if
a Party either fails to participate or to continue to participate in the process referred to in Section
12.1 (Disputes), it shall be finally settled through an arbitration in accordance with the Rules of
Arbitration of the International Chamber of Commerce 2021 in accordance with the Expedited
Procedure Rules irrespective of the amount in dispute. The right and obligation to arbitrate under
this  Section  12.2  (Arbitration)  shall  extend  to  any  claims  by  or  against  the  Parties  and  their
respective Affiliates and any agents, principals, officers, directors, or employees of either of the
Parties or their respective Affiliates. The arbitration tribunal shall be composed of one arbitrator
agreed by the Parties. If the Parties are unable to agree on an arbitrator within 30 Days after the
transmission of the request for arbitration by one of the Parties, then the arbitration tribunal shall
be composed of one arbitrator selected by each Party and one arbitrator selected by the first two
arbitrators. The arbitral award shall be final and binding. A judgment on any award rendered by
the  arbitrator(s)  may  be  entered  in  any  court  having  jurisdiction  thereof.  The  legal  seat  of
arbitration shall be Southern District of New York, and the language of the arbitral proceedings
shall  be  English.  Either  party  may  apply  to  the  arbitrator(s)  seeking  injunctive  relief  until  the
arbitration award is rendered or the controversy is otherwise resolved. The arbitrators shall have
the authority to grant specific performance, issue summary judgments or grant other depository
motions and, if either Party engages attorneys to enforce any rights arising out of or

 
relating  to  the  Agreement,  then  the  prevailing  Party  shall  be  entitled  to  recover  its  reasonable
fees  and  costs  expended  in  engaging  such  attorneys.  The  Parties  agree  that  all  information,
including the result, of such arbitration and the fact that arbitration takes place shall be regarded
as Confidential Information of both Parties and shall not be disclosed without the written consent
of the other Party.

ARTICLE 13
Indemnification

13.1

Indemnification by NextCure.   NextCure hereby agrees to defend, indemnify
and  hold  harmless  LCB  and  its  Affiliates  and  each  of  their  respective  directors,  officers,
employees, agents and representatives (each, a “LCB Indemnitee”) from and against any and all
claims,  suits,  actions,  demands,  liabilities,  expenses  and/or  losses,  including  reasonable  legal
expenses  and  attorneys’  fees  (collectively,  the  “Losses”)  to  which  any  LCB  Indemnitee  may
become subject as a result of any claim, demand, action or other proceeding by any Third Party
(each, a “Claim”) to the extent such Losses arise directly or indirectly out of: (a)  the breach by
NextCure  of  any  warranty,  representation,  covenant  or  agreement  made  by  NextCure  in  this
Agreement;  and  (b)  the  negligence,  gross  negligence,  illegal  conduct,  or  wilful  misconduct
(including to the extent such negligence, gross negligence, illegal conduct or wilful misconduct
gives rise to product liability Claims under any legal theory) of NextCure or its Affiliate or its
licensee  (other  than  LCB  or  its  Affiliate  or  sublicensee),  or  any  officer,  director,  employee,
agent or representative thereof; except, with respect to each of subsections (a) and (b) above, to
the extent such Losses arise directly or indirectly from the negligence, gross negligence, illegal
conduct or wilful misconduct  of  any  LCB  Indemnitee  or  the  breach  by  LCB  of any warranty,
representation, covenant or agreement made by LCB in this Agreement.

