UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-K
___________________________________
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-38697
___________________________________
PhaseBio Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware
03-0375697
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1 Great Valley Parkway, Suite 30
Malvern, Pennsylvania 19355
(Address including zip code of principal executive offices)
(610) 981-6500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Title of Class)
Trading Symbol
(Name of exchange on which registered)
Common Stock, par value $0.001 per share
PHAS
The Nasdaq Stock Market, LLC
Securities registered pursuant to section 12(g) of the Act: None
___________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
☐
Accelerated filer
☐
Non-Accelerated Filer
☒
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2021 was approximately $168.9 million based on the closing price
on the Nasdaq Global Market reported for such date. Shares of common stock held by each officer and director and by each person who is known to own 10% or more of the outstanding common
stock have been excluded in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other
purposes.
Class of Common Stock
Outstanding Shares as of March 21, 2022
Common Stock, $0.001 par value
48,690,590
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement, to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, for its 2022 Annual Meeting of Stockholders are
incorporated by reference in Part III of this Form 10-K.
Table of Contents
Page
PART I
Item 1.
Business
3
Item 1A.
Risk Factors
29
Item 1B.
Unresolved Staff Comments
72
Item 2.
Properties
72
Item 3.
Legal Proceedings
72
Item 4.
Mine Safety Disclosures
72
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
73
Item 6.
Reserved
73
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
73
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
87
Item 8.
Financial Statements and Supplementary Data
87
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
87
Item 9A.
Controls and Procedures
87
Item 9B.
Other Information
88
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
89
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
90
Item 11.
Executive Compensation
90
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
90
Item 13.
Certain Relationships and Related Transactions, and Director Independence
90
Item 14.
Principal Accountant Fees and Services
90
PART IV
Item 15.
Exhibit and Financial Statement Schedules
91
Item 16
Form 10-K Summary
104
i
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, or this Annual Report, contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that
involve substantial risks and uncertainties. The forward-looking statements are contained principally in Part I, Item 1. “Business,” Part I, Item 1A. “Risk
Factors,” and Part II, Item 7. “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 the words “may,” “might,” “will,” “could,” “would,” “should,”
“expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “could,” “predict,” “project,” “target,” “potential,” “continue” and “ongoing,”
or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and
unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different
from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-
looking statement contained in this Annual Report, we caution you that these statements are based on a combination of facts and factors currently known
by us and our expectations of the future, about which we cannot be certain. Forward-looking statements include statements about:
•
the timing, progress and results of clinical trials of bentracimab, PB6440 and any other potential product candidates, including
statements regarding the timing of initiation and completion of preclinical studies or clinical 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 of any submission of filings for regulatory approval of bentracimab, PB6440 and any other product candidates and our
ability to obtain and maintain regulatory approvals for bentracimab, PB6440 or any other product candidates for any indication;
•
our expectations regarding the size of the patient populations, market acceptance and opportunity for and clinical utility of our
product candidates, if approved for commercial use;
•
our manufacturing capabilities and strategy, including the scalability and commercial viability of our manufacturing methods and
processes and our ability to maintain agreements with third parties;
•
our expectations regarding the scope of any approved indications for bentracimab and PB6440;
•
our ability to successfully commercialize our product candidates;
•
our ability to leverage our proprietary elastin-like polypeptide technology to identify and develop future product candidates;
•
the potential effects of COVID-19 on our business, operations and clinical development timelines and plans;
•
our ability to continue as a going concern;
•
our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for or ability to obtain additional
financing;
•
our ability to establish or maintain collaborations or strategic relationships;
•
our ability to identify, recruit and retain key personnel;
•
our ability to protect and enforce our intellectual property position for our product candidates and our research and development
programs, and the scope of such protection;
•
our financial performance;
•
our competitive position and the development of and projections relating to our competitors or our industry;
•
the impact of laws and regulations; and
•
our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business
Startups Act of 2012.
You should refer to “Item 1A., Risk Factors” in this Annual Report for a discussion of important factors that may cause our actual results to
differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-
looking statements in this Annual Report will prove to be accurate.
1
Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these
forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our
objectives and plans in any specified time frame, or at all. The forward-looking statements in this Annual Report represent our views as of the date of this
Annual Report. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these
forward-looking statements at some point in the future, we undertake no obligation to publicly update any forward-looking statements, whether as a result
of new information, future events or otherwise, except as required by law. You should, therefore, not rely on these forward-looking statements as
representing our views as of any date subsequent to the date of this Annual Report.
You should read this report and the documents that we reference in this report, completely and with the understanding that our actual future
results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
All brand names or trademarks appearing in this Annual Report are the property of their respective owners. Solely for convenience, the
trademarks and trade names in this Annual Report are referred to without the symbols ® and ™, but such references should not be construed as any
indication that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. Unless the context requires otherwise,
references in this report to “PhaseBio,” the “Company,” “we,” “us,” and “our” refer to PhaseBio Pharmaceuticals, Inc.
Industry and Market Data
We obtained the industry and market data in this Annual Report from our own research as well as from industry and general publications,
surveys and studies conducted by third parties. Industry and general publications, studies and surveys generally state that the information contained therein
has been obtained from sources believed to be reliable. These third parties may, in the future, alter the manner in which they conduct surveys and studies
regarding the markets in which we operate our business. As a result, you should carefully consider the inherent risks and uncertainties associated with the
industry and market data contained in this Annual Report, including those discussed in Part I Item 1A. “Risk Factors.”
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PART I
Item 1. Business.
Overview
We are a clinical-stage biopharmaceutical company focused on the development and commercialization of novel therapies for cardiovascular
diseases. Our lead product candidate, bentracimab (also known as PB2452), is a novel reversal agent for the antiplatelet drug ticagrelor. Based on feedback
from the United States Food and Drug Administration, or FDA, we intend to seek approval of bentracimab in the United States through an accelerated
approval process. Bentracimab has been generally well tolerated in our completed trials, with no drug-related serious adverse events, or SAEs. In our
completed Phase 2a and Phase 2b clinical trials of bentracimab, we observed immediate and complete reversal of ticagrelor’s antiplatelet activity within
five minutes following initiation of infusion and sustained reversal for over 20 hours. We are currently conducting our pivotal Phase 3 REVERSE-IT trial
of bentracimab. In a prespecified interim analysis of 150 enrolled patients (142 of whom enrolled required urgent surgery or an invasive procedure and
eight of whom enrolled with uncontrolled major or life-threatening bleeding), bentracimab achieved the primary endpoint of the trial by immediately and
sustainably reversing the antiplatelet effects of ticagrelor. We are targeting to submit a Biologics License Application, or BLA, to the FDA for bentracimab
in mid-2022, although this timing could be impacted by the continued scope and duration of the COVID-19 pandemic. We are developing bentracimab
pursuant to a co-development agreement, or the SFJ Agreement, with SFJ Pharmaceuticals X, Ltd., an SFJ Pharmaceuticals Group company, or SFJ. Under
the SFJ Agreement, SFJ has agreed to pay us up to $120.0 million to support the clinical development of bentracimab. We are also developing our
preclinical product candidate, PB6440, for treatment-resistant hypertension. Except for the rights that we granted to Alfasigma S.p.A., or Alfasigma, for
bentracimab, we retain worldwide commercial rights to all of our product candidates.
As we advance our clinical programs for bentracimab with site activations and patient enrollment, we remain in close contact with our clinical
research organizations, clinical sites and suppliers to attempt to assess the impacts that COVID-19 and its variants may have on our clinical trials and
current timelines and to consider whether we can implement appropriate mitigating measures to help lessen such impacts. At this time, however, we cannot
fully forecast the scope of impacts that COVID-19 may have on our ability to initiate trial sites, enroll and assess patients, supply study drug and report trial
results.
Bentracimab
Bentracimab is a novel recombinant human monoclonal antibody antigen-binding fragment, or Fab fragment, designed to reverse the
antiplatelet activity of ticagrelor. Ticagrelor is an antiplatelet therapy widely prescribed to reduce the rates of death, heart attack and stroke in patients with
acute coronary syndrome, or ACS, or who have previously experienced a heart attack. The American College of Cardiology, American Heart Association
and European Society of Cardiology guidelines recognize ticagrelor as the preferred antiplatelet therapy for ACS. In 2021, ticagrelor, currently marketed by
AstraZeneca plc, or AstraZeneca, under the brand names Brilinta and Brilique, had worldwide sales of $1.5 billion. Ticagrelor binds to platelets to prevent
them from forming blood clots, which could restrict blood flow to critical organs in these patients, causing heart attacks or strokes. Due to ticagrelor’s
antiplatelet activity, patients on ticagrelor have an elevated risk of spontaneous bleeding. In addition, patients on ticagrelor who need urgent surgery cannot
wait the recommended five days for ticagrelor’s effect to dissipate and are at increased risk of major bleeding during and after surgery. There are currently
no other known reversal agents approved or in clinical development for ticagrelor or any other antiplatelet drugs. In the European Union, an extracorporeal
whole blood purification adsorber device is available that may be useful for non-specific removal of ticagrelor during some cardiac procedures when used
in conjunction with cardiopulmonary bypass. The maker of the device, CytoSorbents Corporation, has also initiated a clinical trial in the U.S. to evaluate
the use of the DrugSorb-ATR antithrombotic removal system during cardiothoracic surgery. Upon approval, bentracimab would be the only therapeutic
agent available for specific reversal of ticagrelor. We believe the availability of bentracimab as a specific reversal agent could expand ticagrelor's use by
mitigating concerns regarding bleeding risk and uniquely position ticagrelor as the only oral antiplatelet drug with a reversal agent. In our Phase 1, Phase
2a and Phase 2b clinical trials, as well as in the interim analysis of our Phase 3 REVERSE-IT trial, bentracimab achieved immediate and complete reversal
of ticagrelor’s antiplatelet activity, with potential customizable duration of reversal based on the dosing regimen, which we believe has the potential to
bring life-saving therapeutic benefit to these patients by increasing the safety of ticagrelor.
In March 2020, we commenced our pivotal REVERSE-IT trial, a global, multi-center, non-randomized, open-label trial in which we plan to
enroll a total of 200 ticagrelor patients with uncontrolled major or life-threatening bleeding or requiring urgent surgery or an invasive procedure. The
primary endpoints for this trial are the reversal of the antiplatelet effects of ticagrelor with intravenous infusion of bentracimab as measured by the
VerifyNow PRUTest biomarker and achievement of clinical hemostasis in enrolled patients. In the interim analysis of 150 enrolled patients (142 of whom
required urgent surgery or an invasive procedure and eight of whom enrolled with uncontrolled major or life-threatening bleeding), which we announced
3
in November 2021, bentracimab achieved the primary endpoint of the trial by immediately and sustainably reversing the antiplatelet effects of ticagrelor.
Bentracimab was generally well tolerated, with five drug-related non-serious adverse events reported in three patients. The cohort of patients requiring
urgent surgery or an invasive procedure has been fully enrolled, and trial sites have shifted focus to enrolling patients with uncontrolled major or life-
threatening bleeding events. We are continuing to attempt to accelerate enrollment of these patients, including by working to increase the number of
enrolling clinical trial sites in the United States, Canada, and the European Union as we believe that a broader site footprint will increase the probability of
enrolling these patients. In addition, our Investigational New Drug application, or IND, for bentracimab was recently approved by the Center for Drug
Evaluation, or CDE, of the China National Medical Products Administration, or NMPA, in August 2021. We expect to begin enrolling patients in China in
the first half of 2022.
The FDA granted Breakthrough Therapy designation for bentracimab in April 2019, and the European Medicines Agency, or the EMA,
granted bentracimab Priority Medicines, or PRIME, designation in February 2020. The FDA previously provided feedback that we could submit a BLA for
potential accelerated approval based on an interim analysis of the first approximately 100 patients treated in our REVERSE-IT trial. For the interim
analysis, the FDA also recommended that approximately 50 patients enrolled have uncontrolled major or life-threatening bleeding and approximately 50
require urgent surgery or an invasive procedure, although the FDA indicated that whether there are an adequate number of patients in either group would be
a review issue.
We intend to submit our BLA for potential accelerated approval based on the interim analysis of the patients in our REVERSE-IT trial, all of
whom were measured against the same VerifyNow PRUTest biomarker and hemostasis endpoints described above. For the interim analysis, we elected to
continue to enroll ticagrelor patients in excess of our prior target of approximately 100 patients to take advantage of robust surgical enrollment and to
mitigate continued uncertainties caused by the COVID-19 pandemic and its potential impact on future patient availability. We are targeting to submit our
BLA in mid-2022, although that timeline could be impacted by the continued scope and duration of the COVID-19 pandemic. Following the submission of
our BLA, the FDA could determine that we did not enroll a sufficient number of patients in the REVERSE-IT trial, including patients with uncontrolled
major or life-threatening bleeding, for all or some of the proposed indications we intend to pursue. Further, the FDA may require us to conduct extensive
post-approval studies or require us to make modifications to our ongoing REVERSE-IT trial after approval and marketing.
We intend to complete the REVERSE-IT trial and establish a post-approval registry in accordance with FDA
requirements. With regard to the 200 total patients needed for full enrollment of the REVERSE-IT trial, our protocol provides
that no more than approximately two-thirds of patients can come from either the uncontrolled major or life-threatening bleeding
population or the patient population requiring urgent surgery or an invasive procedure. The Committee for Medicinal Products
for Human Use, or CHMP, of the EMA has also generally agreed with our proposed clinical development plan for bentracimab.
In June 2021, we entered into a sublicense agreement with Alfasigma, or the Alfasigma Sublicense, pursuant to which we granted Alfasigma
exclusive rights to distribute and sell bentracimab in the European Union and European Economic Area, as well as the United Kingdom, Russia, Ukraine
and certain other countries within the Commonwealth of Independent States, Europe and central Asia, or the Sublicense Territory. Under the Alfasigma
Sublicense, we are responsible for developing bentracimab and securing regulatory approval with the EMA and the Medicines and Healthcare products
Regulatory Agency, or MHRA, including in accordance with the SFJ Agreement, after which any marketing authorizations will be assigned to Alfasigma.
Alfasigma is obligated to obtain and maintain any regulatory approvals necessary to market and sell bentracimab (including pricing approvals and post-
marketing commitments) and is also responsible for securing regulatory approval in countries outside of Europe and the United Kingdom.
PB6440
PB6440 is a highly selective aldosterone synthase inhibitor being developed for treatment-resistant hypertension. In preclinical studies to date,
PB6440 demonstrated dose-dependent aldosterone reduction without a significant increase in 11-deoxycorticosterone or deoxycortisol in both rodent and
primate models. The oral bioavailability and pharmacokinetic profiles observed in these preclinical studies appear suitable for once-daily oral dosing in
humans. To date, no evidence of toxicity has been observed in either in vitro toxicity studies or in animal models, including primates. We initiated
nonclinical IND-enabling studies for PB6440 in 2021 and we plan to submit an IND in the second half of 2022. We are also targeting to begin a first-in-
human trial in late 2022, although our timelines could be impacted by the scope and duration of the COVID-19 pandemic.
Strategy
Our strategy is to identify, develop and commercialize novel therapies for cardiovascular diseases. The key elements of our strategy include:
•
Continue to advance bentracimab through clinical development and regulatory approval. We intend to develop and commercialize
bentracimab as a novel reversal agent for the antiplatelet drug ticagrelor. In
4
March 2020, in collaboration with SFJ, we commenced our pivotal REVERSE-IT trial in patients on ticagrelor with uncontrolled
major or life-threatening bleeding or requiring urgent surgery or an invasive procedure, and recently completed the planned interim
analysis of the first 150 patients enrolled in the REVERSE-IT trial. We intend to continue to enroll patients in the REVERSE-IT trial
in the United States, the European Union and Canada, and we expect to begin enrolling patients in China in the first half of 2022. We
have received Breakthrough Therapy designation and plan to submit a BLA seeking accelerated approval of bentracimab prior to
completion of the REVERSE-IT trial, based on biomarker data from an initial subset of the REVERSE-IT patients, in mid-2022. The
EMA granted bentracimab PRIME designation in February 2020, and the China NMPA granted Breakthrough Therapy designation
in December 2021.
•
Continue the preclinical development of PB6440 for treatment-resistant hypertension. We initiated IND-enabling studies for
PB6440 in 2021, and we plan to submit an IND for PB6440 with the FDA in the second half of 2022. We are also targeting to begin
a first-in-human trial in late 2022, although our timelines could be impacted by the scope and duration of the COVID-19 pandemic.
•
Leverage our ELP technology platform to expand our development pipeline. We believe that our ELP technology enhances
solubility, stability and bioavailability, provides extended drug exposure and creates product candidates that are straightforward to
manufacture and administer. As such, we plan to utilize our platform to identify product candidates for additional indications. We
intend to apply our ELP technology to improve the pharmacokinetics of proteins and peptides with well-characterized therapeutic
activities but suboptimal half-lives, in order to improve their pharmacokinetics, enable their use as pharmaceutical products and
allow for more convenient dosing regimens.
•
Commercialize our product candidates. We have entered into exclusive license agreements with AstraZeneca for bentracimab and
Duke University, or Duke, for our ELP technology, pursuant to which we retain worldwide commercial rights to our product
candidates. In addition, we own all of the assets and intellectual property rights related to PB6440. If approved, we intend to
commercialize bentracimab and PB6440 independently in the United States and through partnerships in international markets. As we
advance towards regulatory approvals for our product candidates, we intend to establish a focused marketing and sales infrastructure.
5
Pipeline
Our preclinical and clinical-stage pipeline is set forth below:
Bentracimab: Antiplatelet Therapy Reversal Agent for Ticagrelor
Our lead product candidate, bentracimab, is a novel ticagrelor reversal agent, which we are developing for the reversal of the antiplatelet
effects of ticagrelor.
We are currently conducting REVERSE-IT, our pivotal Phase 3 clinical trial of bentracimab, in which we plan to enroll 200 ticagrelor patients
with uncontrolled major or life-threatening bleeding or requiring urgent surgery or an invasive procedure. In the interim analysis of 150 enrolled patients,
bentracimab achieved the primary endpoint of the trial by immediately and sustainably reversing the antiplatelet effects of ticagrelor. Bentracimab was
generally well tolerated. We observed similar results in a Phase 2a clinical trial in older subjects and healthy, younger subjects and in a Phase 2b trial of
healthy, older subjects.
Background on Acute Coronary Syndrome
ACS describes a range of conditions associated with sudden reduced blood flow to the heart, including unstable angina and myocardial
infarction, or heart attack. ACS is caused by the inappropriate formation of clots in the coronary arteries. These blood clots are made up primarily of
platelets, small lens-shaped cells found in the blood that normally aggregate at sites of injury to help stop bleeding. According to the Centers for Disease
Control and Prevention, approximately 805,000 Americans have a heart attack every year, and heart attacks are a leading cause of death in the developed
world.
