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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.
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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
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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.
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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.
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● 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.
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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.
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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%.
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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
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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.
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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.
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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.
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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
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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.
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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
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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
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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.
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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.
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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
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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.
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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
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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
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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
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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
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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
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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,
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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.
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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
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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.
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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
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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.
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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
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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;
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● 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.
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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
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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;
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● 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.
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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
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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
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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;
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● 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;
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● 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
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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
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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.
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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
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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
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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
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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
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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.
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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.
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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.
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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;
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● 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.
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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-
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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.
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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.
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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
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● 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.
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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.
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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;
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● 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.
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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.
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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.
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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.
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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]
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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
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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;
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● 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
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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
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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.
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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.
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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
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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.
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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
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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
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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.
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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.
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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.
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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.
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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
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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.
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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
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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
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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
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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
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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.
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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.
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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.
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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%.
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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.
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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
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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
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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
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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
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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.