13.2

Indemnification by LCB.  LCB  hereby  agrees  to  defend,  indemnify  and  hold
harmless NextCure and its Affiliates and each of their respective directors, officers, employees,
agents  and  representatives  (each,  a  “NextCure  Indemnitee”)  from  and  against  any  and  all
Losses to which any NextCure Indemnitee may become subject as a result of any Claim to the
extent such Losses arise directly or indirectly out of: (a)  the breach by LCB of any warranty,
representation, covenant or agreement made by LCB in this Agreement; and (b) the negligence,
gross  negligence,  illegal  conduct,  or  wilful  misconduct  (including  to  the  extent  such
negligence, gross negligence, illegal conduct or wilful misconduct gives rise to product liability
Claims under any legal theory) of LCB or its Affiliate or its licensee (other than NextCure or
its Affiliate or sublicensee), or any officer, director, employee, agent or representative thereof;
except, with respect to each of subsections (a) and (b) above, to the extent such Losses arise
directly  or  indirectly  from  the  negligence,  gross  negligence,  illegal  conduct  or  wilful
misconduct  of  any  NextCure  Indemnitee  or  the  breach  by  NextCure  of  any  warranty,
representation, covenant or agreement made by NextCure in this Agreement.

 
13.3

Indemnification by Sole Commercializing Party.  Both Parties, to the extent
they are a Sole Developing Party commercializing a respective Product in accord with Section
7.2(a) and Section 11.5(a)(iv), hereby agrees to defend, indemnify and hold harmless the non-
commercializing  Party  and  its  Affiliates,  and  each  of  their  respective  directors,  officers,
employees, agents and representatives (each, a “Non-Developing Indemnitee”) from and against
any and all Losses to which any Non-Developing Indemnitee may become subject to as a result
of any Claim the extent such Losses arise directly or indirectly out of: (a) the practice by the
Sole Developing Party or its Affiliate or their respective sublicensee of any license granted to it
under  Section  11.5(a)(iv)  with  respect  to  the  Research  Program  Technology  and/or  the
technology of the non-commercializing Party; and (b) the manufacture, use, handling, storage,
sale,  marketing,  export,  import,  other  disposition  or  Exploitation  of  any  Product  by  the  Sole
Developing  Party  or  its  Affiliate  or  their  respective  sublicensee,  including  any  Product
Liabilities related to the use or Exploitation of the Product.

13.4

Indemnification Procedures.

(a)

Notice.  Promptly after a Non-Developing Indemnitee, LCB Indemnitee or a
NextCure Indemnitee (each, an “Indemnitee”) receives notice of a pending or threatened Claim,
such Indemnitee shall give written notice of the Claim to the Party from whom the Indemnitee
is entitled to receive indemnification pursuant to Sections 13.1 through 13.3, as applicable (the
“Indemnifying Party”).  However, an Indemnitee’s delay in providing or failure to provide such
notice will not relieve the Indemnifying Party of its indemnification obligations, except to the
extent it can demonstrate prejudice due to the delay or lack of notice.

(b)

Defense.  Upon receipt of notice under Section 13.4 from the Indemnitee, the
Indemnifying Party shall have the duty to either compromise or defend, at its own expense and
by counsel (reasonably satisfactory to Indemnitee), such Claim.  The Indemnifying Party shall
promptly  (and  in  any  event  not  more  than  twenty  (20)  days  after  receipt  of  the  Indemnitee’s
original  notice)  notify  the  Indemnitee  in  writing  that  it  acknowledges  its  obligation  (which
acknowledgement  shall  not  be  deemed  or  construed  as  an  admission  of  liability,  either  under
this ARTICLE 13 or otherwise) to indemnify the Indemnitee with respect to the Claim pursuant
to this Section 13.4 and of its intention either to compromise or defend such Claim.  Once the
Indemnifying Party gives such notice to the Indemnitee, the Indemnifying Party is not liable to
the Indemnitee for the fees of other counsel or any other expenses subsequently incurred by the
Indemnitee in connection with such defense, other than the Indemnitee’s reasonable expenses of
investigation and cooperation.  However, the Indemnitee shall have the right to employ separate
counsel and to control the defense of a Claim at its own expense.