The primary treatment for ACS is the use of antiplatelet drugs to prevent the worsening of existing clots or to reduce the formation of
additional clots. These clots can occur in the heart or in stents that are placed in the blocked coronary artery to keep the blood vessel open or elsewhere in
the body. Without antiplatelet drugs, patients are at a significantly increased risk of recurrent heart attacks, stroke and death. The standard of care for ACS
patients is dual antiplatelet therapy, or DAPT, which is a combination of aspirin and an inhibitor of a specific receptor found on platelets known as the
P2Y receptor. This combination is started after a patient experiences a heart attack or other manifestation of ACS and has been shown to significantly
reduce platelet aggregation and clot formation and reduce the frequency of recurrent heart attacks, stroke and death.
While the antiplatelet drugs used in DAPT have proven effective at improving overall outcomes in ACS patients, their suppression of blood
clotting increases patients’ risk of bleeding. Bleeding events in patients on antiplatelet therapy, which
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can occur spontaneously or as a result of injury or surgery, are classified as minor or major. In the 18,000-patient clinical trial, Platelet Inhibition and
Patient Outcomes, or PLATO, conducted by AstraZeneca, ticagrelor was shown to be superior to the antiplatelet drug clopidogrel, marketed under the
brand name Plavix, in reducing recurrent heart attack, stroke and death in patients with ACS. However, in both treatment groups, approximately 11% to
12% of patients in the trial suffered major bleeding events, and in approximately 6% of patients, these major bleeding events were fatal or life-threatening.
The causes of bleeding varied in the trial population. In approximately 3% of the patients on ticagrelor, the major bleeding events were spontaneous and not
related to any medical procedure, whereas approximately 9% of patients on ticagrelor developed major bleeding that was related to procedures like
coronary artery bypass surgery, or CABG. Although the trial protocol recommended that patients who needed CABG stop taking ticagrelor for one to three
days prior to surgery, nearly half of all ticagrelor patients needed surgery urgently and could not wait the up to three days for ticagrelor’s effect to dissipate
so normal blood clotting could be restored. Overall, up to 80% of patients who underwent CABG surgery in the trial suffered a major or life-threatening
bleeding event related to the surgery, and for those who needed urgent surgery and could not wait three days for the effects of ticagrelor to dissipate,
approximately 50% experienced a fatal or life-threatening bleeding event. While some of this risk was likely associated with patients’ underlying
conditions, the overall bleeding risk is significantly increased by antiplatelet drugs, and the current United States and European prescribing information for
ticagrelor suggests suspension of ticagrelor treatment for five days prior to surgery.
Despite the increased bleeding risk, antiplatelet drugs, along with anticoagulant drugs that are used to prevent clots in veins, represent some of
the most widely prescribed drugs in the United States due to their lifesaving effects. There are currently no other known reversal agents approved or in
clinical development for ticagrelor or any other antiplatelet drugs. In the European Union, an extracorporeal whole blood purification adsorber device is
available that may be useful for non-specific removal of ticagrelor during some cardiac procedures when used in conjunction with cardiopulmonary bypass.
The maker of the device, CytoSorbent Corporation, has also initiated a clinical trial in the U.S. to evaluate the use of the DrugSorb-ATR antithrombotic
removal system during cardiothoracic surgery. Upon approval, bentracimab would be the only therapeutic agent available for specific reversal of ticagrelor.
In the absence of a specific reversal agent, physicians have limited treatment options, and sometimes administer platelet transfusions, which are unproven
in this setting. The ability to quickly reverse the antiplatelet activity of ticagrelor and restore normal clotting would increase its safety, both in instances of
major bleeding as well as in situations where surgical or other medical interventions associated with bleeding are urgently needed.
Background on Antiplatelet Drugs
The three oral antiplatelet P2Y receptor antagonist drugs prescribed in DAPT are clopidogrel, marketed under the brand name Plavix;
prasugrel, marketed under the brand name Effient; and ticagrelor, marketed under the brand names Brilinta and Brilique. Unlike clopidogrel and prasugrel
that permanently bind to and inhibit the target receptors on platelets, ticagrelor binds to the P2Y receptor in a transient manner, quickly cycling on and off
the receptor. We believe this transient binding of ticagrelor presents a unique opportunity to develop a specific reversal agent for ticagrelor, whereas the
permanent binding of the other drugs to the receptor precludes a reversal agent from being developed.
We consider ticagrelor to be the best-in-class P2Y antiplatelet agent because it has demonstrated a superior benefit-risk profile compared to
other products in the P2Y class. In 2020, ticagrelor had worldwide sales of $1.6 billion. Ticagrelor has achieved this level of market share despite the
availability of generic versions of clopidogrel and prasugrel. We believe ticagrelor growth is being driven in part by treatment guidelines from the
American College of Cardiology, American Heart Association and the European Society of Cardiology that recognize ticagrelor as the preferred antiplatelet
treatment for ACS. We believe that the availability of a reversal agent could further drive the use of ticagrelor by making it the only reversible oral P2Y
antiplatelet treatment, thereby conferring a possible safety benefit over the other agents. Furthermore, based on the growth of clopidogrel prescriptions after
the introduction of a generic form of that drug, we believe ticagrelor prescriptions could grow significantly after its patents expire in 2024 and generic
competition drives prices down to similar levels as other P2Y antiplatelet therapies.
Our Solution: Bentracimab
Bentracimab is a human Fab fragment that binds to ticagrelor with high affinity and specificity to reverse ticagrelor’s antiplatelet activity. We
believe that the availability of bentracimab may further differentiate ticagrelor from other P2Y receptor antagonists by providing for better clinical
management of the balance between the desired antiplatelet effect and prevention or control of bleeding. We exclusively licensed bentracimab from
MedImmune Limited, or MedImmune, a wholly-owned subsidiary of AstraZeneca.
Bentracimab Background
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Ticagrelor works by binding to the P2Y receptor on platelets, thereby preventing adenosine diphosphate, or ADP, from causing platelet
aggregation. Ticagrelor binds transiently to the P2Y receptor, quickly cycling on and off, and allowing bentracimab to bind to free ticagrelor, thereby
preventing ticagrelor’s inactivation of the receptor and removing ticagrelor from circulation. With ticagrelor removed, ADP can once again activate the
P2Y receptor and induce platelet aggregation. This activity is illustrated below.
Mechanism of action of ticagrelor and its reversal by bentracimab
Bentracimab binds to ticagrelor with an affinity that is approximately 100 times stronger than ticagrelor’s affinity for the P2Y receptor. This
high affinity enables bentracimab to bind to free ticagrelor, resulting in an immediate reversal of ticagrelor’s effect and restoration of platelet activity.
Clinical Development of Bentracimab
Phase 3 REVERSE-IT Clinical Trial
In March 2020, we commenced our pivotal REVERSE-IT trial. We expect to enroll a total of 200 ticagrelor patients with uncontrolled major
or life-threatening bleeding or requiring urgent surgery or an invasive procedure in this global, multi-center, non-randomized, open-label trial and file for an
accelerated approval based upon the results of the interim analysis of the first 150 patients, which we announced in November 2021. The primary endpoints
for this trial are the reversal of the antiplatelet effects of ticagrelor with intravenous infusion of bentracimab as measured by the VerifyNow® PRUTest®
biomarker and achievement of clinical hemostasis in enrolled patients. We are targeting to submit our BLA in mid-2022.
We recently completed the planned interim analysis of the first 150 patients enrolled in the REVERSE-IT trial and
announced the results from this analysis in November 2021. The prespecified interim analysis of 150 enrolled patients (142 of
whom enrolled required urgent surgery or an invasive procedure and eight of whom enrolled with uncontrolled major or life-threatening bleeding)
demonstrated that bentracimab achieved the primary endpoint of the trial by immediately and sustainably reversing the antiplatelet effects of ticagrelor. As
measured by the point-of-care VerifyNow PRUTest platelet function assay, a
135% reduction in platelet inhibition (P<0.001) was observed within five to ten minutes after initiation of bentracimab infusion
and sustained through all timepoints over 24 hours. More than 90% of eligible patients achieved the co-primary endpoint of the
trial, defined as good or excellent hemostasis within 24 hours of initiation of bentracimab therapy (P<0.001). Thrombotic
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events were reported in 5.3% of patients, with none resulting in death or considered by investigators to be related to
bentracimab.
Bentracimab was generally well tolerated, with five non-serious adverse events, reported in three patients,
considered by investigators to be related to bentracimab. The most common adverse events were related to pain associated with
surgical procedures. Four patients died of events considered by investigators to be unrelated to treatment with bentracimab: two
patients from septic shock and two patients from cardiogenic shock. Bentracimab immunogenicity was also measured in the
trial by testing patients for anti-drug antibodies, or ADA, before and after the initiation of bentracimab infusion. Results of the
immunogenicity testing found that 22.6% of patients had pre-existing ADA, 24.3% of patients developed ADA after
bentracimab infusion, and 53.0% of patients had no ADA. The presence of ADA had no apparent effect on ticagrelor reversal
as measured by VerifyNow or on achievement of effective hemostasis.
Phase 2b Clinical Trial
In November 2021, we announced topline data from our Phase 2b bentracimab trial, which is a multi-center, randomized, double-blind,
placebo-controlled trial that is designed to evaluate the safety and efficacy of bentracimab in reversing the antiplatelet effects of ticagrelor in 200 healthy
volunteers who are older and elderly (ages 50 to 80), with 150 subjects receiving bentracimab and 50 subjects receiving placebo, all after pretreatment with
dual antiplatelet therapy composed of ticagrelor and low-dose aspirin. In the Phase 2b bentracimab trial, we observed immediate and complete reversal of
ticagrelor’s antiplatelet activity within five minutes following initiation of infusion and sustained reversal for over 20 hours as measured using the point-of-
care VerifyNow PRUTest biomarker. In addition, treatment with bentracimab had a favorable safety profile, with no drug-related SAEs or thrombotic
events reported in the Phase 2b trial. In our earlier, completed Phase 2a clinical trial of bentracimab, we also observed immediate and complete reversal of
ticagrelor’s antiplatelet activity within five minutes following initiation of infusion and sustained reversal for over 20 hours.
Phase 2a Clinical Trial
In September 2019, we completed a Phase 2a clinical trial of bentracimab in older and elderly subjects dosed with ticagrelor and aspirin and
in healthy, younger subjects on supratherapeutic doses of ticagrelor. We observed a statistically significant reversal of ticagrelor within five minutes of
initiation of bentracimab infusion, which was sustained for over 20 hours. Platelet function was normalized by 15 minutes (30 minutes for the
supratherapeutic ticagrelor-dose cohort) following initiation of bentracimab infusion and remained normal for over 20 hours. Bentracimab was generally
well tolerated, with only minor AEs reported. These results are consistent with results observed in healthy, younger subjects treated with ticagrelor in our
Phase 1 trial. The older and elderly subjects in the Phase 2a trial resemble the patient population most likely to be treated with ticagrelor and to potentially
benefit from bentracimab, if approved.
Phase 1 Clinical Trial
In September 2018, we completed a Phase 1 dose escalation clinical trial of bentracimab, delivered as an intravenous infusion in healthy
subjects pre-dosed with ticagrelor that was designed to identify the target dose, determine proof of concept and evaluate the safety and tolerability of
bentracimab. In the trial, we observed that bentracimab immediately and completely reversed the antiplatelet effects of ticagrelor. We conducted this trial
pursuant to an IND that we sponsored and that became effective in March 2018. In March 2019, the full results from this trial of bentracimab were
published in the New England Journal of Medicine.
Our Phase 1 clinical trial enrolled 64 subjects across 10 sequential dose cohorts. Based on pharmacokinetic and pharmacodynamic data from
the early dose cohorts in the trial, we adjusted the intravenous infusion of bentracimab to identify the optimal dose and dosing regimen for future trials and
for the target patient populations. The initial three cohorts of subjects were dosed with 30-minute intravenous infusions of bentracimab alone in order to
assess pharmacokinetics and safety. Subsequent cohorts were pre-dosed with the standard clinical regimen of ticagrelor for two days prior to administration
of bentracimab to enable direct assessment of reversal of ticagrelor’s inhibition of platelet aggregation using platelet function assays. There were no
bentracimab-related AEs or SAEs in any of the dose cohorts.
In cohorts 5 and 6, which were the first cohorts in which potentially pharmacodynamically active doses of bentracimab were administered, we
saw immediate and complete reversal of ticagrelor’s antiplatelet activity based upon restoration of platelet function. In 11 out of 12 subjects, platelet
function was restored at the first measured time point at the end of the 30-minute infusion. The duration of reversal varied from approximately one to four
hours depending upon the dose level and subject, with longer duration at higher doses. In cohort 7, we modified the dosing regimen to deliver a total dose
of 18 g,
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with 3 g delivered in the first five minutes of infusion, followed by 15 g delivered at a constant rate over an additional seven hours and 55 minutes. In
cohort 7, we observed that all subjects achieved complete and sustained restoration of platelet function within two hours after the start of infusion. The
duration of reversal in cohort 7 lasted approximately 16 hours from the start of the infusion as measured by restoration of platelet activity.
In cohorts 8, 9 and 10, the dosing regimen of bentracimab was further refined to achieve both a more rapid onset of reversal and a longer
duration of reversal compared to earlier cohorts. We administered a total dose of 18 g, with the initial 6 g delivered as a bolus in cohorts 8, 9 and 10. The
remaining 12 g was administered after the initial bolus for an additional 12 to 16 hours in cohorts 8, 9 and 10. In each of these cohorts, we observed both
immediate and complete reversal within the first five minutes following initiation of infusion and a sustained duration of reversal of over 20 hours. We
intend to further evaluate the dose and dosing regimens observed in these cohorts in future clinical trials.
Planned BLA Submission
Based on feedback from the FDA, we intend to submit a BLA for potential accelerated approval based on the interim analysis of our
REVERSE-IT trial, which included 142 patients enrolled requiring urgent surgery or an invasive procedure and eight patients enrolled with uncontrolled
major or life-threatening bleeding. To support our plan to seek full approval and consistent with the recommendation of the FDA, we plan to enroll 200
total patients in the REVERSE-IT trial. After we submit our BLA with data from the first 150 patients, we intend to complete the REVERSE-IT trial and
establish a post-approval registry in accordance with FDA requirements. We are targeting to submit our BLA for bentracimab in mid-2022, although this
timing could be impacted by the continued scope and duration of the COVID-19 pandemic. The FDA granted Breakthrough Therapy designation for
bentracimab in April 2019. The EMA granted bentracimab PRIME designation in February 2020 and NMPA of China granted Breakthrough Therapy
designation in December 2021.
PB6440 for Treatment-Resistant Hypertension
PB6440 is a selective aldosterone synthase inhibitor that we are developing as an orally administered treatment for resistant hypertension. The
mineralocorticoid hormone aldosterone is a critical regulator of fluid and electrolyte balance in the body and, as such, can play an important role in the
development of high blood pressure or hypertension. Elevated aldosterone levels are associated with resistant hypertension, congestive heart failure and
chronic kidney disease. Agents that block the action of mineralocorticoids at the receptor level, such as spironolactone, have been shown to lower blood
pressure, including in patients with resistant hypertension. However, use of these agents is limited by adverse side effects. Inhibition of the production of
aldosterone through inhibition of the enzyme responsible for its synthesis, aldosterone synthase (CYP11B2), is an alternative approach to treatment of
hypertension. However, development of aldosterone synthase inhibitors is challenging because of a closely-related enzyme, steroid 11β-hydroxylase
(CYP11B1), which many potential compounds also inhibit. In preclinical studies, PB6440 was observed to be a highly potent and selective inhibitor of
aldosterone synthase and demonstrated a dose-dependent aldosterone reduction without a significant increase in 11-deoxycorticosterone or deoxycortisol in
both rodent and primate models. The oral bioavailability and pharmacokinetic profiles appear suitable for once-daily oral dosing in humans.
We initiated nonclinical IND-enabling studies for PB6440 in 2021, and we plan to submit an IND in the second half of 2022. We are also
targeting to begin a first-in-human trial in late 2022, although our timelines could be impacted by the scope and duration of the COVID-19 pandemic.
ELP Technology
Our proprietary ELP technology is based on recombinant biopolymers called ELPs, which comprise individual subunits or building blocks
derived from a five-amino acid repeat motif found in the human protein elastin. This five-amino acid motif is repeated multiple times to form the ELP
biopolymer. We produce our ELP-based products by engineering E. coli to produce a single protein comprising the active peptide or protein fused to the
ELP biopolymer. This molecule is active as a fusion protein and does not require cleavage or release of the peptide. ELP fusion proteins are produced in the
soluble fraction of E. coli, which allows for ease of scale-up and purification.
Fusion to ELPs significantly improves the stability of peptides and proteins and enables use of natural or minimally altered peptide sequences.
We believe these fusion proteins retain similar potency to the native molecule while being protected from degradation by enzymes in circulation.
Additionally, we have observed that the fusion protein maintains the solubility and long half-life of the ELP, in many cases allowing for long-term liquid
stability, which is important for injectable products.
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ELP fusion proteins can undergo a reversible phase transition, in which ELP fusion proteins aggregate and form a sustained-release depot
under the skin. This phase transition is driven by changes in temperature. At lower temperatures ELP fusion proteins are completely soluble, while at
warmer temperatures the ELP fusion proteins are in a gel-like state. This allows the ELP fusion proteins to be easily handled and administered
subcutaneously using standard, fine gauge needles and syringes. Once the ELP fusion protein is exposed to body heat, it forms a drug depot that slowly
releases soluble ELP fusion protein into circulation. By modifying the amino acid sequence of the individual subunits and by varying its overall length, we
can engineer our ELP fusion proteins to be released on timescales extending to a week or longer.
Product candidates based on our ELP technology, including prior product candidates for which we have ceased development in order to focus
on the development of therapies for cardiovascular diseases, have been evaluated in over 500 patients with no known SAEs considered to be drug-related
and resulting in study drug discontinuation.
Preclinical ELP Programs
We continue to invest in applying our ELP technology to the development of novel product candidates. Our focus is on peptides and proteins
that are scientifically or clinically validated but where a suboptimal half-life, stability and delivery limit their potential therapeutic applications.
Our more advanced ELP preclinical programs include:
•
Glucagon-like peptide-2. Glucagon-like peptide-2, or GLP-2, stimulates growth of intestinal villi, increasing their ability to absorb
nutrients. GLP-2 is a potential treatment for patients with short bowel syndrome, Crohn’s disease or mucositis in patients undergoing
cancer treatment. Teduglutide, currently marketed under the brand name Gattex, is an FDA-approved therapy based on GLP-2 that
requires daily injections. In animal models, our GLP-2-ELP product candidate provided sustained levels of GLP-2, resulting in
greater efficacy than teduglutide with less frequent dosing.
•
C-type natriuretic peptide. C-type natriuretic peptide, or CNP, is a regulator of bone growth and can rescue defects in fibroblast
growth factor 3 that cause achondroplasia resulting in dwarfism. Native CNP has a half-life of less than three minutes, limiting its
use as a direct therapeutic. We are developing our CNP-ELP product candidate to deliver therapeutic levels of CNP with once
weekly subcutaneous injections. In a mouse model, we observed a demonstrated effect on linear growth when our CNP-ELP product
candidate was injected once every four days.