(c)

Cooperation.    The  Indemnitee  shall  cooperate  fully  with  the  Indemnifying
Party  and  its  legal  representatives  in  the  investigation  and  defense  of  any  Claim.    The
Indemnifying Party shall keep the Indemnitee informed on a reasonable and timely basis

as to the status of such Claim (to the extent the Indemnitee is not participating in the defense of
such Claim) and conduct the defense of such Claim in a prudent manner.

(d)

Settlement.    If  an  Indemnifying  Party  assumes  the  defense  of  a  Claim,  no
compromise or settlement of such Claim may be effected by the Indemnifying Party without the
Indemnitee’s  written  consent  (such  consent  not  to  be  unreasonably  withheld,  delayed  or
conditioned).    Notwithstanding  the  foregoing,  the  Indemnitee’s  consent  shall  not  require  of  a
settlement where: (i) there is no finding or admission of any violation of law or any violation of
the  rights  of  any  person  and  no  effect  on  any  other  claims  that  may  be  made  against  the
Indemnitee;  (ii)  the  sole  relief  provided  is  monetary  damages  that  are  paid  in  full  by  the
Indemnifying  Party;  and  (iii)  the  Indemnitee’s  rights  under  this  Agreement  are  not  adversely
affected.  If the Indemnifying Party fails to assume defense of a Claim within a reasonable time,
the Indemnitee may settle such Claim on such terms as it deems appropriate with the consent of
the Indemnifying Party (such consent not to be unreasonably withheld, delayed or conditioned),
and the Indemnifying Party shall be obligated to indemnify the Indemnitee for such settlement
as provided in this ARTICLE 13.

13.5

Insurance.  Each Party shall, at its own expense, procure and maintain during
the Term insurance policy/policies, including product liability insurance where applicable given
the  development  stage  of  the  Co-Development  Product,  adequate  to  cover  its  obligations
hereunder  and  which  are  consistent  with  usual  business  practices  of  prudent  companies
similarly situated.  Such insurance shall not be construed to create a limit of the Party’s liability
with  respect  to  its  indemnification  obligations  under  this  ARTICLE  13.    The  Parties  shall
provide  the  other  Party  with  prompt  written  notice  of  cancellation,  non-renewal  or  material
change in such insurance or self-insurance that could materially adversely affect the rights of the
Parties  hereunder  and  shall  provide  such  notice  within  thirty  (30)  days  after  any  such
cancellation, non-renewal or material change.

Limitation  of  Liability.    EXCEPT  FOR  A  PARTY’S  OBLIGATIONS  SET
13.6
FORTH 
IN  THIS  SECTION  13,  AND  ANY  BREACH  OF  SECTION  10
(CONFIDENTIALITY),  IN  NO  EVENT  WILL  EITHER  PARTY  BE  LIABLE  TO  THE
OTHER  PARTY  (OR  THE  OTHER  PARTY’S  AFFILIATES  OR  SUBLICENSEES)  IN
CONNECTION WITH THIS AGREEMENT FOR LOST REVENUE, LOST PROFITS, LOST
SAVINGS,  LOSS  OF  USE,  DAMAGE  TO  GOODWILL,  OR  ANY  CONSEQUENTIAL,
INCIDENTAL,  SPECIAL,  EXEMPLARY,  PUNITIVE  OR  INDIRECT  DAMAGES  UNDER
ANY THEORY, INCLUDING CONTRACT, NEGLIGENCE, OR STRICT LIABILITY, EVEN
IF  THAT  PARTY  HAS  BEEN  PLACED  ON  NOTICE  OF  THE  POSSIBILITY  OF  SUCH
DAMAGES.

ARTICLE 14
Miscellaneous

 
14.1

Designation  of  Affiliates.  Each  Party  may  discharge  any  obligations  and
exercise  any  rights  hereunder  through  delegation  of  its  obligations  or  rights  to  any  of  its
Affiliates.    Each  Party  hereby  guarantees  the  performance  by  its  Affiliates  of  such  Party’s
obligations under this Agreement and shall cause its Affiliates to comply with the provisions of
this Agreement in connection with such performance.  Any breach by a Party’s Affiliate of any
of such Party’s obligations under this Agreement shall be deemed a breach by such Party, and
the other Party may proceed directly against such Party without any obligation to first proceed
against such Party’s Affiliate.

14.2

Notices.  All notices and other communications given or made pursuant hereto
shall  be  in  writing  and  shall  be  deemed  to  have  been  duly  given  on  the  date  delivered,  if
delivered  personally,  or  on  the  next  Business  Day  after  being  sent  by  reputable  overnight
courier (with delivery tracking provided, signature required and delivery prepaid), in each case,
to  the  parties  at  the  following  addresses,  or  on  the  date  sent  and  confirmed  by  electronic
transmission to the telecopier number specified below or confirmatory return email to the email
address  specified  below  (or  at  such  other  address,  telecopier  number  or  email  address  for  a
party as shall be specified by notice given in accordance with this Section 14.2).

(a)

If to NextCure:

NextCure, Inc.
9000 Virginia Manor Road, Suite 200 
Beltsville, MD, U.S.A.

Attention: CEO

with cc to: legal@nextcure.com

(b)

If to LCB:

LegoChem Biosciences, Inc. 
10, Gukjegwahak 10-ro, Yuseong-gu,
Daejeon, 34002, Republic of Korea

Attention:  Jeiwook Chae, Chief Business Development Officer
Email:

chae@legochembio.com

CC to: Business Development Manager
Email: bd@legochembio.com

14.3

Force  Majeure.    Both  Parties  shall  be  excused  from  the  performance  of  their
obligations  under  this  Agreement  to  the  extent  that  such  performance  is  prevented  by  Force
Majeure and the nonperforming Party promptly provides notice of the prevention to the other

 
 
 
 
 
 
Party.    Such  excuse  shall  be  continued  so  long  as  the  condition  constituting  Force  Majeure
continues  and  the  nonperforming  Party  takes  reasonable  efforts  to  remove  the  condition.
  Notwithstanding  the  foregoing,  a  Party  shall  not  be  excused  from  making  payments  owed
hereunder  because  of  a  Force  Majeure  affecting  such  Party.    If  a  Force  Majeure  persists  for
more than ninety (90) days, then the Parties shall discuss in good faith the modification of the
Parties’ obligations under this Agreement in order to mitigate the delays caused by such Force
Majeure.

14.4

Assignment.    

(a)

Subject  to  Section  14.4(b),  neither  Party  may  assign,  mortgage,  charge,  or
otherwise  transfer  any  rights  or  obligations  under  the  Agreement  without  the  prior  written
consent of the other Party.

(b)

With  written  notice  to  the  other  Party  before  such  assignment  or  transfer,
either  Party  may  assign  and  transfer  all  its  rights  and  obligations  under  the  Agreement  to  an
Affiliate. A Party may assign this Agreement with notice to the other Party to (i) a Third Party
in  case  of  a  sale  of  substantially  all  of  such  Party’s  assets  relating  to  one  or  more  Co-
Development  Products  and/or  Co-Development  Targets  to  such  Third  Party,  or  (iii)  to  a
successor in interest in the case of a merger, acquisition, or other change of control transaction.
In all cases, the assignee must undertake in writing to the non-assigning Party to be bound by
and perform the obligations of the assignor under the Agreement. Any assignment or attempted
assignment by either Party in violation of the terms of this Section 14.4 (Assignment) will be
null, void and of no legal effect.

14.5

Severability.  If any one or more of the provisions of this Agreement is held to
be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be
or is taken, the provision shall be considered severed from this Agreement and shall not serve to
invalidate any remaining provisions hereof.  The Parties shall make a good faith effort to replace
any invalid or unenforceable provision with a valid and enforceable one such that the objectives
contemplated by the Parties when entering this Agreement may be realized.