Pemziviptadil (PB1046)
Pemziviptadil (also known as PB1046), a novel, subcutaneously-injected VIP analogue, is a recombinant fusion
protein composed of VIP and our proprietary ELP technology. Pemziviptadil has been administered to nearly 90 patients
with hypertension or a history of cardiac disease in three Phase 1/2 clinical trials conducted in the United States with no SAEs
considered to be drug-related and resulting in study drug discontinuation to date. We previously pursued development of
pemziviptadil for the treatment of pulmonary arterial hypertension, or PAH, but voluntarily ended our Phase 2b trial in
December 2021 due to impacts of the COVID-19 pandemic on manufacturing, associated drug supply and the rate of
enrollment in the trial. After a strategic review, we have decided to stop further development of pemziviptadil in order to
reprioritize resources and capital towards pre-commercialization activities for bentracimab and the advancement of other
pipeline programs, including PB6440 for resistant hypertension.
License, Co-Development and Other Agreements
MedImmune Limited License Agreement
In November 2017, we entered into an exclusive license agreement with MedImmune, a wholly-owned subsidiary of AstraZeneca, or the
MedImmune License. Pursuant to the MedImmune License, MedImmune granted us an exclusive, worldwide license under certain patent rights owned or
controlled by MedImmune to develop and commercialize any products covered by the MedImmune License, or the MedImmune licensed products, for the
treatment, palliation, diagnosis or prevention of any human disorder or condition. The in-licensed patent rights are generally directed to antibodies that bind
to ticagrelor and methods of use and include two issued patents in the United States, three pending patent applications in the United States and 13 pending
foreign applications. The last patent is expected to expire in 2036 without extension. We have the right to sublicense the licensed technology to third parties
subject to certain conditions as specified in the MedImmune License. Under the MedImmune License, we grant to MedImmune a worldwide, non-
exclusive, royalty-free, irrevocable license and
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right of reference solely to exploit any drug product containing ticagrelor or any invention, discovery, development or modification with respect to any drug
product containing ticagrelor.
Under the terms of the MedImmune License, we have paid or are required to pay:
•
an upfront fee of $0.1 million;
•
quarterly fees relating to technical services provided by MedImmune;
•
up to $18.0 million upon the achievement of certain clinical and regulatory milestones;
•
up to $50.0 million upon the achievement of certain commercial milestones; and
•
mid-single digit to low-teen royalty percentages on net sales of MedImmune licensed products, subject to reduction in specified
circumstances.
From the inception of the MedImmune License through December 31, 2021, we have paid $3.6 million under the MedImmune License,
related to third-party product storage costs and a milestone payment.
The MedImmune License requires us to use commercially reasonable efforts to develop, obtain and maintain regulatory approval for and
commercialize the MedImmune licensed products throughout the term of the MedImmune License. We have the first right, but not the obligation, to control
prosecution of the in-licensed patents. In addition, our rights under the MedImmune License are not assignable without the prior written consent of
MedImmune, except to a third-party acquirer by our merger or sale of our stock or assets or to an affiliate of our company.
Unless earlier terminated, the MedImmune License automatically expires on the date on which we no longer owe any royalty payments to
MedImmune under the MedImmune License, which date will occur on the later of (1) the tenth anniversary of the first commercial sale of the MedImmune
licensed products, (2) the expiration of the last in-licensed patent in 2036 and (3) the expiration of regulatory exclusivity under the MedImmune License.
The MedImmune License may be terminated prior to its expiration:
•
by mutual written consent of us and MedImmune;
•
by either party upon the other party’s material breach of the MedImmune License that is not cured within the specified cure period
based on the nature of such breach;
•
by either party in the event of either party’s bankruptcy, insolvency or certain similar occurrences;
•
by MedImmune if we bring any action or proceeding challenging the validity or enforceability of any of the licensed patents;
•
by us, under specified circumstances, if we believe in good faith that there is (1) an issue with respect to the safety or efficacy of
bentracimab or any MedImmune licensed product containing bentracimab or (2) an issue with respect to the commercial viability of
any MedImmune licensed products, in each case subject to dispute resolution by an independent expert; and
•
by us, with respect to a particular country or region, if any product containing ticagrelor is withdrawn by a regulatory authority in
such country or region.
Upon termination of the MedImmune License, we grant to MedImmune an exclusive, royalty-free, sublicensable license under our patent
rights and know-how to use, sell, have sold, offer for sale, develop, make, have made, manufacture, commercialize, have used, import, export, transport,
distribute, promote, market or otherwise dispose certain compounds or products covered by the MedImmune License.
In January 2020, in connection with our entering the SFJ Agreement, we entered into an amendment to the exclusive license agreement
pursuant to which MedImmune consented to a potential assignment of the MedImmune License and transfer of our business related to bentracimab to SFJ
in the event of the occurrence of certain program transfer events, should they ever occur.
Co-Development Agreement for Bentracimab with SFJ Pharmaceuticals
In January 2020, we entered into the SFJ Agreement, pursuant to which SFJ provides us funding to support the global development of
bentracimab as a reversal agent for the antiplatelet drug ticagrelor. Under the SFJ Agreement, SFJ has agreed to pay us up to $120.0 million to support the
clinical development of bentracimab. In addition to the $90.0 million of
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initial funding, we have elected to receive an additional $30.0 million of funding having met specific, pre-defined clinical development milestones for
bentracimab. From the inception of the SFJ Agreement through December 31, 2021, SFJ has provided funding and paid for amounts on our behalf in the
aggregate amount of $91.3 million under the SFJ Agreement. We also expect that SFJ will fund or reimburse an additional $28.7 million of clinical trial
costs and other expenses.
During the term of the SFJ Agreement, we have primary responsibility for clinical development and regulatory activities for bentracimab in
the United States and the European Union, while SFJ has primary responsibility for clinical development and regulatory activities for bentracimab in China
and Japan and provides clinical trial operational support in the European Union. We have agreed to use commercially reasonable efforts to conduct and
complete our REVERSE-IT trial of bentracimab and to file a BLA or its foreign equivalent within specified timelines with each of the FDA and the EMA.
We have formed a joint steering committee with SFJ to oversee and manage the collaboration, including our REVERSE-IT program and the regulatory
process.
Under the terms of the SFJ Agreement, following the FDA approval of a BLA for bentracimab, we will pay SFJ an initial payment of $5.0
million and an additional $325.0 million in the aggregate in seven additional annual payments. If the EMA, or the national regulatory authority in certain
European countries, authorizes a marketing approval for bentracimab, we will pay SFJ an initial payment of $5.0 million and an additional $205.0 million
in the aggregate in seven additional annual payments. If either the Pharmaceuticals and Medical Devices Agency of Japan, or the PMDA, or the NMPA of
China approves a marketing application for bentracimab, we will pay SFJ an initial payment of $1.0 million and then an additional $59.0 million in the
aggregate in eight additional annual payments.
Within 120 days following approval of a BLA, or its equivalent, for bentracimab in one of the jurisdictions described above, we have the
right, at our option, to make a one-time cash payment to SFJ to buy out all or a portion of the future unpaid approval payments for such jurisdiction (i.e.,
the U.S. Approval Payments, EU Approval Payments or Japan/China Approval Payments, as applicable) for a price reflecting a mid-single-digit discount
rate. Within 120 days following a change of control of our company, we or our successor have the right, at its option, to make a one-time cash payment to
SFJ to buy out all or a portion of the future unpaid approval payments in any of the jurisdictions in which a BLA, or its equivalent, for bentracimab was
approved prior to the change of control for a price reflecting a mid-single-digit discount rate, provided that SFJ has not previously assigned the right to
receive such payments to a third party, in which event we or our successor shall not have such right.
Under the SFJ Agreement, we granted SFJ a security interest in all of the assets we own or control that are necessary for the manufacture, use
or sale of bentracimab, or bentracimab Intellectual Property. In connection with the grant of the security interest, we agreed to certain affirmative and
negative covenants, including restrictions on our ability to pay dividends, incur additional debt or enter into licensing transactions with respect to the
bentracimab Intellectual Property. In addition, we agreed that the security interest granted to SFJ will be a first-priority security interest, subject only to the
lien of SVB for our existing indebtedness to SVB.
Upon execution of the SFJ Agreement, we issued to SFJ a ten-year warrant exercisable for 2,200,000 shares of our common stock at an
exercise price per share of $6.50. The warrant is exercisable as follows: (i) 1,100,000 shares may be exercised at any time after the effective date of the SFJ
Agreement, provided that SFJ may not sell such exercised shares until one year after such effective date, and (ii) the remaining 1,100,000 shares may be
exercised at any time at SFJ’s election if the results of our REVERSE-IT trial meet the interim primary endpoint as set forth in the REVERSE-IT trial
protocol.
In the event that (i) we fail to pay any amounts payable to SFJ under the SFJ Agreement within a specified time period, (ii) we are in default
of our obligations, subject to certain exclusions, under the MedImmune License, or (iii) either (a) we determine it is probable that we will be unable to meet
our obligations as they become due within one year after the date that our financial statements for the then-current quarter are issued, or available to be
issued or (b) a “going concern” footnote is included in any of our financial statements, and, in either case ((a) or (b)), we fail to remedy such going concern
condition as specified in the SFJ Agreement, SFJ may elect to have our business related to bentracimab transferred to SFJ. We refer to such events (i), (ii)
or (iii) as the Potential Program Transfer Events. We have multiple quarters in which to remedy the going concern condition, including by restructuring our
costs and operations, raising additional capital in financing or strategic transactions or accepting additional financing from SFJ on the same terms as their
original commitment (which additional financing they have the option, but not obligation, to provide). If our business related to bentracimab is transferred
to SFJ, we will not share in any revenues from the commercialization of bentracimab until SFJ has received a 300% return on its investment in
bentracimab, after which we will be entitled to a mid-single-digit royalty on net sales of bentracimab in the United States and certain European countries,
and after SFJ has received an aggregate 500% return on its investment in bentracimab, we will be entitled to a mid-single-digit royalty on net sales of
bentracimab in the rest of the world. See Risk Factors—"The auditor's opinion on our audited financial statements for the fiscal year ended December 31,
2021 included in this Annual Report on Form 10-K contains an explanatory paragraph relating to our substantial doubt about our ability to continue as a
going concern. Further, under the SFJ Agreement, SFJ may elect to have our business related to bentracimab
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transferred to SFJ if we do not remedy such going concern condition within the periods specified in the SFJ Agreement and our ability to share in any
revenues from the commercialization of bentracimab will be materially and adversely affected. We may be forced to delay
or reduce the scope of our development programs and/or limit or cease our operations if we are unable to obtain additional
funding to support our current operating plan."
The SFJ Agreement expires upon the payment of all approval payments owing to SFJ, unless earlier terminated. The SFJ Agreement may be
terminated by us at will at any time after SFJ has paid or incurred a total of $60.0 million of bentracimab development costs and before receipt of approval
of any BLA (or its equivalent) for bentracimab from the FDA, the EMA, the PMDA or the NMPA. SFJ may terminate the SFJ Agreement (i) upon the
occurrence of a material adverse event, as defined in the SFJ Agreement, (ii) upon a change of control of us, (iii) if (a) we are enjoined from further
developing or commercializing bentracimab in any of the United States, certain European countries, China, Japan or Hong Kong or (b) the future value of
bentracimab is materially adversely affected due to (1) certain third-party patents that would be infringed by the manufacture, use, sale, offer for sale or
import of bentracimab in any of the United States, certain European countries or China, Japan or Hong Kong or (2) invalidity or unenforceability of all
patent rights controlled by us covering bentracimab as a reversal agent for the antiplatelet drug ticagrelor in patients with uncontrolled major or life-
threatening bleeding or requiring urgent surgery or an invasive procedure in any of the United States, certain European countries, Japan, China or Hong
Kong (we refer to each of (a) and (b) as an Adverse Patent Impact), if we do not cure the Adverse Patent Impact within six months of notice from SFJ, or
(iv) if SFJ disagrees with certain decisions made by us as part of the joint steering committee. The SFJ Agreement may be terminated by either party
(i) upon a material breach of the SFJ Agreement by the other party, (ii) if bentracimab fails to receive regulatory approval from at least one of the FDA, the
EMA, the PMDA or the NMPA after completion of the REVERSE-IT trial of bentracimab, submission of BLAs, or their equivalents, to such agencies and
the use of commercially reasonable efforts to obtain approval of such BLAs, or their equivalents, (iii) if the REVERSE-IT trial of bentracimab is completed
or terminated and either (a) the primary endpoint in the REVERSE-IT trial is not achieved or (b) SFJ reasonably determines that the results of the trial do
not support regulatory approval, (iv) upon the bankruptcy of the other party, (v) if the independent data monitoring committee for the REVERSE-IT trial of
bentracimab recommends termination of the trial for safety or health reasons or for futility or the parties mutually agree that a material health or safety
concern exists, or (vi) upon a breach by the other party involving improper payments or a violation of anti-corruption policies, unless such breach can be
cured without having a materially adverse impact on the probability of completing clinical trials of bentracimab or obtaining regulatory approval for
bentracimab.
In certain instances, upon the termination of the SFJ Agreement, we will be obligated to pay SFJ a multiple of the amounts paid or incurred by
SFJ under the SFJ Agreement, including specifically:
•
300% of such amounts (1) in the event that SFJ terminates the SFJ Agreement due to a material uncured breach of the SFJ
Agreement by us or our bankruptcy, (2) if we terminate the SFJ Agreement at will prior to the first regulatory approval of
bentracimab, or (3) if the SFJ Agreement were to be terminated due to a safety concern and such termination either (a) arose from
our gross negligence, or (b) is due to a serious safety issue that was known to us on the date of the SFJ Agreement but the data
demonstrating such serious safety issue were not disclosed to SFJ or publicly known prior to the date of the SFJ Agreement;
•
150% of such amounts if SFJ terminates the SFJ Agreement (1) upon a change of control of us or (2) upon a breach involving
improper payments or a violation of anti-corruption policies by us, unless such breach can be cured without having a materially
adverse impact on the probability of completing clinical trials of bentracimab or obtaining regulatory approval for bentracimab;
•
100% of such amounts in the event of a termination due to an Adverse Patent Impact; and
•
100% of such amounts (plus an amount reflecting interest on such amounts) at an annual rate of 25% in the event of termination by
SFJ due to disagreement with certain decisions made by us as part of the joint steering committee.
In addition, if following termination of the SFJ Agreement we continue to develop bentracimab and obtain approval of a BLA (or its
equivalent) in the United States, the European Union, Japan or China, we will make the applicable approval payments for such jurisdiction to SFJ as if the
SFJ Agreement had not been terminated, less any payments made upon termination, except that if we terminate the SFJ Agreement for SFJ’s failure to
make any payment to us when due, or SFJ terminates the SFJ Agreement due to a material adverse event, as defined in the SFJ Agreement, then our
obligation to make such approval payments would be reduced by 50%.
Duke License Agreement
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In October 2006, we entered into an exclusive license agreement with Duke, which was most recently amended in April 2019, or the Duke
License. Pursuant to the Duke License, Duke granted to us an exclusive, worldwide license under certain patent rights owned or controlled by Duke, and a
non-exclusive, worldwide license under certain know-how of Duke, to develop and commercialize any products or processes covered by the Duke License,
or the Duke licensed products, relating to ELPs. The in-licensed patent rights are generally directed to providing extended exposure for proteins and
peptides administered through subcutaneous injections and include 13 registered patents in the United States, 24 registered patents in foreign jurisdictions,
two pending patent applications in the United States and four pending foreign applications. The last patent is expected to expire in 2030 without extension.
We have the right to sublicense the Duke licensed products to third parties subject to certain conditions specified in the Duke License. In May
2017, certain patent rights under the Duke License reverted to Duke, and Duke subsequently granted to us a non-exclusive license under such patent rights
to develop and commercialize any products or processes involving such patent rights. We also granted back to Duke an exclusive sublicense under certain
patent rights licensed to us under the Duke License and a non-exclusive license under certain patent rights owned or controlled by us, in each case to
exploit compounds developed using our proprietary ELP technology.
Under the terms of the Duke License, we have paid or are required to pay:
•
an upfront fee of $37,000;
•
amendment fees of $0.2 million related to subsequent amendments of the Duke License;
•
additional licensing fees of $0.2 million;
•
up to $2.2 million in clinical and regulatory milestone fees;
•
up to $0.4 million in commercial milestone fees;
•
low single-digit royalty percentages on net sales of Duke licensed products, with minimum aggregate royalty payments of
$0.2 million payable following our achievement of certain commercial milestones; and
•
up to the greater of $0.3 million or a low double-digit percentage of the fees we receive from a third party in consideration of
forming a strategic alliance with respect to certain patent rights covered under the Duke License.
In consideration for license rights granted to us, we initially issued Duke 24,493 shares of our common stock. Until we had reached a certain
stipulated equity milestone, which we reached in October 2007, we were obligated to issue additional shares of common stock to Duke from time to time so
that its aggregate ownership represented 7.5% of our issued and outstanding capital stock.
From the inception of the Duke License through December 31, 2021, we have incurred royalty costs of $0.3 million under the Duke License.
As of May 2017, Duke is required to pay us a percentage of revenue that it receives from granting a license or sublicense with respect to certain products
covered under the Duke License. As of December 31, 2021, Duke has not paid us any of such fees. We also must pay Duke the first $1.0 million of non-
royalty payments we receive from a sublicensee, and thereafter a low double-digit percentage of any additional non-royalty payments we receive.
The Duke License requires us to use commercially reasonable efforts to develop, obtain and maintain regulatory approval for and
commercialize the Duke licensed products according to a particular development schedule throughout the term of the Duke License. We are required to
apply for, prosecute and maintain all United States and foreign patent rights under the Duke License. In addition, our rights under the Duke License are not
assignable without the prior written consent of Duke, except to a third-party acquirer by our merger or sale of our stock or assets, or to an affiliate of our
company.
Unless earlier terminated, the Duke License automatically expires on the date on which all patent rights granted under the Duke License
expire, or upon our bankruptcy, insolvency or certain similar occurrences. The Duke License may be terminated prior to its expiration:
•
by mutual written consent of us and Duke;
•
by us upon three months’ written notice to Duke;
•
by either party upon the other party’s illegal conduct or guilty plea with respect to intentional fraud, willful misconduct or felony;
•
by either party upon the other party’s material breach of the Duke License that is not cured within the specified cure period based on
the nature of such breach; and
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•
by Duke upon our decision to cease commercial development of the patent rights covered by the Duke License for a material period
of time.
Upon termination of the Duke License, we grant to Duke an exclusive, royalty-free, sublicensable license under our patent rights and know-
how to use any intellectual property developed by us in the course of exercising our rights under the Duke License.
Alfasigma Sublicense Agreement
In June 2021, we entered into the Alfasigma Sublicense under which we granted to Alfasigma exclusive rights to develop, use, sell, have sold,
offer for sale and import any product composed of or containing bentracimab, or Licensed Products, in the Sublicense Territory. Under the terms of the
Alfasigma Sublicense, in July 2021, we received a $20.0 million upfront payment from Alfasigma, and we will be eligible to receive up to $35.0 million
upon the achievement of certain pre-revenue regulatory milestones, up to $190.0 million upon the achievement of certain commercial milestones and tiered
royalty payments on net sales, with percentages starting in the low double digits and escalating to the mid-twenties.