14.6

English  Language.    This  Agreement  shall  be  written  and  executed  in,  and  all
other  communications  under  or  in  connection  with  this  Agreement,  shall  be  in  the  English
language.  Any translation into any other language shall not be an official version thereof, and in
the event of any conflict in interpretation between the English version and such translation, the
English version shall control.

14.7

Waiver  and  Non-Exclusion  of  Remedies.    Any  term  or  condition  of  this
Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly executed by or on

behalf of the Party waiving such term or condition.  The waiver by either Party hereto of any
right hereunder or of the failure to perform or of a breach by the other Party shall not be deemed
a  waiver  of  any  other  right  hereunder  or  of  any  other  breach  or  failure  by  such  other  Party
whether  of  a  similar  nature  or  otherwise.    The  rights  and  remedies  provided  herein  are
cumulative  and  do  not  exclude  any  other  right  or  remedy  provided  by  Applicable  Law  or
otherwise available except as expressly set forth herein.

14.8

Further Assurance.  Each Party shall duly execute and deliver, or cause to be
duly executed and delivered, such further instruments and do and cause to be done such further
acts  and  things,  including  the  filing  of  such  assignments,  agreements,  documents,  and
instruments, as may be necessary or as the other Party may reasonably request in connection
with this Agreement or to carry out more effectively the provisions and purposes hereof.

14.9

Relationship of the Parties.  It is expressly agreed that this Agreement does not
create or constitute a partnership, joint venture or agency, including for tax purposes.  Neither
LCB  nor  NextCure  shall  have  the  authority  to  make  any  statements,  representations  or
commitments of any kind, or to take any action which shall be binding on the other, without the
prior  written  consent  of  the  other  Party  to  do  so.   All  persons  employed  by  a  Party  shall  be
employees of that Party and not of the other Party and all expenses and obligations incurred by
reason of such employment shall be for the account and expense of such Party.

14.10 Construction.  Except where the context otherwise requires, wherever used, the
singular shall include the plural, the plural shall include the singular, and the use of any gender
shall be applicable to all genders.  Whenever this Agreement refers to a number of days without
using a term otherwise defined herein, such number refers to calendar days.  The captions of this
Agreement are for the convenience of reference only and in no way define, describe, extend, or
limit  the  scope  or  intent  of  this  Agreement  or  the  intent  of  any  provision  contained  in  this
Agreement.  The terms “including,” “include,” “includes” or “for example” shall not limit the
generality  of  any  description  preceding  such  term  and  as  used  herein  shall  have  the  same
meaning as “including, but not limited to” or “including, without limitation.”  The language of
this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule
of strict construction shall be applied against either Party hereto.  Each Party represents that it
has been represented by legal counsel in connection with this Agreement and acknowledges that
it has participated in the drafting hereof.  In interpreting and applying the terms and provisions
of  this  Agreement,  the  Parties  agree  that  no  presumption  will  apply  against  the  Party  which
drafted such terms and Provision.

14.11 Governing Laws.  This Agreement was prepared in the English language, which
language  shall  govern  the  interpretation  of,  and  any  dispute  regarding,  the  terms  of  this
Agreement.  This Agreement and all disputes arising out of or related to this Agreement or any
breach hereof shall be governed by and construed under the laws of the State of New York,

without  giving  effect  to  any  choice  of  law  principles  that  would  require  the  application  of  the
laws of a different state.

14.12

Entire  Agreement.    This  Agreement,  including  the  Exhibits  hereto,  sets  forth
the  complete,  final  and  exclusive  agreement  and  all  the  covenants,  promises,  agreements,
warranties,  representations,  conditions  and  understandings  between  the  Parties  hereto  with
respect  to  the  subject  matter  hereof  and  supersedes,  as  of  the  Effective  Date,  all  prior  and
contemporaneous agreements and understandings between the Parties with respect to the subject
matter  hereof.    There  are  no  covenants,  promises,  agreements,  warranties,  representations,
conditions or understandings, either oral or written, between the Parties other than as are set forth
herein and therein.  No subsequent alteration, amendment, change or addition to this Agreement
shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of
each Party.  In the event of any inconsistency between the body of this Agreement and either any
Exhibits  to  this  Agreement  or  any  subsequent  agreements  ancillary  to  this  Agreement,  unless
otherwise  express  stated  to  the  contrary  in  such  Exhibit  or  ancillary  agreement,  the  terms
contained in this Agreement shall control.