With respect to the up to $35.0 million of regulatory milestone payments: (i) $10.0 million is payable following acceptance by the EMA of
the filing of the first drug approval application for a Licensed Product; (ii) $12.5 million is payable following achievement of conditional regulatory
approval from the EMA; and (iii) the remaining $12.5 million is payable following achievement of unconditional regulatory approval from the EMA
allowing for prescribing of a Licensed Product for the reversal of the antiplatelet effects of ticagrelor in both (a) patients with uncontrolled major or life-
threatening bleeding and (b) patients requiring urgent surgery or an invasive procedure.
Under the Alfasigma Sublicense, we are responsible for developing the Licensed Products and securing regulatory approval with the EMA
and the MHRA, including in accordance with the SFJ Agreement, after which any marketing authorizations will be assigned to Alfasigma. Alfasigma is
obligated to obtain and maintain any regulatory approvals necessary to market and sell the Licensed Products (including pricing approvals and post-
marketing commitments) and is also responsible for securing regulatory approval in countries outside of Europe and the United Kingdom. Alfasigma will
purchase its requirements from us for a set period, after which we are obligated to supply a lesser amount of Alfasigma's requirements, for Licensed
Product at the lower of cost or a price not to exceed certain agreed amounts.
Unless earlier terminated, the Alfasigma Sublicense automatically expires, with respect to each Licensed Product and each country in the
Sublicense Territory, on the latest of (1) the tenth anniversary of the first commercial sale of such Licensed Product in such country, (2) the expiration of
the last out-licensed patent of such Licensed Product in such country and (3) the expiration of regulatory exclusivity, if any, of such Licensed Product in
such country.
In connection with the Alfasigma Sublicense, in June 2021 we also entered into an Acknowledgement of Grant of Sublicense with
MedImmune and Alfasigma, or the Acknowledgement of Grant, which provides for, among other things, (i) a potential assignment of the Alfasigma
Sublicense from us to MedImmune or (ii) a potential assignment of the Medimmune License from us to Alfasigma, in either case in the event that we
breach certain obligations under the Medimmune License that are not cured or remedied and SFJ has grounds to execute a “Program Transfer” (as defined
in the SFJ Agreement) but elects not to do so. We recognized $10.8 million and zero in revenue under the Alfasigma Sublicense for the years ended
December 31, 2021 and 2020, respectively.
Wacker License Agreement
In April 2019, we entered into a license agreement, or the Wacker License Agreement, with Wacker Biotech GmbH, or Wacker, pursuant to
which Wacker granted us an exclusive license under certain of Wacker’s intellectual property rights to use Wacker’s proprietary E. coli strain for the
manufacture of bentracimab worldwide outside of specified Asian countries and to commercialize bentracimab, if approved, manufactured by us or on our
behalf using Wacker’s proprietary E. coli strain throughout the world. We have the right to grant sublicenses under the license, subject to certain conditions
as specified in the Wacker License Agreement. Under the terms of the agreement, we are required to pay a fixed, nominal per-unit royalty, which is subject
to adjustment, and an annual license fee in a fixed Euro amount in the low to mid six digits. The agreement will be in force for an indefinite period of time,
and upon the expiration of our royalty obligations, the license will be considered fully paid and will convert to a non-exclusive license. Either party may
terminate the Wacker License Agreement for breach if such breach is not cured within a specified number of days. We completed a technology transfer of
our current manufacturing process for bentracimab from Wacker to BioVectra Inc., or BioVectra, another manufacturer certified for good manufacturing
practices, or cGMP, and have engaged BioVectra to manufacture drug substance for our ongoing clinical trials and to manufacture commercial supply of
bentracimab following regulatory approval, if obtained.
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Viamet Asset Purchase Agreement
In January 2020, we entered into an asset purchase agreement, or the PB6440 Agreement, with Viamet Pharmaceuticals Holdings, LLC and
its wholly-owned subsidiary, Selenity Therapeutics (Bermuda), Ltd., or the Sellers, pursuant to which we acquired all of the assets and intellectual property
rights related to PB6440, the Sellers’ proprietary CYP11B2 inhibitor compound (formerly known as SE-6440 or VT-6440) and certain other CYP11B2
inhibitor compounds that are covered by the patent rights acquired by us under the PB6440 Agreement, or together, the Compounds. The acquired patent
rights include 20 issued or pending United States and foreign patents and patent applications, with the last issued patent acquired expected to expire in
2037. Under the terms of the PB6440 Agreement, we paid the Sellers an upfront fee of $0.1 million upon the closing of the transaction, and we are required
to pay the Sellers up to $5.1 million upon the achievement of certain development and intellectual property milestones with respect to certain product
candidates that contain a Compound, up to $142.5 million upon the achievement of certain commercial milestones with respect to any approved product
that contains a Compound, and low- to mid-single digit royalty percentages on the net sales of approved products that contain a Compound, subject to
customary reductions and offsets in specified circumstances.
BioVectra Supply Agreement
In March 2021, we entered into a supply agreement with BioVectra, or the BioVectra Agreement, for the manufacture and supply by
BioVectra of bulk drug substance for bentracimab for commercial distribution following regulatory approval, if obtained. We have also engaged BioVectra
to manufacture drug substance for our ongoing clinical trials. Under the terms of the BioVectra Agreement, BioVectra has committed to maintaining
capacity to manufacture an agreed number of batches of product each year, and we have committed to purchase a specified minimum number of batches of
product per year, or the Minimum Annual Commitment, although we are free to contract with third parties for the manufacture of bentracimab.
We will pay a supply price per batch of product to be determined after the manufacturing process for the product is validated in accordance
with the BioVectra Agreement, plus the cost of certain consumables, raw materials, and third-party testing. The parties have agreed that the initial supply
price of product will be within a specified percentage of the estimated supply price set forth in the BioVectra Agreement and will remain firm through the
second anniversary of validation. Thereafter, on an annual basis following the second anniversary of validation, either party may propose adjustments to the
supply price for increases or decreases based on a specified inflation rate, subject to a maximum inflation adjustment per year, and BioVectra may propose
adjusting the supply price beyond that inflation rate if it can document extraordinary increases or decreases in costs, subject to a specified maximum
percentage increase or decrease per year.
Pursuant to the Minimum Annual Commitments, we are obligated to purchase a minimum of (i) approximately $14.0 million of batches of
product in years 2022 through 2023, (ii) approximately $37.0 million of batches of product in 2024, and (iii) approximately $48.0 million of batches of
product in each of years 2025 through 2031. In the event we do not purchase the applicable Minimum Annual Commitment in a given year, we will be
obligated to make a payment to BioVectra in an amount equal to the then-applicable supply price per batch multiplied by the difference between the
Minimum Annual Commitment for such year and the number of batches of product we actually purchased in such year, or the Minimum Shortfall Payment,
except in the event that BioVectra was unable to deliver the number of batches ordered by us in such year. In the event of certain serious or extended
failures by BioVectra to supply product in the quantities ordered by us in a given year, our Minimum Annual Commitment for such year (and potentially
one or more subsequent years) will be subject to reduction, and our obligation to make a Minimum Shortfall Payment for such year (and potentially one or
more subsequent years) will be waived. We will have the right to reduce the Minimum Annual Commitments for the year 2026 and subsequent years by up
to a specified maximum percentage per year. Further, if we are only able to obtain regulatory approval for products incorporating bentracimab in only one
of the United States or Europe, we and BioVectra have agreed to discuss in good faith an amendment to the BioVectra Agreement to reflect decreased
requirements for product and impacts to the supply price to reflect lower volume commitments.
The initial term of the BioVectra Agreement commences on the effective date of the BioVectra Agreement and continues until the tenth
anniversary after the manufacturing process for the product is validated in accordance with the BioVectra Agreement, or Validation. The term of the
BioVectra Agreement may be extended for additional one-year periods upon mutual agreement of the parties. Either party may terminate the BioVectra
Agreement in the event of an uncured material breach by the other party or upon the occurrence of certain events of insolvency of the other party. We may
terminate the BioVectra Agreement (i) in the event of certain regulatory compliance failures by BioVectra or any person employed or retained by it to
perform services under the BioVectra Agreement, or (ii) subject to payment of a termination fee to BioVectra (the amount of which decreases over the term
of the BioVectra Agreement from an initial maximum in the mid-teens of millions of dollars to zero), in the event we decide that it will not, or is unable to,
pursue regulatory approval or commercialization of products incorporating bentracimab or in the event of termination of our license to the product from
MedImmune Limited. We may also terminate the BioVectra Agreement without cause and without payment of a termination
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fee upon 24 months’ notice following the fifth anniversary of regulatory approval of a product incorporating bentracimab by either the FDA or the EMA.
Manufacturing
Our large molecule clinical product candidate bentracimab and our ELP preclinical and research and development pipeline candidates are
currently manufactured using a microbial expression system. Our manufacturing utilizes a straight-forward E. coli fermentation process with a simple
column chromatography-based purification process. Our small molecule candidate, PB6440 is manufactured through chemical synthesis. We believe that
these manufacturing processes will enable our product candidates to be manufactured efficiently for clinical and commercial applications. We do not have
any cGMP manufacturing facilities. Instead, we utilize third parties for the cGMP manufacture of our product candidates for clinical trials, and we intend to
continue to use third parties in the near term for the future clinical development and, if they are approved, commercial manufacture of our drug products.
Our contract manufacturers are FDA-inspected establishments that have a history of supplying products to the pharmaceutical industry in accordance with
cGMP.
Bentracimab
Bentracimab bulk drug substance, provided to us pursuant to the MedImmune License, was filled and released for use in our initial clinical
trials. The bentracimab drug substance was manufactured by Wacker, a third-party contract manufacturer, utilizing Wacker’s proprietary E. coli strain. We
completed a technology transfer of our current manufacturing process for bentracimab from Wacker to BioVectra, another cGMP manufacturer, and have
engaged BioVectra to manufacture drug substance for our ongoing clinical trials and to manufacture commercial supply of bentracimab following
regulatory approval, if obtained.
ELP Preclinical Pipeline
To date, we have relied on a non-proprietary E. coli strain for the production of our preclinical ELP pipeline candidates. Third-party
manufacturers have performed the cGMP manufacturing of the drug product. Due to efficiencies achieved to date, we intend to utilize this non-proprietary
strain for future manufacturing. As we advance preclinical product candidates through development, we intend to establish additional supply agreements
and/or technology transfer agreements in order to meet our expected needs for future clinical trials and potential commercial demand.
PB6440
PB6440 is a small molecule candidate manufactured through chemical synthesis. Third-party manufacturers will perform the cGMP
manufacturing of the drug. As we advance PB6440 through development, we intend to establish additional supply agreements and/or technology transfer
agreements in order to meet our expected needs for future clinical trials and potential commercial demand.
Sales and Marketing
Except for the for the rights we granted to Alfasigma for bentracimab, we retain worldwide commercial rights to all of our product candidates.
Given our stage of development, we are in the process of building our commercial organization and distribution capabilities. We intend to commercialize
bentracimab, if approved, independently in the United States because we believe the patient populations and medical specialists for these indications are
sufficiently concentrated to allow us to effectively promote these products with a targeted sales team. We may explore, and selectively pursue, strategic
collaborations or partnerships with third parties to commercialize any other future approved products both in and outside of the United States in order to
maximize the commercial potential of our products.
Competition
The pharmaceutical industry is subject to rapidly advancing technologies, intense competition and a strong emphasis on proprietary products.
We face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies,
academic institutions, governmental agencies and public and private research institutions. Any product candidates that we successfully develop and
commercialize will compete with existing treatments and new treatments that may become available in the future.
Our current and potential future competitors have significantly more experience commercializing drugs that have been approved for
marketing. Mergers and acquisitions in the pharmaceutical and biotechnology industries could result in even more resources being concentrated among a
small number of our competitors. Accordingly, our competitors may be more
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successful than us in obtaining regulatory approval for therapies and in achieving widespread market acceptance of their drugs. It is also possible that the
development of a cure or more effective treatment method for the disorders we are targeting by a competitor could render our current or future drug
candidates non-competitive or obsolete or reduce the demand for our drug candidates before we can recover our development and commercialization
expenses.
Bentracimab
There are currently no other known reversal agents approved or in clinical development for ticagrelor or any other antiplatelet drugs. In the
European Union, an extracorporeal whole blood purification adsorber device is available that may be useful for non-specific removal of ticagrelor during
some cardiac procedures when used in conjunction with cardiopulmonary bypass. The maker of the device, CytoSorbent Corporation, has also initiated a
clinical trial in the U.S. to evaluate the use of the DrugSorb-ATR antithrombotic removal system during cardiothoracic surgery. Upon approval,
bentracimab would be the only therapeutic agent available for specific reversal of ticagrelor. As a result, market acceptance of bentracimab, if approved,
will depend heavily on the continued market acceptance and use of ticagrelor. Ticagrelor competes against other commercially available antiplatelet
therapies, including other P2Y receptor antagonists, many of which are available as generic drugs and are therefore currently significantly less expensive
than ticagrelor. New antiplatelet therapies may also be developed in the future, including other reversible P2Y receptor antagonists and other antiplatelet
therapies, which could also have reversal agents, that could displace ticagrelor as the preferred antiplatelet agent for ACS.
PB6440
Although we anticipate that PB6440 may be used as a complement to patients’ existing antihypertensive therapies, we expect to compete with existing
generic treatments for hypertension that target the mineralocorticoid receptor. In addition to the currently approved mineralocorticoid receptor antagonists,
eplerenone and spironolactone, we are also aware of a number of therapies in clinical development for the treatment of resistant hypertension with which
PB6440 would compete if approved, including:
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Aprocitentan, orally active dual endothelin receptor antagonist that is being developed by Janssen Biotech;
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Firibastat, a selective and specific inhibitor of Aminopeptidase A being developed by Quantum Genomics;
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CIN-107, an aldosterone synthase inhibitor being developed by Cincor Pharmaceuticals;
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MLS-101, and aldosterone synthase inhibitor being studied by Mineralys Therapeutics; and
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BI 690517, an aldosterone synthase inhibitor being studied by Boehringer Ingelheim.
Intellectual Property
Our commercial success depends in part upon our ability to obtain and maintain proprietary protection for bentracimab, PB6440 and future
product candidates and related discoveries and our ELP technology; to operate without infringing on or otherwise violating the proprietary rights of others;
and to prevent others from infringing or otherwise violating our proprietary rights. We seek to protect our proprietary position by, among other methods,
filing United States and foreign patent applications related to our ELP technology, our product candidates and other proprietary technologies, inventions
and improvements that are important to the development and implementation of our business. We also rely on trademarks, trade secrets, know-how,
continuing technological innovation and potential in-licensing opportunities to develop and maintain our proprietary position.
The term of individual patents varies depending on the date of filing of the patent application and the legal term of patents in the countries in
which they are obtained. Generally, patents issued from regularly filed applications in the United States are granted a term of 20 years from the earliest
filing date of a non-provisional application. In addition, in certain instances, a patent term can be adjusted to recapture a portion of the delay by the United
States Patent and Trademark Office in issuing the patent. In addition, a patent term may be extended to recapture a portion of the patent term effectively
lost as a result of the FDA regulatory review period of the drug covered by the patent. The patent term extension based upon delay by the FDA can be up to
five years beyond the expiration of the patent, but cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval
and the extension may only apply to one patent that covers the approved drug (and to only those patent claims covering the approved drug or a method for
using it). There can be no assurance that any such patent term adjustment or extension will be obtained. The duration of foreign patents varies in
accordance with provisions of applicable local law, but typically in countries in which we file, the patent term is 20 years from the earliest filing date of a
non-
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provisional patent application. However, the actual protection afforded by a patent varies on a product-by-product basis and from country to country and
depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal
remedies in a particular country and the validity and enforceability of the patent.
Furthermore, we rely upon trade secrets, know-how and continuing technological innovation to develop and maintain our competitive
position. We seek to protect our proprietary information, in part, using confidentiality agreements with our commercial partners, collaborators, employees
and consultants and invention assignment agreements with our employees. We also have confidentiality agreements or invention assignment agreements
with our commercial partners and selected consultants. These agreements are designed to protect our proprietary information and, in the case of the
invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. These agreements may
be breached and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently
discovered by competitors. To the extent that our commercial partners, collaborators, employees and consultants use intellectual property owned by others
in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
As of December 31, 2021, our patent estate contained at least 22 patent families that we own or in-license that protect various aspects of our
ELP technology or our product candidates. We own or have rights in 26 United States patents, 16 United States patent applications, 135 foreign patents and
75 foreign patent applications.
Bentracimab
With regard to bentracimab, we in-licensed one patent family. As of December 31, 2021, this patent family included two issued United States
patents with composition of matter claims covering bentracimab that are expected to expire in 2035 and 2036, without taking patent term extensions into
account, three pending United States patent applications, two issued foreign patents, and 13 pending foreign applications, that if issued, would expire in
2035.
PB6440
Upon acquiring the intellectual property rights of PB6440 in January 2020, we acquired three patent families relating to aldosterone synthase
inhibitors, which as of December 31, 2021 consisted of three granted patents in the United States, two pending applications in the United States and 15
pending foreign applications. The granted United States patents are expected to expire in 2037, without taking patent term extensions into account.
ELP Technology
As of December 31, 2021, we owned two patent families relating to our ELP technology, which consist of two granted patents in the United
States, two pending applications in the United States and ten pending foreign applications. The first granted patent is expected to expire in 2021 and the
second is expected to expire in 2035, without taking patent term extensions into account.
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,
record keeping, approval, advertising, promotion, marketing, post-approval monitoring and post-approval reporting of biologics such as those we are
developing. We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of
the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates.
The process required by the FDA before biologic product candidates may be marketed in the United States generally involves the following:
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completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s Good Laboratory Practices, or
GLP, regulation;
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submission to the FDA of an IND, which must become effective before clinical trials may begin and must be updated annually or
when significant changes are made;
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•
approval by an independent Institutional Review Board, or IRB, or ethics committee at each clinical site before the trial is
commenced;
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performance of adequate and well-controlled human clinical trials to establish the safety, purity and potency of the proposed biologic
product candidate for its intended purpose;
•
preparation of and submission to the FDA of a BLA after completion of all pivotal clinical trials;
•
satisfactory completion of an FDA Advisory Committee review, if applicable;
•
a determination by the FDA within 60 days of its receipt of a BLA to file the application for review;
•
satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is
produced to assess compliance with cGMP and to assure that the facilities, methods and controls are adequate to preserve the
biological product’s continued safety, purity and potency and of selected clinical investigation sites to assess compliance with Good
Clinical Practices, or GCP; and
•
FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the United
States.
Preclinical and Clinical Development
Prior to beginning the first clinical trial with a product candidate, we must submit an IND to the FDA. An IND is a request for authorization
from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan
and the protocol(s) for clinical studies. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics,
pharmacology and pharmacodynamic characteristics of the product; chemistry, manufacturing and controls information; and any available human data or
literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically
becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed
clinical trial. 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.
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in
accordance with GCPs, 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. 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, which provides authorization for
whether or not a trial may move forward at designated check points based on access to certain data from the trial and may halt the clinical trial if it
determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements
governing the reporting of ongoing clinical trials and clinical trial results to public registries.
For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap.
•
Phase 1—The investigational product is initially introduced into healthy human subjects or patients with the target disease or
condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the
investigational product in humans, the side effects associated with increasing doses and, if possible, to gain early evidence on
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.
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•
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 establish the overall risk/benefit ratio of the investigational product and to
provide an adequate basis for product approval.
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. These so-called Phase 4 studies may be made a condition to approval of the BLA. Concurrent with clinical trials, companies
may complete additional animal studies and develop additional information about the biological characteristics of the product candidate and must finalize a
process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of
consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality
and purity of the final product or, for biologics, the safety, purity and potency. Additionally, appropriate packaging must be selected and tested and stability
studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
BLA Submission and Review
Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product
development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more
indications. The BLA must include all relevant data available from pertinent preclinical and clinical studies, including negative or ambiguous results as
well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls and proposed labeling, among
other things. The submission of a BLA requires payment of a substantial application user fee to FDA, unless a waiver or exemption applies.
Once a BLA has been submitted, the FDA’s goal is to review standard applications within ten months after it accepts the application for filing
or, if the application qualifies for priority review, six months after the FDA accepts the application for filing. In both standard and priority reviews, the
review process is often significantly extended by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among
other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed or held meets standards designed to
assure the product’s continued 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 are in compliance with cGMP requirements and adequate to assure
consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more
clinical sites to assure compliance with GCP. 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.
After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug
substance will be produced, the FDA may issue an approval letter or a Complete Response letter. An approval letter authorizes commercial marketing of
the product with specific prescribing information for specific indications. A Complete Response letter 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 Complete Response letter without first conducting required inspections, testing submitted product lots and/or reviewing proposed labeling. In
issuing the Complete Response letter, the FDA may recommend actions that the applicant might take to place the BLA in condition for approval, including
requests for additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied,
require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.
If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the
indicated uses for which such product may be marketed. For example, the FDA may approve the BLA with a Risk Evaluation and Mitigation Strategy, or
REMS, to ensure the benefits of the product outweigh its risks. 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. The FDA
also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once
approved, 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. The FDA may require
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one or more Phase 4 post-marketing studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization
and may limit further marketing of the product based on the results of these post-marketing studies.
Accelerated Approval Program
Any marketing application for a biologic submitted to the FDA for approval may be eligible for FDA programs intended to expedite the FDA
review and approval process, such as priority review and accelerated approval. A product is eligible for priority review if it has the potential to provide a
significant improvement in the treatment, diagnosis or prevention of a serious disease or condition compared to marketed products. For biologic products,
priority review designation means the FDA’s goal is to take action on the marketing application within six months of the 60-day filing date (compared with
ten months under standard review).
Additionally, products studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive
accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on a
clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity
or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative
treatments. As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled post-marketing
clinical studies to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. In addition, the FDA currently
requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch
of the product.
Priority review and accelerated approval do not change the standards for approval but may expedite the development or approval process.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which
is a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States for which
there is no reasonable expectation that the cost of developing and making available in the United States a drug or biologic for this type of disease or
condition will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before submitting a BLA.
After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.
The orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process.
If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation,
the product is entitled to orphan drug exclusive approval (or exclusivity), which means that the FDA may not approve any other applications, including a
full BLA, to market the same drug or biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical
superiority to the product with orphan drug exclusivity. Orphan drug exclusivity does not prevent FDA from approving a different drug or biologic for the
same disease or condition or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax
credits for certain research and a waiver of the BLA application fee.
A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it
received orphan designation. In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for
designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare
disease or condition.
Breakthrough Therapy Designation
To qualify for the Breakthrough Therapy program, product candidates must be intended to treat a serious or life-threatening disease or
condition and preliminary clinical evidence must indicate that such product candidates may demonstrate substantial improvement on one or more clinically
significant endpoints over existing therapies. The FDA will seek to ensure the sponsor of a Breakthrough Therapy product candidate receives: intensive
guidance on an efficient drug development program; intensive involvement of senior managers and experienced staff on a proactive, collaborative and
cross-disciplinary review; and rolling review. Breakthrough Therapy designation does not change the standards for approval but may expedite the
development or approval process.
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Post-Approval Requirements
Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA,
including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, 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 prior FDA review and approval. There also are continuing user fee requirements, under which FDA assesses an annual
program fee for each product identified in an approved BLA. Biologic manufacturers and their subcontractors are required to register their establishments
with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with
cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process
are strictly regulated and, depending on the significance of the change, may require prior 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 and other aspects of regulatory compliance.
The FDA may withdraw 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 AEs of unanticipated severity or frequency, or with
manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information;
imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS
program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of a product, complete withdrawal of the product from the market or product recalls;
•
fines, warning 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
•
injunctions or the imposition of civil or criminal penalties.
The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. 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 and other
agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in,
among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally
available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label
uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied
circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s
communications on the subject of off-label use of their products.
Biosimilars and Reference Product Exclusivity
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA,
signed into law in 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009, or the BPCIA, which created an abbreviated
approval pathway for biological products that are biosimilar to or interchangeable with an FDA-approved reference biological product. To date, a number
of biosimilars have been licensed under the BPCIA, and numerous biosimilars have been approved in Europe. The FDA has issued several guidance
documents outlining an approach to review and approval of biosimilars.
Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in
terms of safety, purity and potency, can be shown through analytical studies, animal studies and a clinical study or studies. Interchangeability requires that a
product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference
product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be
alternated or 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 biological products, as well as the processes 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.
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Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the
reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years
from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing
version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data and data from
adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods
for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be
readily substituted by pharmacies, which are governed by state pharmacy law.
The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, recent government proposals have sought
to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have
also been the subject of recent litigation. As a result, the ultimate impact, implementation and impact of the BPCIA is subject to significant uncertainty.
Federal and State Fraud and Abuse, Data Privacy and Security and Transparency Laws and Regulations
In addition to FDA restrictions on marketing of pharmaceutical products, federal and state healthcare laws and regulations restrict business
practices in the biopharmaceutical industry. These laws may impact, among other things, our current and future business operations, including our clinical
research activities and proposed sales, marketing and education programs and constrain the business or financial arrangements and relationships with
healthcare providers and other parties through which we market, sell and distribute our products for which we obtain marketing approval. These laws
include anti-kickback and false claims laws and regulations, data privacy and security and transparency laws and regulations, including, without limitation,
those laws described below.
The federal Anti-Kickback Statute prohibits, among other things, individuals or entities from knowingly and willfully offering, paying,
soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind to induce or in return for purchasing, leasing, ordering or
arranging for or recommending the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare
programs. The term “remuneration” has been broadly interpreted to include anything of value. The federal Anti-Kickback Statute has been interpreted to
apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers and formulary managers on the other hand.
Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and
safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or
recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor.
In addition, a person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed
a violation. Further, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute
constitutes a false or fraudulent claim for purposes of the False Claims Act and the civil monetary penalties statute.
The federal civil and criminal false claims laws, including the False Claims Act, which prohibit, among other things, any individual or entity
from knowingly presenting or causing to be presented, a false claim for payment to the federal government or knowingly making, using or causing to be
made or used a false record or statement material to a false or fraudulent claim to the federal government. A claim includes “any request or demand” for
money or property presented to the United States government. Several pharmaceutical and other healthcare companies have been prosecuted under these
laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other
companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of products for unapproved, and thus non-
reimbursable, uses.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit,
among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payors and
knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection
with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to
have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective
implementing regulations, impose certain requirements relating to the privacy, security and transmission of individually identifiable health information
without appropriate authorization on certain health plans, healthcare clearinghouses and certain healthcare providers, known as covered entities, and their
respective business associates, independent contractors that perform certain services involving the use or disclosure of individually identifiable health
information, as well as their
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covered subcontractors. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly
applicable to business associates and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce
HIPAA and seek attorneys’ fees and costs associated with pursuing federal civil actions.
The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which
payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for
Medicare & Medicaid Services, or CMS, information related to payments or other transfers of value made to physicians (defined to include doctors,
dentists, optometrists, podiatrists, and chiropractors), other health care professionals (such as physician assistants and nurse practitioners), and teaching
hospitals and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held
by physicians and their immediate family members.
We may also be subject to state and foreign law equivalents of each of the above federal laws; state laws that require manufacturers to report
information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; 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 that otherwise restrict payments that may be made to healthcare providers; state and local laws that require the
registration of pharmaceutical sales representatives; as well as state and foreign laws that govern the privacy and security of health information in some
circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve
substantial costs. Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible
that some of our business activities could be subject to challenge under one or more of such laws. It is possible that governmental authorities will conclude
that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare
laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may
be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participating in
government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a
corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm and
the curtailment or restructuring of our operations. To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign
laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and
implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.
We are also subject to additional federal laws, such as the United States Foreign Corrupt Practices Act, or the FCPA, which prohibits, any
United States individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign
official, political party, or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in
obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions
requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international
subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. In many other countries, the
healthcare 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 would be subject to regulation under the FCPA. Activities that violate the FCPA, even if they
occur wholly outside the United States, can result in criminal and civil fines, imprisonment, disgorgement, oversight, and debarment from government
contracts.
Coverage and Reimbursement
Market acceptance and sales of any drug products depend in part on coverage and the extent to which adequate reimbursement for drug
products will be available from third-party payors, including government health administration authorities, managed care organizations and other private
health insurers. Coverage and reimbursement for our product also depends on coverage and adequate reimbursement for the procedures using bentracimab
as a ticagrelor reversal agent. 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. Even if the procedure using our product is covered, third-party payors may package the cost of the drug
into the procedure payment and not separately reimburse the physician for the costs associated with our product. A decision by a third-party payor not to
cover or separately reimburse for our products could reduce physician utilization of our products once approved. Additionally, in the United States, there is
no
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uniform policy of coverage and reimbursement among third-party payors. Third-party payors often rely upon Medicare coverage policy and payment
limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to
be provided is made on a payor-by-payor basis. One payor’s determination to provide coverage for a drug product does not assure that other payors will
also provide coverage and adequate reimbursement.
Third-party payors determine which medical procedures they will cover and establish reimbursement levels. Even if a third-party payor
covers a particular procedure, the resulting reimbursement payment rates may not be adequate. Patients who are treated in-office for a medical condition
generally rely on third-party payors to reimburse all or part of the costs associated with the procedure and may be unwilling to undergo such procedures in
the absence of such coverage and adequate reimbursement.
Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that a procedure
is safe, effective and medically necessary; appropriate for the specific patient; cost-effective; supported by peer-reviewed medical journals; included in
clinical practice guidelines; and neither cosmetic, experimental, nor investigational.
Further, from time to time, typically on an annual basis, payment rates are updated and revised by third-party payors. Such updates could
impact the demand for our product candidates, to the extent that customers who are prescribed our product candidates, if approved, are not separately
reimbursed for the cost of the product candidates. An example of payment updates is the Medicare program updates to physician payments, which is
completed on an annual basis. In the past, when the application of the formula resulted in lower payment, Congress has passed interim legislation to
prevent the reductions. The Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, ended the use of the statutory formula and introduced a
merit-based incentive bonus program for Medicare physicians, also referred to as the Quality Payment Program. This program provides clinicians with two
ways to participate, including through the Advanced Alternative Payment Models, or APMs, and the Merit-based Incentive Payment System, or MIPS. In
November 2019, CMS issued a final rule finalizing the changes to the Quality Payment Program. The full impact to overall physician reimbursement as a
result of the introduction of the Quality Payment Program remains unclear. Any reduction in reimbursement from Medicare or other government programs
may result in a similar reduction in payments from private payors.
Impact of Healthcare Reform on our Business
In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and
proposed changes regarding the healthcare system that could prevent or delay marketing approval of drug product candidates, restrict or regulate post-
approval activities and affect the profitable sale of drug product candidates.
Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems
with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been
a particular focus of these efforts and has been significantly affected by major legislative initiatives. In March 2010, the ACA was passed, which
substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the United States
pharmaceutical industry. The ACA, among other things, contains a number of provisions of particular importance to the pharmaceutical and biotechnology
industries, including, but not limited to, those governing enrollment in federal healthcare programs, a new methodology by which rebates owed by
manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, implanted or injected, and annual fees based on
pharmaceutical companies' share of sales to federal health care programs.
There have been executive, judicial and Congressional challenges to certain aspects 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 Tax Act, includes a provision repealing, effective January 1, 2019, 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.” In addition,
the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored
health coverage and medical device tax and, effective January 1, 2021, also eliminated the health insurer tax. The Bipartisan Budget Act of 2018, or the
BBA, among other things, amends the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the
“donut hole.” On June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety
because the “individual mandate” was repealed by Congress. Thus, the ACA will remain in effect in its current form. Prior to the U.S. Supreme Court
ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance
coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies
and rules that limit access to healthcare, including
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among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary
barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the ACA will be subject to judicial or
Congressional challenges in the future. It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact the
ACA and our business.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to
Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013 and, due to subsequent legislative
amendments to the statute, including the BBA and the Infrastructure Investment and Jobs Act, will remain in effect through 2031 unless additional
Congressional action is taken. However, COVID-19 relief legislation has temporarily suspended these reductions from May 1, 2020 through March 31,
2022. Under current legislation the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester.
The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer
treatment centers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These
new laws may result in additional reductions in Medicare and other healthcare funding, which could have an adverse effect on customers for our product
candidates, if approved, and, accordingly, our financial operations.
Additionally, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising
cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state
legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient
programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration used several means
to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24,
2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement
several of the administration’s proposals. As a result, the FDA concurrently released a final rule and guidance in September 2020 providing pathways for
states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health and Human Services,
or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Medicare
Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been
delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for
price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and
manufacturers, the implementation of which have also been delayed until January 1, 2023. On November 20, 2020, CMS issued an interim final rule
implementing the Trump administration’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-
administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. As a result of litigation challenging the
Most Favored Nation model, on December 27, 2021, CMS published a final rule that rescinded the Most Favored Nation model interim final rule. In July
2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at
prescription drugs. In response to President Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug
Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential
administrative actions HHS can take to advance these principles. No legislation or administrative actions have been finalized to implement these principles.
Congress is also considering drug pricing as part of other health reform initiatives. It is unclear whether these or similar policy initiatives will be
implemented in the future. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control
pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and
marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.
Additional Regulation
We are subject to various federal, state and local laws and regulations relating to the protection of the environment, human health and safety
in the U.S. and in other jurisdictions in which we operate. If we violate these laws and regulations, we could be fined, criminally charged or otherwise
sanctioned by regulators. Environmental laws and regulations are complex, change frequently and have become more stringent over time. We believe that
our operations currently comply in all material respects with applicable environmental laws and regulations.
Employees and Human Capital Resources
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As of December 31, 2021, we had 60 employees, all of whom are full-time employees. All of our employees are located in the United States.
None of our employees is represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees
to be good.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and
additional employees. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors
through granting of equity-based compensation awards.
Corporate Information
We were incorporated under the laws of the State of Delaware in January 2002. Our principal executive offices are located at 1 Great Valley
Parkway, Suite 30, Malvern, Pennsylvania 19355. Our telephone number is (610) 981-6500. Our common stock is listed on the Nasdaq Global Market
under the symbol “PHAS.”
Available Information
Our internet website address is www.phasebio.com. In addition to the information contained in this Annual Report, information about us can
be found on our website. Our website and information included in or linked to our website are not part of this Annual Report.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through our website as soon
as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission, or the SEC. The SEC maintains
an internet site that contains reports, proxy and information statements and other information. The address of the SEC’s website is www.sec.gov.
Item 1A. Risk Factors.
The following information sets forth risk factors that could cause our actual results to differ materially from those contained in forward-
looking statements we have made in this Annual Report on Form 10-K and those we may make from time to time. You should carefully consider the risks
described below, in addition to the other information contained in this Annual Report on Form 10-K and our other public filings. Our business, financial
condition or results of operations could be harmed by any of these risks. The risks and uncertainties described below are not the only ones we face.
Additional risks not presently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our
business operations.
Summary of Risk Factors
Our business is subject to a number of risks of which you should be aware before making a decision to invest in our common stock. These
risks are more fully described in this “Risk Factors” section, including the following:
•
The ongoing COVID-19 pandemic has and may continue to adversely impact our business and operations, including our clinical
trials.
•
We have incurred significant losses since our inception. We expect to incur losses over the next several years and may never achieve
or maintain profitability.
•
We will need substantial additional funding to be able to continue as a going concern, to meet our financial obligations and to pursue
our business objectives. If we are unable to raise capital when needed, we could be forced to curtail our planned operations and the
pursuit of our growth strategy.
•
The auditor's opinion on our audited financial statements for the fiscal year ended December 31, 2021 included in this Annual Report
on Form 10-K contains an explanatory paragraph relating to our substantial doubt about our ability to continue as a going concern.
Further, under the SFJ Agreement, SFJ may elect to have our business related to bentracimab transferred to SFJ if we do not remedy
such going concern condition within the periods specified in the SFJ Agreement and our ability to share in any revenues from the
commercialization of bentracimab will be materially and adversely affected. We may be forced to delay or reduce the scope of our
development programs and/or limit or cease our operations if we are unable to obtain additional funding to support our current
operating plan.
•
If we receive regulatory approval for bentracimab, or alternatively if the SFJ Agreement were to be terminated, we will be required
to make substantial payments to SFJ pursuant to the SFJ Agreement. If
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we do not have sufficient funding or cash flow from our business to meet our payment obligations under the SFJ Agreement, SFJ
could exercise its remedies as a holder of a first-priority security interest in our assets and our business could be materially harmed.
•
If Alfasigma does not satisfy its obligations under our agreement with them, or if they terminate our partnership with them, we may
not be able to commercialize our partnered product candidate as planned and our expected revenue from this agreement could be
materially affected.
•
We currently have only one clinical-stage product candidate, bentracimab, a ticagrelor reversal agent. If we are unable to
successfully develop, receive regulatory approval for and commercialize bentracimab, or successfully develop any other product
candidates, or experience significant delays in doing so, our business will be harmed.
•
Based on feedback from the FDA, we intend to seek regulatory approval of bentracimab in the United States through an accelerated
approval process. If we are not successful with this process, the development and commercialization of bentracimab could be
delayed, abandoned or become significantly more costly.
•
Interim "top-line" 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 and verification procedures that could result in material changes in the final
data.
•
Success in preclinical studies or earlier clinical trials may not be indicative of results in future clinical trials.
•
As an organization, we have never completed pivotal clinical trials, and we may be unable to do so for any product candidates we
may develop.
•
ELP is a novel technology, which makes it difficult to predict the time, risks and cost of development and the ability to subsequently
obtain regulatory approval of our ELP product candidates.