14.13

Headings. The  headings  of  each  Section  and  Sections  in  this  Agreement  have
been inserted for convenience of reference only and are not intended to limit or expand on the
meaning of the language contained in the particular Section or Sections.  

14.14

Counterparts.  This Agreement may be executed and delivered in counterparts
signed  with  wet  ink  or  electronically  (including  via  .pdf  or  other  electronically  transmitted
signature  platforms)  and  such  signatures  shall  be  deemed  to  bind  each  Party  hereto  as  if  they
were the original signatures on the same instrument.

SIGNATURE PAGE FOLLOWS

This Agreement has been entered into on the Effective Date.

Y

For and on behalf of

LegoChem Biosciences, Inc.

For and on behalf of
NextCure, Inc.

/s/   Yong-Zu Kim
Signed

/s/  Michael Richman
Signed

Name: Yong-Zu Kim

Name: Michael Richman

Title: CEO & President

Title: President & CEO

Date: Nov. 10, 2022

Date: Nov. 9, 2022

Exhibit A

Initial Research Plan for First Research Program Target

[***]

Exhibit B

Financial Terms if either Party terminates the Agreement for any Product or
Research Program Target

1st occurrence
[***]
[***]
1st indication
[***]
[***]
[***]

2nd occurrence
[***]
[***]
2nd indication
[***]
[***]
[***]

Terms
Development milestones

Payments

1st dose in Phase 2
1st dose in Phase 3

US approval
European approval
Japan approval
[***]

[***]

Regulatory milestones

Commercial milestones on
worldwide annual net sales
Royalties on worldwide
annual net sales by the
Sole Developing Party,
Sublicensee, assignee,
transferee, acquirer or their
respective Affiliate

Each of the Development and Regulatory milestones above will be payable once per Product.
However, in the event there is more than one Product for any given Research Program Target, the
milestone would be paid only once and for the first Product based on the Research Program Target
to achieve the milestone.

Commercial milestones are payable once for each Product and determined using cumulative annual 
Net Sales for all Products for the respective Research Program Target.  

Royalty tiers are determined using Net Sales on a Product-by-Product Basis.

Net Sales shall be determined in accordance with generally accepted accounting principles in the
United States.

   
Exhibit C

Partial Projected Co-Commercialization Budget for First Research Program Target

[***]

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

Exhibit 23.1

(1) Registration Statement (Form S-8 No. 333-231438) pertaining to the NextCure, Inc. 2019

Employee Stock Purchase Plan,

(2) Registration Statement (Form S-8 No. 333-231436) pertaining to the NextCure, Inc. 2015 Omnibus

Incentive Plan and the NextCure, Inc. 2019 Omnibus Incentive Plan,

(3) Registration Statement (Form S-8 No. 333-260776) pertaining to the NextCure, Inc. 2019

Employee Stock Purchase Plan,

(4) Registration Statement (Form S-8 No. 333-260779) pertaining to the NextCure, Inc. 2019 Omnibus

Incentive Plan,

(5) Registration Statement (Form S-8 No. 333-273735) of NextCure, Inc.,

(6) Registration Statement (Form S-3 No. 333-241706) of NextCure, Inc., and

(7) Registration Statement (Form S-3 No. 333-273723) of NextCure, Inc.

of our report dated March 21, 2024, with respect to the financial statements of NextCure, Inc. included in
this Annual Report (Form 10-K) of NextCure, Inc. for the year ended December 31, 2023.