•
We may not be successful in our efforts to increase our pipeline of product candidates, including by pursuing additional indications
for our current product candidates or in-licensing or acquiring additional product candidates for other diseases.
•
Market acceptance of bentracimab, if approved, will depend heavily on the continued market acceptance and use of ticagrelor.
•
We currently rely, and expect to continue to rely, on third parties for the cGMP manufacture of bentracimab, PB6440 and any other
product candidates that we may pursue for clinical development as well as for commercial manufacturing, if we receive marketing
approval. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or such
quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
•
If we are unable to obtain or protect intellectual property rights related to any of our product candidates, we may not be able to
compete effectively in our market.
•
If we fail to comply with our obligations in our current and future intellectual property licenses and funding arrangements with third
parties, including the SFJ Agreement and the Alfasigma Sublicense, we could lose rights that are important to our business.
•
The trading price of the shares of our common stock has and may be volatile, and purchasers of our common stock could incur
substantial losses.
Risks Related to Our Financial Position and Capital Needs
The ongoing COVID-19 pandemic has and may continue to adversely impact our business and operations, including our clinical trials.
Our business operations have and may continue to be adversely affected by the effects of the ongoing COVID-19 pandemic. The U.S., state
and local governments have and may in the future impose travel and other restrictions in order to reduce the spread of the disease and its variants, including
state and local orders across the United States that, among other things, direct individuals to shelter at their places of residence, direct businesses and
governmental agencies to cease non-essential operations at physical locations, prohibit certain non-essential gatherings and events, mandate healthcare
workers to
30
become fully vaccinated and order cessation of non-essential travel. As certain of these restrictions have eased, we have begun to resume some activities,
including limited business travel, and implemented hybrid work environments that permit in-person work as appropriate based on the employee’s work
responsibilities. Re-opening our offices could expose our employees to health risks, and us to associated liability, and could create additional risks and
operational challenges that require us to make additional investments in the design, implementation and enforcement of new workplace health and safety
protocols. We expect many employees to continue to work remotely or a hybrid of in-person and remote work, which presents risks, uncertainties and costs
that could affect our performance, including operational and workplace culture challenges, uncertainty regarding office space needs and heightened
vulnerability to cyberattacks.
We have and may continue to experience disruptions due to the COVID-19 pandemic that could severely impact our business and clinical
trials, including:
•
delays, difficulties or a suspension in enrolling patients in our ongoing and planned clinical trials;
•
delays, difficulties or a suspension in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical
site staff;
•
interruptions in our ability to manufacture and deliver drug supply for trials;
•
diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical
trial sites and hospital staff supporting the conduct of our clinical trials;
•
interruption of key clinical trial activities, such as clinical trial site monitoring, and the ability or willingness of subjects to travel to
trial sites due to limitations on travel imposed or recommended by federal or state governments, employers and others; and
•
limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of
choosing not to comply with vaccine mandates for healthcare workers, sickness of employees or their families or the desire of
employees to avoid contact with large groups of people.
For our clinical trials that are planned to be conducted at sites in countries that are experiencing heightened impact from COVID-19, in
addition to the risks listed above, we have and may continue to also experience the following adverse impacts:
•
delays in receiving approvals from local regulatory authorities to initiate our planned clinical trials;
•
delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials;
•
interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in our
clinical trials;
•
changes in local regulations as part of a response to the COVID-19 outbreak which may require us to change the ways in which our
clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;
•
delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to
limitations in employee resources or forced furlough of government employees; and
•
refusal of the FDA to accept data from clinical trials in these affected geographies.
As we advance our clinical program for bentracimab with site activations and patient enrollment, we remain in close contact with our clinical
research organizations, or CROs, clinical sites and suppliers to attempt to assess the impacts that COVID-19 may have on our clinical trial and current
timelines and to consider whether we can implement appropriate mitigating measures to help to lessen such impacts. At this time, however, we cannot
currently fully forecast the scope of impacts that COVID-19 may have on our ability to initiate trial sites, enroll and assess patients, supply study drug and
report trial results.
On December 21, 2021, we announced that we had voluntarily ended our Phase 2b trial of pemziviptadil in PAH due to COVID-19 impacts
on manufacturing, associated drug supply and the rate of enrollment in the trial. After a strategic review, we have decided to stop further development of
pemziviptadil in order to reprioritize resources and capital towards pre-commercialization activities for bentracimab and the advancement of other pipeline
programs, including PB6440 for resistant hypertension.
In addition, remote work policies, quarantines, shelter-in-place and similar government orders, shutdowns or other restrictions on the conduct
of business operations related to the COVID-19 pandemic could negatively impact productivity, disrupt our ongoing research and development activities
and impact our operations, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations and their effect
on our ability to conduct our business in the ordinary course. In addition, although our employees are accustomed to working remotely, changes in internal
controls due
31
to remote work arrangements could potentially result in control deficiencies in the preparation of our financial reports, which could be significant.
The spread of COVID-19 and its variants, which has had a broad impact globally, may materially affect us economically. While the potential
economic impact brought by, and the continued duration of, the COVID-19 pandemic may be difficult to assess or predict, a continued and growing
pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect
our liquidity. In addition, a recession or market correction, inflation or other negative global economic conditions resulting from the spread of COVID-19
and its variants could materially affect our business and the value of our common stock.
The global COVID-19 pandemic continues to rapidly evolve. The extent to which COVID-19 may impact our business and clinical trials will
depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the geographic spread of the disease and its
variants over time, the continued duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business
closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease, including the
efficacy and availability of vaccines and antiviral agents against the disease and the success of vaccination efforts. Accordingly, we do not yet know the full
extent of potential delays or impacts on our business, our clinical and regulatory activities, healthcare systems or the global economy as a whole. However,
these impacts could adversely affect our business, financial condition, results of operations and growth prospects.
In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect
of heightening many of the other risks and uncertainties described in this “Risk Factors” section.
We have incurred significant losses since our inception. We expect to incur losses over the next several years and may never achieve or maintain
profitability.
We are a clinical-stage biopharmaceutical company, and we have incurred significant net losses since our inception. Our net loss was $131.1
million for the year ended December 31, 2021. As of December 31, 2021, we had an accumulated deficit of $391.8 million. We expect to continue to incur
significant expenses and operating losses for the foreseeable future. Since inception, we have financed our operations primarily with proceeds raised in our
initial public offering, or IPO, and subsequent underwritten sales of our common stock, private placements of convertible debt and convertible preferred
stock, borrowings under our term loan, funds we have received under the SFJ Agreement and funds we have received pursuant to the Alfasigma
Sublicense. In future periods we expect SFJ to provide up to $28.7 million of funding pursuant to the SFJ Agreement. We have no products approved for
commercialization and have never generated any revenue from product sales.
We have devoted substantially all of our financial resources and efforts to the development of our clinical and preclinical product candidates
and our proprietary half-life extending ELP technology, including conducting preclinical studies and clinical trials. We expect to continue to incur
significant expenses and operating losses over the next several years. We expect that it could be several years, if ever, before we have a commercialized
product. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially as
we:
•
continue our ongoing clinical trial of bentracimab, as well as initiate and complete additional clinical trials, as needed;
•
seek to expand our geographical reach through the SFJ Agreement and the corresponding clinical development support fees that we
will incur;
•
pursue regulatory approvals for bentracimab as a reversal agent for the antiplatelet drug ticagrelor;
•
develop PB6440 for treatment-resistant hypertension;
•
seek to discover and develop additional clinical and preclinical product candidates;
•
scale up our clinical and regulatory capabilities;
•
establish a commercialization infrastructure and scale up external manufacturing and distribution capabilities to commercialize any
product candidates for which we may obtain regulatory approval, including bentracimab;
•
adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;
•
maintain, expand and protect our intellectual property portfolio;
•
hire additional clinical, manufacturing and scientific personnel;
32
•
add operational, financial and management information systems and personnel, including personnel to support our product
development and planned future commercialization efforts; and
•
incur additional legal, accounting and other expenses in operating as a public company.
To become and remain profitable, we must succeed in developing and eventually commercializing product candidates that generate significant
revenue. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product
candidates, obtaining regulatory approval, and manufacturing, marketing and selling any product candidates for which we may obtain regulatory approval,
as well as discovering and developing additional product candidates. We are only in the preliminary stages of most of these activities. We may never
succeed in these activities and, even if we do, may never generate any revenue or revenue that is significant enough to achieve profitability.
Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become
and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our development
efforts, obtain product approvals, diversify our offerings 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 no history of commercializing products, which may make it difficult for an investor to evaluate the success of our business to date and to
assess our future viability.
We commenced operations in 2002, and our operations to date have been largely focused on raising capital and developing our clinical and
preclinical product candidates, including undertaking preclinical studies and conducting clinical trials. To date, we have not yet demonstrated our ability to
successfully complete pivotal clinical trials, obtain regulatory approvals, manufacture a product on a commercial scale, or arrange for a third party to do so
on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Consequently, any predictions you make about our
future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and
commercializing products.
We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business
objectives. We will need to develop commercial capabilities, and we may not be successful in doing so.
We will need substantial additional funding to be able to continue as a going concern, to meet our financial obligations and to pursue our business
objectives. If we are unable to raise capital when needed, we could be forced to curtail our planned operations and the pursuit of our growth strategy.
Our operations have consumed substantial amounts of cash since inception. Identifying potential product candidates and conducting
preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the
necessary data or results required to obtain regulatory approval and achieve product sales. We expect to continue to incur significant expenses and
operating losses over the next several years as we complete our ongoing clinical trials of our product candidates, initiate future clinical trials of our product
candidates, seek marketing approval for bentracimab as a ticagrelor reversal agent, develop PB6440 for treatment-resistant hypertension and advance any
of our other product candidates we may develop or otherwise acquire. In addition, our product candidates, if approved, may not achieve commercial
success. Our revenue, if any, will be derived from sales of products that we do not expect to be commercially available for a number of years, if at all. If we
obtain marketing approval for bentracimab, PB6440 or any other product candidates that we develop or otherwise acquire, we expect to incur significant
commercialization expenses related to product sales, marketing, distribution and manufacturing. We also expect an increase in our expenses associated with
creating additional infrastructure to support operations as a public company.
We have experienced net losses and negative cash flows from operations and, as of December 31, 2021, had an accumulated deficit of $391.8
million. We expect to continue to incur net losses for at least the next several years. As of December 31, 2021, we had cash and cash equivalents of $41.8
million. We believe that our existing cash and cash equivalents as of December 31, 2021, in addition to the $28.7 million of clinical trial costs and other
expenses that we expect SFJ will fund or reimburse pursuant to the SFJ Agreement, will not be sufficient to fund our operating expenses and capital
requirements for 12 months from the date of the issuance of the financial statements included in this Annual Report on Form 10-K. These factors raise
substantial doubt about our ability to continue as a going concern. We will need substantial additional funding to meet our financial obligations and to
pursue our business objectives. Our future capital requirements will depend on many factors, including:
33
•
the progress and results of our ongoing and planned future clinical trials of bentracimab and our development of PB6440 and other
preclinical programs;
•
the timing and amount of any payments we receive under the SFJ Agreement, and our ability to comply with our capitalization
requirements under the SFJ Agreement;
•
the achievement of regulatory milestones, commercial milestones, and royalties that we are eligible to earn pursuant to the Alfasigma
Sublicense;
•
the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for any future product
candidates we may decide to pursue;
•
the extent to which we develop, in-license or acquire other product candidates and technologies;
•
the number and development requirements of other product candidates that we may pursue;
•
the costs, timing and outcome of regulatory review of our product candidates;
•
the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for
any of our product candidates for which we receive marketing approval;
•
the amount of revenues, if any, received from commercial sales of our product candidates for which we receive marketing approval;
•
our ability to establish collaborations to commercialize bentracimab, PB6440 or any of our other product candidates outside the
United States; and
•
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property
rights and defending any intellectual property-related claims.
We will require additional capital to commercialize bentracimab and PB6440. If we receive regulatory approval for any of these product
candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution depending on
where we choose to commercialize. Additional funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not
be sufficient to enable us to continue to implement our long-term business strategy. Further, our ability to raise additional capital may be adversely
impacted by potential worsening global economic conditions and the disruptions to and volatility in the credit and financial markets in the United States
and worldwide resulting from the ongoing COVID-19 pandemic. If we are unable to raise sufficient additional capital, we could be forced to curtail our
planned operations and the pursuit of our growth strategy.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or
product candidates.
Until such time, if ever, as we can generate substantial revenue, we may finance our cash needs through a combination of equity offerings,
government or private party grants, debt financings and license and collaboration agreements. Except with respect to the funding obligations pursuant to the
SFJ Agreement and the Alfasigma Sublicense, we do not currently have any other committed external source of funds. To the extent that we raise
additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may
include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if
available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt,
making capital expenditures or declaring dividends. For example, under the SFJ Agreement, we granted SFJ a first-priority security interest in all of our
assets related to bentracimab, subject only to the lien of SVB and WestRiver, or the Lenders, for existing indebtedness to the Lenders. In connection with
the grant of the security interest, we agreed to certain affirmative and negative covenants, including restrictions on our ability to pay dividends, incur
additional debt or enter into licensing transactions with respect to intellectual property related to bentracimab. Similarly, our loan and security agreement
with the Lenders is secured by a security interest in substantially all of our current and future assets. We are also obligated to comply with various other
customary covenants, including restrictions on our ability to encumber our intellectual property assets. The security interests granted to SFJ and the
Lenders may preclude future debt financing or make the terms of such financings less favorable.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties,
we may be required to relinquish valuable rights to our technologies, future revenue streams or product candidates, grant licenses on terms that may not be
favorable to us or commit to future payment streams. If we are unable to raise additional funds through equity or debt financings when needed, we may be
required to delay, limit, reduce or
34
terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise
prefer to develop and market ourselves.
The auditor's opinion on our audited financial statements for the fiscal year ended December 31, 2021 included in this Annual Report on Form 10-K
contains an explanatory paragraph relating to our substantial doubt about our ability to continue as a going concern. Further, under the SFJ
Agreement, SFJ may elect to have our business related to bentracimab transferred to SFJ if we do not remedy such going concern condition within the
periods specified in the SFJ Agreement and our ability to share in any revenues from the commercialization of bentracimab will be materially and
adversely affected. We may be forced to delay or reduce the scope of our development programs and/or limit or cease our operations if we are unable to
obtain additional funding to support our current operating plan.
The auditor's opinion on our audited financial statements for the year ended December 31, 2021 included in this Annual Report on Form 10-K
includes an explanatory paragraph stating that our recurring losses and negative cash flows from operations raise substantial doubt about our ability to
continue as a going concern. Under the SFJ Agreement, if we fail to remedy such going concern condition during the periods specified in the SFJ
Agreement, SFJ may elect to have our business related to bentracimab transferred to SFJ. We have multiple quarters in which to remedy the going concern
condition, including by restructuring our costs and operations, raising additional capital in financing or strategic transactions or accepting additional
financing from SFJ on the same terms as their original commitment (which additional financing they have the option, but not obligation, to provide). If we
are unable to remedy the going concern condition and our business related to bentracimab is transferred to SFJ as a result, we will not share in any revenues
from the commercialization of bentracimab until SFJ has received a 300% return on its investment in bentracimab, after which we will be entitled to a mid-
single-digit royalty on net sales of bentracimab in the United States and certain European countries, and after SFJ has received an aggregate 500% return on
its investment in bentracimab, we will be entitled to a mid-single-digit royalty on net sales of bentracimab in the rest of the world.
There can be no assurances that we will be able to raise the capital we need to continue our operations and to remedy the going concern
condition pursuant to the SFJ Agreement or that we will be able to generate sufficient liquidity or eliminate our operating losses. If we are unable to obtain
sufficient funding, we would need to significantly scale back our expenditures and thereby reduce our operating plans and curtail some or all of our product
development, commercialization and strategic plans, and our ability to share in any revenues from the commercialization of bentracimab will be materially
and adversely affected, each of which would similarly materially and adversely affect our business, prospects, financial condition and results of operations.
If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on
our audited financial statements, and it is likely that investors will lose all or a part of their investment. If we seek additional financing to fund our business
activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be
unwilling to provide additional funding on commercially reasonable terms or at all. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for a discussion of our liquidity needs and capital resources.
If we receive regulatory approval for bentracimab, or alternatively if the SFJ Agreement were to be terminated, we will be required to make substantial
payments to SFJ pursuant to the SFJ Agreement. If we do not have sufficient funding or cash flow from our business to meet our payment obligations
under the SFJ Agreement, SFJ could exercise its remedies as a holder of a first-priority security interest in our assets and our business could be
materially harmed.
On January 9, 2020, we entered into the SFJ Agreement, pursuant to which SFJ agreed to provide up to $120.0 million to support the global
development of bentracimab. If we receive regulatory approval for bentracimab as a reversal agent for the antiplatelet drug ticagrelor, we will be required
to make substantial payments to SFJ pursuant to the SFJ Agreement. Our ability to make these required payments will depend on our future performance,
which will be subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in
the future sufficient to meet our obligations under the SFJ Agreement. If we are unable to generate such cash flow or to obtain additional funding through
public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources on acceptable terms or at all, we could
default on our payment obligations to SFJ. We have granted SFJ a first-priority security interest in all of our assets related to bentracimab, subject only to
the lien of the Lenders for existing indebtedness to the Lenders. If we are unable to meet our payment obligations to SFJ, SFJ may exercise its remedies as
a holder of a first-priority security interest, which would result in a loss of our assets and our business would be materially harmed.
In addition, in the event that (i) we fail to pay any amounts payable to SFJ under the SFJ Agreement within a specified time period, (ii) we are
in default of our obligations (subject to certain exclusions) under the MedImmune License or (iii) either (a) we determine it is probable that we will be
unable to meet our obligations as they become due within one year after the date that our financial statements for the then-current quarter are issued, or
available to be issued or (b) a “going concern” footnote is included in any of our financial statements, and, in either case ((a) or (b)), we fail to remedy such
going
35
concern condition as specified in the agreement, SFJ may elect to have our business related to bentracimab transferred to SFJ. We have multiple quarters in
which to remedy the going concern condition, including by restructuring our costs and operations, raising additional capital in financing or strategic
transactions or accepting additional financing from SFJ on the same terms as their original commitment (which additional financing they have the option,
but not obligation, to provide). The auditor’s opinion on the audited financial statements included in this Annual Report on Form 10-K for the year ended
December 31, 2021 contains an explanatory paragraph relating to our substantial doubt about our ability to continue as a going concern, thus creating a
“going concern” condition under the SFJ Agreement. If we are unable to remedy the going concern condition and if our business related to bentracimab is
transferred to SFJ, we will not share in any revenues from the commercialization of bentracimab until SFJ has received a 300% return on its investment in
bentracimab, after which we will be entitled to a mid-single-digit royalty on net sales of bentracimab in the United States and certain European countries,
and after SFJ has received an aggregate 500% return on its investment in bentracimab, we will be entitled to a mid-single-digit royalty on net sales of
bentracimab in the rest of the world. See “—The auditor's opinion on our audited financial statements for the fiscal year ended December 31, 2021 included
in this Annual Report on Form 10-K contains an explanatory paragraph relating to our substantial doubt about our ability to continue as a going concern.
Further, under the SFJ Agreement, SFJ may elect to have our business related to bentracimab transferred to SFJ if we do not remedy such going concern
condition within the periods specified in the SFJ Agreement and our ability to share in any revenues from the commercialization of bentracimab will be
materially and adversely affected. We may be forced to delay or reduce the scope of our development programs and/or limit or cease our operations if we
are unable to obtain additional funding to support our current operating plan.”
In the event that the SFJ Agreement were to be terminated, we will be obligated to make substantial payments to SFJ. If following termination
of the SFJ Agreement we continue to develop bentracimab and obtain BLA approval in the United States, the European Union, Japan or China, we will be
obligated to pay applicable approval payments for any such jurisdiction to SFJ as if the SFJ Agreement had not been terminated, less any payments made
upon termination, except in limited circumstances. Further, if our business related to SFJ is transferred to SFJ in the event that we breach certain provisions
of the SFJ Agreement, we will not share in any revenues from the commercialization of bentracimab until SFJ has received an at least 300% return on its
investment in bentracimab. Such payment obligations could have significant consequences for our stockholders and our business, results of operations and
financial condition and could force us to delay or terminate development of bentracimab or other product candidates.
If Alfasigma does not satisfy its obligations under our agreement with them, or if they terminate our partnership with them, we may not be able to
commercialize our partnered product candidate as planned and our expected revenue from this agreement could be materially affected.
We have entered into an exclusive sublicense agreement with Alfasigma under which we granted to Alfasigma exclusive rights to develop, use,
sell, have sold, offer for sale and import the Licensed Products in the Sublicense Territory. Under the Alfasigma Sublicense, we are responsible for
developing the Licensed Products and securing regulatory approval with the EMA and the MHRA, including in accordance with the SFJ Agreement, after
which any marketing authorizations will be assigned to Alfasigma. Alfasigma is obligated to obtain and maintain any regulatory approvals necessary to
market and sell the Licensed Products (including pricing approvals and post-marketing commitments) and is also responsible for securing regulatory
approval in countries outside of Europe and the United Kingdom. We will supply Alfasigma’s requirements for Licensed Product at the lower of cost or a
price not to exceed certain agreed amounts.
Alfasigma may not fulfill all of its obligations under this agreement, and, in certain circumstances, they or we may terminate the sublicense. In
such an event, we may be unable to assume the sublicense responsibilities or find a suitable alternative commercial partner to commercialize the Licensed
Products in the Sublicense Territory. If Alfasigma elected to promote alternative products and product candidates, such as its own products and product
candidates, in preference to those licensed from us, does not devote an adequate amount of time and resources to our product candidates or is otherwise
unsuccessful in its efforts with respect to our products or product candidates, the commercialization of the Licensed Products could be delayed or
terminated, future payments to us could be delayed, reduced or eliminated, and our business and financial condition could be materially and adversely
affected. Accordingly, our ability to receive any revenue from the Licensed Products in the Sublicensed Territory is dependent on the efforts of Alfasigma.
Risks Related to the Development of Our Product Candidates
We currently have only one clinical-stage product candidate, bentracimab, a ticagrelor reversal agent. If we are unable to successfully develop, receive
regulatory approval for and commercialize bentracimab, or successfully develop any other product candidates, or experience significant delays in doing
so, our business will be harmed.
36
We currently have no products that are approved for commercial sale. We currently have only one clinical-stage product candidate,
bentracimab. To date, we have not yet completed any pivotal clinical trials. We have not completed the development of any product candidates, and we
may never be able to develop marketable products.
We have invested substantially all of our efforts and financial resources in the development of our clinical and preclinical product candidates
and our proprietary ELP technology. Our ability to generate revenue from our product candidates, which we do not expect will occur for several years, if
ever, will depend heavily on the successful development, regulatory approval and eventual commercialization of our product candidates. The success of
bentracimab, PB6440 or any other product candidates that we develop or otherwise may acquire will depend on several factors, including:
•
timely and successful completion of preclinical studies and clinical trials;
•
sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials;
•
successful enrollment, including with respect to the various indications for which we might seek approval of bentracimab, and
completion of clinical trials;
•
with respect to bentracimab, the success of our collaboration with SFJ;
•
successful development of, or making arrangements with third-party manufacturers for, our commercial manufacturing processes for
any of our product candidates that receive regulatory approval;
•
receipt of timely marketing approvals from applicable regulatory authorities;
•
launching commercial sales of products, if approved;
•
acceptance of our products, if approved, by patients, the medical community and third-party payors, for their approved indications;
•
Alfasigma's ability to successfully launch, distribute and sell bentracimab pursuant to the Alfasigma Sublicense;
•
the prevalence and severity of adverse events experienced with bentracimab, PB6440 or any other product candidates;
•
the availability, perceived advantages, cost, safety and efficacy of alternative therapies for any product candidate, and any indications
for such product candidate, that we develop, specifically, alternative reversal agents or antiplatelet therapies to ticagrelor (including
therapies that may be developed with a reversal agent), or alternative treatments for treatment-resistant hypertension;
•
our ability to produce bentracimab, PB6440 or any other product candidates we develop on a commercial scale;
•
obtaining and maintaining patent, trademark and trade secret protection and regulatory exclusivity for our product candidates and
otherwise protecting our rights in our intellectual property portfolio;
•
maintaining compliance with regulatory requirements, including current good manufacturing practices, or cGMPs, and complying
effectively with other procedures; and
•
maintaining a continued acceptable safety, tolerability and efficacy profile of the products following approval.
If we are not successful with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an
inability to successfully commercialize the product candidates we develop, which would materially harm our business. If we do not receive marketing
approvals for bentracimab, PB6440 or any other product candidate we develop, we may not be able to continue our operations.
The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable. If we are
not able to obtain required regulatory approval for our product candidates, our business will be substantially harmed.
The time required to obtain approval or other marketing authorizations by the FDA and comparable foreign authorities is unpredictable, and it
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, and the type and amount of clinical data necessary to gain approval may change during
the course of a product candidate’s
37
clinical development and may vary among jurisdictions. Bentracimab is currently our only clinical-stage product candidate. We have not obtained
regulatory approval for any product candidate, and it is possible that we may never obtain regulatory approval for bentracimab, PB6440 or any product
candidates we may seek to develop in the future. Neither we nor any current or future collaborator is permitted to market any drug product candidates in the
United States until we receive regulatory approval of a BLA, or a new drug application, or NDA, from the FDA. To date, we have only had limited
discussions with the EMA and other comparable foreign authorities regarding regulatory approval for bentracimab or any other product candidate outside
of the United States.
Prior to obtaining approval to commercialize any drug product candidate in the United States or abroad, we must demonstrate with substantial
evidence from well-controlled clinical trials, and to the satisfaction of the FDA or foreign regulatory agencies, that such product candidates are safe, pure
and effective for their intended uses. Results from preclinical studies and clinical trials can be interpreted in different ways. Even if we believe the
preclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory
authorities. The FDA may also require us to conduct additional preclinical studies or clinical trials for our product candidates either prior to or after
approval, or it may object to elements of our clinical development programs.
Of the large number of products in development, only a small percentage successfully complete the FDA or foreign regulatory approval
processes and are commercialized. The lengthy approval and marketing authorization process as well as the unpredictability of future clinical trial results
may result in our failing to obtain regulatory approval and marketing authorization to market our product candidates, which would significantly harm our
business, financial condition, results of operations and prospects.
We have invested a significant portion of our time and financial resources in the development of our clinical and preclinical product
candidates, including bentracimab and PB6440. Our business is dependent on our ability to successfully complete preclinical and clinical development of,
obtain regulatory approval for, and, if approved, successfully commercialize bentracimab, PB6440 and any future product candidates in a timely manner.
Even if we eventually complete clinical testing and receive approval of a BLA, NDA or foreign marketing application for bentracimab,
PB6440 or any future product candidates, the FDA or the applicable foreign regulatory agency may grant approval or other marketing authorization
contingent on the performance of costly additional clinical trials, including post-marketing clinical trials. The FDA or the applicable foreign regulatory
agency also may approve or authorize for marketing a product candidate for a more limited indication or patient population than we originally request, and
the FDA or applicable foreign regulatory agency may not approve or authorize the labeling that we believe is necessary or desirable for the successful
commercialization of a product candidate. Any delay in obtaining, or inability to obtain, applicable regulatory approval or other marketing authorization
would delay or prevent commercialization of that product candidate and would materially adversely impact our business and prospects.
In addition, the FDA and other regulatory authorities may change their policies, issue additional regulations or revise existing regulations, or
take other actions, which 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 marketing authorizations we may have obtained.
Based on feedback from the FDA, we intend to seek regulatory approval of bentracimab in the United States through an accelerated approval process.
If we are not successful with this process, the development and commercialization of bentracimab could be delayed, abandoned or significantly more
costly.
The FDA’s accelerated approval regulations allow drugs that are being developed to treat an unmet medical need to be approved substantially
based on evidence of an effect on a surrogate biomarker endpoint that is considered reasonably likely to predict clinical benefit, rather than a clinical
endpoint such as survival or irreversible morbidity. Based on feedback from the FDA, our strategy is to use an accelerated approval pathway that may
require that our REVERSE-IT trial of bentracimab be ongoing at the time of BLA approval. To support our BLA submission for accelerated approval, the
FDA recommended an interim analysis of biomarker data from an initial subset of 100 patients, with approximately 50 patients with uncontrolled major or
life-threatening bleeding and approximately 50 patients requiring urgent surgery or an invasive procedure, in our REVERSE-IT trial, together with safety
data from our Phase 2 clinical trials, although the FDA indicated that whether there are an adequate number of patients with uncontrolled major or life-
threatening bleeding or requiring urgent surgery or an invasive procedure would be a review issue.
We intend to complete the REVERSE-IT trial and establish a post-approval registry in accordance with FDA requirements. With regards to
the 200 total patients needed for full enrollment of the REVERSE-IT trial, our protocol provides that no more than approximately two-thirds of patients can
come from either the uncontrolled major or life-threatening bleeding
38
population or the patient population requiring urgent surgery or an invasive procedure. The CHMP of the EMA has also generally agreed with our proposed
clinical development and commercialization plan for bentracimab.
In November 2021, we announced results from the specified interim analysis of the first 150 patients enrolled in the REVERSE-IT trial (142
of whom enrolled required urgent surgery or an invasive procedure and eight of whom enrolled with uncontrolled major or life-threatening bleeding). The
cohort of patients requiring urgent surgery or an invasive procedure has been fully enrolled, and trial sites have shifted focus to enrolling patients with
uncontrolled major or life-threatening bleeding events, although there is no guarantee that we will be able to successfully accelerate enrollment of these
patients.
We intend to submit our BLA for potential accelerated approval based on the interim analysis of these patients and are targeting to submit our
BLA in mid-2022, although that timeline could be impacted by the continued scope and duration of the COVID-19 pandemic. Following the submission of
our BLA, the FDA could determine that the trials conducted by us were insufficient to support approval because, among other potential reasons, we did not
enroll a sufficient number of patients in the REVERSE-IT trial, including patients with uncontrolled major or life-threatening bleeding, for all or some of
the proposed indications we intend to pursue. Further, the FDA may require us to conduct extensive post-approval studies or require us to make
modifications to our ongoing REVERSE-IT trial after approval and marketing.
Clinical product development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs and experience
delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
In order to obtain FDA approval to market a new biological or drug product we must demonstrate proof of safety, purity and efficacy in
humans. The risk of failure for product candidates is high. It is impossible to predict when or if any of our product candidates will prove effective or safe in
humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must
complete preclinical development and then conduct extensive clinical trials to demonstrate the safety, purity, potency, and efficacy of our product
candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain as to
outcome. A failure of one or more clinical trials can occur at any stage of testing or at any time during the trial process. The outcome of preclinical testing
and early clinical trials may not be predictive of the results of later clinical trials, and interim results of a clinical trial do not necessarily predict final
results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their
product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
We have not completed all clinical trials required for the approval of any of our product candidates. We cannot assure you that any clinical
trial that we are conducting, or may conduct in the future, will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to
market our product candidates.
We may incur additional costs and experience delays in ongoing clinical trials for our product candidates, and we do not know whether future
clinical trials, if any, will begin on time, need to be redesigned, enroll an adequate number of patients on time or be completed on schedule, if at all. We
may experience numerous unforeseen events during or as a result of clinical trials that could delay or prevent our ability to receive marketing approval or
commercialize our product candidates, including:
•
regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical
trial at a prospective trial site;
•
we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with
prospective trial sites or prospective CROs, the terms of which can be subject to extensive negotiation and may vary significantly
among different CROs and trial sites;
•
clinical trials of our product candidates may produce negative or inconclusive results, including failure to demonstrate statistical
significance, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development
programs;
•
the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these
clinical trials may be slower than we anticipate or participants may drop out of these clinical trials or fail to return for post-
treatment follow-up at a higher rate than we anticipate;
•
our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators,
regulators or institutional review boards to suspend or terminate the trials;
39
•
our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely
manner, or at all;
•
regulators or institutional review boards may require that we or our investigators suspend or terminate clinical development for
various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to
unacceptable health risks;
•
the cost of clinical trials of our product candidates may be greater than we anticipate; and
•
the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may
be insufficient or inadequate.
If we experience delays in the completion of any clinical trial of our product candidates or if any such trial is terminated, 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 our product candidate development and approval process and
jeopardize our ability to commence product sales and generate revenues.
If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if
we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not favorable or if
there are safety concerns, we may:
•
be delayed in obtaining marketing approval for our product candidates;
•
not obtain marketing approval at all;
•
obtain approval for indications or patient populations that are not as broad as intended or desired;
•
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;
•
be subject to additional post-marketing testing requirements; or
•
have the product removed from the market after obtaining marketing approval.
Success in preclinical studies or earlier clinical trials may not be indicative of results in future clinical trials.
Success in preclinical testing and early clinical trials does not ensure that later clinical trials will generate the same results or otherwise
provide adequate data to demonstrate the efficacy and safety of a product candidate. Preclinical tests and Phase 1 and Phase 2 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. Success in preclinical or animal studies and early clinical trials does not ensure that later large-scale efficacy trials will be successful nor does it
predict final results. Our product candidates may fail to show the desired safety and efficacy in clinical development despite positive results in preclinical
studies or having successfully advanced through initial clinical trials.
Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after
achieving promising results in preclinical testing and earlier-stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying
interpretations, which may delay, limit or prevent regulatory approval. 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.
Interim “top-line” 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 and verification procedures that could result in material changes in the final data.
From time to time, we may publish interim top-line or preliminary results from our clinical trials. Interim results from clinical trials that we
may complete, including from our Phase 3 REVERSE-IT trial of bentracimab, 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. Preliminary or top-line results also remain subject to audit and
verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim
and preliminary data 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.
40
Our clinical trials may fail to demonstrate the safety and efficacy of our product candidates, or serious adverse or unacceptable side effects may be
identified during the development of our product candidates, which could prevent or delay regulatory approval and commercialization, increase our
costs or necessitate the abandonment or limitation of the development of some of our product candidates.
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 effective for use in each target indication, and failures can
occur at any stage of testing. Clinical trials often fail to demonstrate safety or efficacy of the product candidate studied for the target indication. Based on
the health profile of our patient population, it is possible that we may experience a serious adverse event that could prevent or delay regulatory approval
and commercialization, increase our costs or necessitate the abandonment or limitation of the development of some of our product candidates.
If our product candidates are associated with side effects in clinical trials or have characteristics that are unexpected, we may need to abandon
their development or limit development to more narrow uses in which the side effects or other characteristics are less prevalent, less severe or more
acceptable from a risk-benefit perspective. The FDA or an institutional review board may also require that we suspend, discontinue, or limit our clinical
trials based on safety information, or that we conduct additional animal or human studies regarding the safety and efficacy of our product candidates which
we have not planned or anticipated. Such findings could further result in regulatory authorities failing to provide marketing authorization for our product
candidates or limiting the scope of the approved indication, if approved. Many product candidates that initially showed promise in early stage testing have
later been found to cause side effects that prevented further development of the product candidate.
Additionally, if one or more of our product candidates receives marketing approval, and we or others identify undesirable side effects caused
by such products, a number of potentially significant negative consequences could result, including:
•
regulatory authorities may withdraw approvals of such product;
•
regulatory authorities may require additional warnings on the labels;
•
we may be required to 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 not be able to achieve or maintain third-party payor coverage and adequate reimbursement; and
•
our reputation and physician or patient acceptance of our products may suffer.
There can be no assurance that we will resolve any issues related to any product-related adverse events to the satisfaction of the FDA or
foreign regulatory agency in a timely manner or at all. Moreover, any of these events could prevent us from achieving or maintaining market acceptance of
the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.
As an organization, we have never completed pivotal clinical trials, and we may be unable to do so for any product candidates we may develop.
We will need to successfully complete pivotal clinical trials in order to obtain the approval of the FDA, EMA or other regulatory agencies to
market bentracimab, PB6440 or any future product candidate. Carrying out pivotal clinical trials is a complicated process. As an organization, we have not
previously completed any later stage or pivotal clinical trials. In order to do so, we have needed to and will need to further expand our clinical development
and regulatory capabilities, and we may be unable to recruit and train additional qualified personnel. We also expect to continue to rely on third parties to
conduct our pivotal clinical trials. See “— Risks Related to our Dependence on Third Parties —We rely on third parties to conduct a significant portion of
our existing clinical trials and potential future clinical trials for product candidates, and those third parties may not perform satisfactorily, including failing
to meet deadlines for the completion of such trials.” In particular, pursuant to the SFJ Agreement, SFJ has primary responsibility for clinical development
and regulatory activities for bentracimab in China and Japan and provides clinical trials operational support in the European Union. Consequently, we may
be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to BLA or NDA submission and approval of
bentracimab, PB6440 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. Failure to commence or complete, or delays in, our planned clinical trials, could
prevent us from or delay us in commercializing our product candidates.
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If we experience delays or difficulties in the enrollment and/or maintenance of patients in clinical trials, our receipt of necessary regulatory approvals
could be delayed or prevented.
Successful and timely completion of clinical trials will require that we enroll a sufficient number of patients. Patient enrollment, a significant
factor in the timing of clinical trials, is affected by many factors, including the size and nature of the patient population. Trials may be subject to delays as a
result of patient enrollment taking longer than anticipated or patient withdrawal. We may not be able to initiate or continue clinical trials for our product
candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or foreign
regulatory authorities. We cannot predict how successful we will be at enrolling subjects in future clinical trials. Subject enrollment is affected by other
factors including:
•
the eligibility criteria for the trial in question;
•
the size of the patient population and process for identifying patients;
•
the perceived risks and benefits of the product candidate in the trial;
•
the availability of competing commercially available therapies and other competing drug candidates’ clinical trials;
•
the willingness of patients to be enrolled in our clinical trials;
•
the efforts to facilitate timely enrollment in clinical trials;
•
potential disruptions caused by the COVID-19 pandemic, including difficulties in initiating clinical sites, enrolling and retaining
participants, diversion of healthcare resources away from clinical trials, travel or quarantine policies that may be implemented, and
other factors;
•
the patient referral practices of physicians;
•
the ability to monitor patients adequately during and after treatment;
•
the proximity and availability of clinical trial sites for prospective patients; and
•
economic and political instability in countries where our trial sites are located, including terrorist attacks, civil unrest and actual or
threatened armed conflict.