/s/ Ernst & Young LLP

Baltimore, Maryland
March 21, 2024

Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael Richman, certify that:

1.    I have reviewed this annual report on Form 10-K of NextCure, 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;

(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: March 21, 2024

/s/ Michael Richman
Name: Michael Richman
Title:

President and Chief Executive Officer

Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Steven P. Cobourn, certify that:

1.    I have reviewed this annual report on Form 10-K of NextCure, Inc.;

EXHIBIT 31.2

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: March 21, 2024

/s/ Steven P. Cobourn
Name: Steven P. Cobourn
Title:

Chief Financial 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 NextCure, Inc. (the “Company”) for the year ended December 31, 2023,

as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned each hereby certifies pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge, on
the date hereof:

(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.

Dated: March 21, 2024

Dated: March 21, 2024

/s/ Michael Richman
Name: Michael Richman
Title:

President and Chief Executive Officer

/s/ Steven P. Cobourn
Name: Steven P. Cobourn
Title:

Chief Financial Officer

NextCure, Inc.

POLICY ON RECOUPMENT OF INCENTIVE COMPENSATION

Exhibit 97

Introduction

The Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of
NextCure, Inc. (the “Company”) has adopted this Policy on Recoupment of Incentive Compensation (this
“Policy”), which provides for the recoupment of compensation in certain circumstances in the event of a 
restatement of financial results by the Company.  This Policy shall be interpreted to comply with the 
requirements of U.S. Securities and Exchange Commission (“SEC”) rules and Nasdaq Stock Market
(“Nasdaq”) listing standards implementing Section 954 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and, to the extent this Policy is in any manner
deemed inconsistent with such rules, this Policy shall be treated as retroactively amended to be compliant
with such rules.

Administration

This Policy shall be administered by the Compensation Committee.  Any determinations made by the 
Compensation Committee shall be final and binding on all affected individuals.  The Compensation 
Committee is authorized to interpret and construe this Policy and to make all determinations necessary, 
appropriate or advisable for the administration of this Policy, in all cases consistent with the Dodd-Frank 
Act.  The Board or Compensation Committee may amend this Policy from time to time in its discretion.

Covered Executives

This Policy applies to any current or former “executive officer,” within the meaning of Rule 10D-1 under
the Securities Exchange Act of 1934, as amended, of the Company or a subsidiary of the Company (each
such individual, an “Executive”).  This Policy shall be binding and enforceable against all Executives and 
their beneficiaries, executors, administrators, and other legal representatives.

Recoupment Upon Financial Restatement

If the Company is required to prepare an accounting restatement due to the material noncompliance of the
Company with any financial reporting requirement under the securities laws, including any required
accounting restatement to correct an error in previously issued financial statements that is material to the
previously issued financial statements, or that would result in a material misstatement if the error were
corrected in the current period or left uncorrected in the current period (a “Financial Restatement”), the 
Compensation Committee shall cause the Company to recoup from each Executive, as promptly as 
reasonably possible, any erroneously awarded Incentive-Based Compensation, as defined below.  

No-Fault Recovery

Recoupment under this Policy shall be required regardless of whether the Executive or any other person was 
at fault or responsible for accounting errors that contributed to the need for the Financial Restatement or 
engaged in any misconduct.  

Compensation Subject to Recovery; Enforcement

This Policy applies to all compensation granted, earned or vested based wholly or in part upon the
attainment of any financial reporting measure determined and presented in accordance with the accounting
principles used in preparing the Company’s financial statements, and any measure that is derived wholly or
in part from such measures, whether or not presented within the Company’s financial statements or included
in a filing with the SEC, including stock price and total shareholder return (“TSR”), including but not
limited to performance-based cash, stock, options or other equity-based awards paid or granted to the
Executive (“Incentive-Based Compensation”).  Compensation that is granted, vests or is earned based solely 
upon the occurrence of non-financial events, such as base salary, restricted stock or options with time-based 
vesting, or a bonus awarded solely at the discretion of the Board or Compensation Committee and not based 
on the attainment of any financial measure, is not subject to this Policy. 

In the event of a Financial Restatement, the amount to be recovered will be the excess of (i) the Incentive-
Based Compensation received by the Executive during the Recovery Period (as defined below) based on the 
erroneous data and calculated without regard to any taxes paid or withheld, over (ii) the Incentive-Based 
Compensation that would have been received by the Executive had it been calculated based on the restated 
financial information, as determined by the Compensation Committee.  For purposes of this Policy, 
“Recovery Period” means the three completed fiscal years immediately preceding the date on which the 
Company is required to prepare the Financial Restatement, as determined in accordance with the last 
sentence of this paragraph, or any transition period that results from a change in the Company’s fiscal year 
(as set forth in Section 5608(b)(i)(D) of the Nasdaq Listing Rules).  The date on which the Company is 
required to prepare a Financial Restatement is the earlier to occur of (A) the date the Board or a Board 
committee (or authorized officers of the Company if Board action is not required) concludes, or reasonably 
should have concluded, that the Company is required to prepare a Financial Restatement or (B) the date a 
court, regulator, or other legally authorized body directs the Company to prepare a Financial Restatement.

For Incentive-Based Compensation based on stock price or TSR, where the amount of erroneously awarded
compensation is not subject to mathematical recalculation directly from the information in the Financial
Restatement, then the Compensation Committee shall determine the amount to be recovered based on a
reasonable estimate of the effect of the Financial Restatement on the stock price or TSR upon which the
Incentive-Based Compensation was received and the Company shall document the determination of that
estimate and provide it to the Nasdaq.

Incentive-Based Compensation is considered to have been received by an Executive in the fiscal year during
which the applicable financial reporting measure was attained or purportedly attained, even if the payment
or grant of such Incentive-Based Compensation occurs after the end of that period.

The Company may use any legal or equitable remedies that are available to the Company to recoup any 
erroneously awarded Incentive-Based Compensation, including, without limitation, by collecting from the 
Executive cash payments or shares of Company common stock from or by forfeiting any amounts that the 
Company owes to the Executive.    

No Indemnification

The Company shall not indemnify any Executive or pay or reimburse the premium for any insurance policy
to cover any losses incurred by such Executive under this Policy.

Exceptions

The compensation recouped under this Policy shall not include Incentive-Based Compensation received by
an Executive (i) prior to beginning service as an Executive or (ii) if he or she did not serve as an Executive
at any time during the performance period applicable to the Incentive-Based Compensation in question. The
Compensation Committee (or a majority of independent directors serving on the Board) may determine not
to seek recovery from an Executive in whole or part to the extent it determines in its sole discretion that
such recovery would be impracticable because (A) the direct expense paid to a third party to assist in
enforcing recovery would exceed the recoverable amount (after having made a reasonable attempt to
recover the erroneously awarded Incentive-Based Compensation and providing corresponding
documentation of such attempt to the Nasdaq), (B) recovery would violate the home country law that was
adopted prior to November 28, 2022, as determined by an opinion of counsel licensed in the applicable
jurisdiction that is acceptable to and provided to the Nasdaq, or (C) recovery would likely cause the
Company’s 401(k) plan or any other tax-qualified retirement plan to fail to meet the requirements of Section
401(a)(13) or Section 411(a) of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.

Other Remedies Not Precluded

The exercise by the Compensation Committee of any rights pursuant to this Policy shall be without 
prejudice to any other rights or remedies that the Company, the Board or the Compensation Committee may 
have with respect to any Executive subject to this Policy.  

Effective Date and Applicability

This Policy has been adopted by the Compensation Committee August 30, 2023, and shall apply to any
Incentive-Based Compensation that is received by an Executive on or after October 2, 2023.