Our inability to enroll a sufficient number of patients for clinical trials would result in significant delays and could require us to abandon one
or more clinical trials, and potentially clinical development programs, altogether. For example, we have stopped development of pemziviptadil for the
treatment of PAH after previously voluntarily ending our Phase 2b trial of pemziviptadil in PAH due to COVID-19 impacts on the rate of enrollment in the
trial, among other impacts.
Enrollment delays in any of our clinical trials may result in increased development costs for our product candidates, which would cause the
value of our company to decline and limit our ability to obtain additional financing. Additionally, we rely on and expect to continue to rely on CROs and
clinical trial sites to ensure the proper and timely conduct of our clinical trials and we will have limited influence over their performance.
Furthermore, even if we are able to enroll a sufficient number of patients for our clinical trials, we may have difficulty maintaining enrollment
of such patients in our clinical trials.
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 product characteristics. 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.
Our clinical development of bentracimab depends on the continued use of ticagrelor as an antiplatelet therapy.
We are developing bentracimab as a ticagrelor reversal agent for the treatment of patients on ticagrelor. If previously unknown safety risks
related to ticagrelor are discovered that would affect its use as an antiplatelet therapy, or if
42
market acceptance of ticagrelor significantly changes, we may pause or stop development of bentracimab, which would significantly and adversely affect
our business prospects.
ELP is a novel technology, which makes it difficult to predict the time, risks and cost of development and of subsequently obtaining regulatory approval
of our ELP product candidates.
Certain of our preclinical product candidates are based on our proprietary ELP technology. Some of our future success depends on the
successful development of this technology and products based on it. To our knowledge, no regulatory authority has granted approval to any person or
entity, including us, to market and commercialize therapeutics using our novel ELP technology. We may never receive approval to market and
commercialize any product candidate that utilizes ELP.
If we uncover any previously unknown risks related to our ELP technology, or if we experience unanticipated problems or delays in
developing our ELP product candidates, we may be unable to complete our clinical trials and preclinical studies, meet the obligations of our license
agreements or commercialize our product candidates on a timely or profitable basis. If serious adverse events or unacceptable side effects are observed in
clinical trials or preclinical studies of a product candidate based on our ELP technology, our ability to develop other product candidates based on our ELP
technology would be adversely affected.
Breakthrough Therapy designation by the FDA and PRIME designation by the EMA for bentracimab, or any other product candidate, may not lead to
a faster development or regulatory review or approval process, and it does not increase the likelihood that the product candidate will receive marketing
approval.
We have received a Breakthrough Therapy designation for bentracimab for the reversal of ticagrelor's antiplatelet activity and may, in the
future, apply for Breakthrough Therapy designation for other product candidates. A Breakthrough Therapy is defined as a product candidate that is
intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence
indicates that the product candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such
as substantial treatment effects observed early in clinical development. For product candidates that have been designated as Breakthrough Therapies,
interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while
minimizing the number of patients placed in ineffective control regimens. Product candidates designated as breakthrough therapies by the FDA are also
eligible for priority review if supported by clinical data at the time of the submission of the BLA.
Designation as a Breakthrough Therapy is within the discretion of the FDA. Accordingly, even if we believe that one of our product
candidates meets the criteria for designation as a Breakthrough Therapy, the FDA may disagree and instead determine not to make such designation. In any
event, the receipt of a Breakthrough Therapy designation for a product candidate may not result in a faster development process, review or approval
compared to product candidates considered for approval under conventional FDA procedures and it would not assure ultimate approval by the FDA. In
addition, even if one or more of our product candidates qualifies as a Breakthrough Therapy, the FDA may later decide that the product candidate no longer
meets the conditions for qualification or it may decide that the time period for FDA review or approval will not be shortened.
Access to the PRIME initiative is granted by the EMA to support the development and accelerate the review of new therapies to treat patients
with unmet medical need. The receipt of this access for a product candidate may not result in a faster development process, review or approval compared to
products considered for approval under conventional EMA procedures and, in any event, does not assure ultimate approval by the EMA. In addition, even
though bentracimab has been granted access to PRIME, the EMA may later decide that it no longer meets the conditions for such access.
We may not be successful in our efforts to increase our pipeline of product candidates, including by pursuing additional indications for our current
product candidates or in-licensing or acquiring additional product candidates for other diseases.
A key element of our strategy is to build and expand our pipeline of product candidates, including by developing PB6440 for treatment-
resistant hypertension and by identifying other product candidates using our ELP technology. In addition, we may in-license or acquire additional product
candidates for other diseases. We may not be able to identify or develop product candidates that are safe, tolerable and effective. Even if we are successful
in continuing to build our pipeline, the potential product candidates that we identify, in-license or acquire may not be suitable for clinical development,
including as a result of their being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will
receive marketing approval and achieve market acceptance.
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We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications
that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and management resources, we focus on development programs and product candidates that we identify for
specific indications. As such, we are currently primarily focused on the development of bentracimab as a ticagrelor reversal agent and PB6440 for
treatment-resistant hypertension. We previously pursued development of pemziviptadil for the treatment of PAH, but after a strategic review, have decided
to stop further development of pemziviptadil in order to reprioritize resources and capital towards pre-commercialization activities for bentracimab and the
advancement of other pipeline programs, including PB6440 for resistant hypertension.
We may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater
commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.
Our spending on current and future development programs and product candidates for specific indications may not yield any commercially viable products.
If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that
product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain
sole development and commercialization rights to such product candidate.
The United Kingdom’s withdrawal from the European Union may adversely impact our ability to obtain regulatory approvals of our product candidates
in the United Kingdom, result in restrictions or imposition of taxes and duties for importing our product candidates into the United Kingdom, and may
require us to incur additional expenses in order to develop, manufacture and commercialize our product candidates in the United Kingdom.
Following the result of a referendum in 2016, the United Kingdom left the European Union on January 31, 2020, commonly referred to as
Brexit. Pursuant to the formal withdrawal arrangements agreed to by the United Kingdom and the European Union, the United Kingdom was subject to a
transition period until December 31, 2020, or the Transition Period, during which EU rules continued to apply. A trade and cooperation agreement, or the
Trade and Cooperation Agreement, that outlines the post-Transition Period trading relationship between the United Kingdom and the European Union was
agreed to in December 2020 and formally entered into force on May 1, 2021.
Since a significant proportion of the regulatory framework in the United Kingdom applicable to our business and our product candidates is
derived from EU directives and regulations, Brexit has had, and will continue to have, a material impact on the regulatory regime with respect to the
development, manufacture, importation, approval and commercialization of our product candidates in the United Kingdom. For example, Great Britain is
no longer covered by the centralized procedures for obtaining EU-wide marketing authorizations from the EMA, and a separate marketing authorization
will be required to market our product candidates in Great Britain. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of
Brexit or otherwise, would delay or prevent us from commercializing our product candidates in the United Kingdom and limit our ability to generate
revenue in that territory. While the Trade and Cooperation Agreement provides for the tariff-free trade of medicinal products between the United Kingdom
and the European Union, there are additional non-tariff costs to such trade that did not exist prior to the end of the Transition Period and frequent delays in
the transit of goods between the United Kingdom and the European Union. Further, should the United Kingdom diverge from the European Union from a
regulatory perspective in relation to medicinal products, tariffs could be put into place in the future. We could therefore, both now and in the future, face
significant additional expenses (when compared to prior to the end of the Transition Period) to operate our business, which could significantly and
materially harm or delay our ability to generate revenues or achieve profitability of our business. Any further changes in international trade, tariff and
import/export regulations as a result of Brexit or otherwise may impose unexpected duty costs or other non-tariff barriers on us. These developments, or the
perception that any of them could occur, may significantly reduce global trade and, in particular, trade between the impacted nations and the United
Kingdom.
Risks Related to the Commercialization of Our Product Candidates
Market acceptance of bentracimab, if approved, will depend heavily on the continued market acceptance and use of ticagrelor.
The commercial success of bentracimab as a ticagrelor reversal agent, if approved, is dependent on the continued market acceptance and use
of ticagrelor as an antiplatelet therapy. Ticagrelor competes against other commercially available antiplatelet therapies, including other P2Y receptor
antagonists, many of which are available as generic drugs and therefore significantly less expensive than ticagrelor. New antiplatelet therapies may also be
developed in the future, including other P2Y receptor antagonists and other antiplatelet therapies, which could also have reversal agents, that could
displace ticagrelor as the American College of Cardiology, American Heart Association and European Society of Cardiology’s preferred antiplatelet agent
for acute coronary syndrome or otherwise reduce ticagrelor’s market position. Any such changes in the
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market acceptance and use of ticagrelor would significantly harm our business, results of operations and prospects for bentracimab.
Even if any of our product candidates receive marketing approval, they 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 of our product candidates receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians,
patients, third-party payors and others in the medical community. If our product candidates do not achieve an adequate level of acceptance, we may not
generate significant revenue and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial
sale, will depend on a number of factors, including:
•
the efficacy, safety and potential advantages compared to alternative treatments;
•
our ability to offer our products for sale at competitive prices;
•
the convenience and ease of administration compared to alternative treatments;
•
product labeling or product insert requirements of the FDA or foreign regulatory authorities, including any limitations or warnings
contained in a product’s approved labeling, including any black box warning;
•
the willingness of the target patient population to try new treatments and of physicians to prescribe these treatments;
•
our ability to hire and retain a sales force in the United States;
•
Alfasigma's ability to achieve a successful commercial launch of bentracimab in its target countries pursuant to the Alfasigma
Sublicense;
•
the strength of marketing and distribution support;
•
the availability of third-party coverage and adequate reimbursement for bentracimab, PB6440 and any other product candidates, once
approved;
•
the prevalence and severity of any side effects; and
•
any restrictions on the use of our products together with other medications.
If we are unable to establish sales, marketing and distribution capabilities for bentracimab, PB6440 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.
To achieve commercial success for bentracimab, PB6440 or any other product candidate for which we may obtain marketing approval, we
will need to establish a sales and marketing organization or identify a commercialization partner. We are currently building 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 sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time consuming and could delay any
product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing 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
•
unforeseen costs and expenses associated with creating an independent sales and marketing organization.
Pursuant to the Alfasigma Sublicense, we granted to Alfasigma exclusive rights to develop, use, sell, have sold, offer for sale and import any
product composed of or containing bentracimab in the Sublicense Territory. If we are unable to
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successfully establish our own sales, marketing 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 additional 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 sales, marketing and distribution capabilities successfully, either on our own
or in collaboration with additional third parties, we will not be successful in commercializing our product candidates.
We face substantial competition, which may result in a smaller than expected commercial opportunity and/or others discovering, developing or
commercializing products before or more successfully than we do.
The life sciences industry is highly competitive. We face competition with respect to our current product candidates, and will face competition
with respect to any product candidates that we may seek to develop or commercialize in the future, from many different sources, including major
pharmaceutical and specialty pharmaceutical companies, compounding facilities, academic institutions and governmental agencies and public and private
research institutions.
We are currently not aware of reversal agents approved or in clinical development for ticagrelor or any other antiplatelet drugs. In the
European Union, an extracorporeal whole blood purification adsorber device is available that may be useful for non-specific removal of ticagrelor during
some cardiac procedures when used in conjunction with cardiopulmonary bypass. The maker of the device, CytoSorbents Corporation, has also initiated a
clinical trial in the U.S. to evaluate the use of the DrugSorb-ATR antithrombotic removal system during cardiothoracic surgery. Upon approval,
bentracimab would be the only therapeutic agent available for specific reversal of ticagrelor. There can be no assurance that competitors will not seek to
develop a competing product. Moreover, the success of bentracimab, if approved, will be dependent on the continued success of ticagrelor. See “—Market
acceptance of bentracimab, if approved, will depend heavily on the continued market acceptance and use of ticagrelor.”
In addition, we are aware of several other products and product candidates as potential treatments for treatment-resistant hypertension that
could compete with PB6440. Although we anticipate that PB6440 may be used as a complement to patients’ existing antihypertensive therapies, we expect
to compete with existing generic treatments for hypertension that target the mineralocorticoid receptor. In addition to the currently approved
mineralocorticoid receptor antagonists, eplerenone and spironolactone, we are also aware of a number of therapies in clinical development for the treatment
of resistant hypertension with which PB6440 would compete if approved, including CIN-107, an aldosterone synthase inhibitor currently being evaluated
by CinCor Pharma, Inc. in two Phase 2 clinical trials and MLS-101, an aldosterone synthase inhibitor being evaluated by Mineralys Therapeutics in a
Phase 2 clinical trial.
In addition, our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer
or more effective, have fewer or less severe side effects, are more convenient or are less expensive than bentracimab, PB6440 or any other product that we
may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for our
product, which could result in our competitors establishing a strong market position before we are able to enter the market.
Many of the companies against which we are competing, or against which we may compete in the future, have significantly greater financial
resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and
marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources
being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified
scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies
complementary to, or that may be necessary for, our programs.
The success of bentracimab as a ticagrelor reversal agent, PB6440 for treatment-resistant hypertension or any future product candidate will depend
significantly on coverage and adequate reimbursement or the willingness of patients to pay for these procedures.
We believe our success depends on obtaining and maintaining coverage and adequate reimbursement for bentracimab as a ticagrelor reversal
agent, PB6440 for treatment-resistant hypertension and/or procedures utilizing bentracimab, PB6440 or any other product candidate, and the extent to
which patients will be willing to pay out-of-pocket for such products and procedures, in the absence of reimbursement for all or part of the cost. 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
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used may not be available. Even if the procedure using our product is covered, third-party payors, such as Medicare, Medicaid, managed care
organizations, and private health insurers, may package the cost of the drug into the procedure payment and not separately reimburse the physician for the
costs associated with our product. A decision by a third-party payor not to cover or separately reimburse for our products could reduce physician utilization
of our products once approved. Additionally, in the United States, there is no uniform policy of coverage and reimbursement among third-party payors.
Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However,
decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a payor-by-payor basis. One payor’s determination to
provide coverage for a drug product does not assure that other payors will also provide coverage, and adequate reimbursement.
Third-party payors determine which products and procedures they will cover and establish reimbursement levels. Even if a third-party payor
covers a particular product or procedure, the resulting reimbursement payment rates may not be adequate. Patients who are treated in-office for a medical
condition generally rely on third-party payors to reimburse all or part of the costs associated with the procedure, including costs associated with products
used during the procedure, and may be unwilling to undergo such procedures in the absence of such coverage and adequate reimbursement. Physicians may
be unlikely to offer procedures for such treatment if they are not covered by insurance and may be unlikely to purchase and use our product candidates, if
approved, for our stated indications unless coverage is provided and reimbursement is adequate.
Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that a procedure
is safe, effective and medically necessary; appropriate for the specific patient; cost-effective; supported by peer-reviewed medical journals; included in
clinical practice guidelines; and neither cosmetic, experimental, nor investigational.
Further, from time to time, typically on an annual basis, payment rates are updated and revised by third-party payors. An example of payment
rate updates occurs in the Medicare program updates to physician payments, which is done on an annual basis. In the past, when the application of the
formula resulted in lower payment, Congress has passed interim legislation to prevent the reductions. The Medicare Access and CHIP Reauthorization Act
of 2015, or MACRA, ended the use of the statutory formula and introduced a merit-based incentive bonus program for Medicare physicians, also referred
to as the Quality Payment Program. This program provides clinicians with two ways to participate, including through the Advanced Alternative Payment
Models and the Merit-based Incentive Payment System. In November 2019, the Centers for Medicare & Medicaid Services, or CMS, issued a rule
finalizing the changes to the Quality Payment Program. The full impact to overall physician reimbursement as a result of the introduction of the Quality
Payment Program remains unclear. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in
payments from private payors. Any resulting decrease in payment under the merit-based reimbursement system may adversely affect our revenue and
results of operations. In addition, the Medicare physician fee schedule has been adapted by some private payors into their plan-specific physician payment
schedule. We cannot predict how pending and future healthcare legislation will impact our business, and any changes in coverage and reimbursement that
further restricts coverage of our product candidates or lowers reimbursement for procedures using our products could harm our business.
Foreign governments also have their own healthcare reimbursement systems, which vary significantly by country and region, and we cannot
be sure that coverage and adequate reimbursement will be made available with respect to the treatments in which our products are used under any foreign
reimbursement system.
There can be no assurance that bentracimab, PB6440 or any other product candidate, if approved for sale in the United States or in other
countries, will be considered medically reasonable and necessary, that it will be considered cost-effective by third-party payors, that coverage or an
adequate level of reimbursement will be available or that reimbursement policies and practices in the United States and in foreign countries where our
products are sold will not adversely affect our ability to sell our product candidates profitably, if they are approved for sale.
The market for bentracimab, PB6440 or any other product candidates may be smaller than we expect.
Our estimates of the potential market opportunity for bentracimab, PB6440 or any other product candidates include several key assumptions
based on our industry knowledge, industry publications and third-party research reports. These assumptions include, for bentracimab, the number of
patients on ticagrelor who will experience uncontrolled bleeding or who will require surgery; and for PB6440, the number of patients with treatment-
resistant hypertension, as well as the estimated reimbursement levels for each product candidate if approved. However, there can be no assurance that any
of these assumptions are, or will remain, accurate. If the actual market for bentracimab, PB6440 or for any other product candidates we may develop is
smaller than we expect, our revenues, if any, may be limited and it may be more difficult for us to achieve or maintain profitability.
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Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.
We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an
even greater risk if we commercially sell any products that we may develop. If we cannot successfully defend ourselves against claims that our product
candidates or drugs caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
•
decreased demand for any product candidates or drugs that we may develop;
•
injury to our reputation and significant negative media attention;
•
withdrawal of clinical trial participants;
•
significant costs to defend the related litigation;
•
substantial monetary awards paid to trial participants or patients;
•
loss of revenue;
•
reduced resources of our management to pursue our business strategy; and
•
the inability to commercialize any products that we may develop.
We currently hold $10,000,000 in product liability insurance coverage in the aggregate, with a per incident limit of $10,000,000, which may
not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage as we expand our clinical trials or if we
commence commercialization of our product candidates. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage
at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
Risks Related to Our Dependence on Third Parties
We rely on third parties to conduct a significant portion of our existing clinical trials and potential future clinical trials for product candidates, and
those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials.
To date, we have generally engaged CROs to conduct or assist in our ongoing clinical trials of bentracimab and other prior clinical trials of
our product candidates. We expect to engage CROs for future clinical trials for bentracimab, PB6440 or other product candidates that we may progress to
clinical development. In addition, pursuant to the SFJ Agreement, SFJ has primary responsibility for clinical development and regulatory activities for
bentracimab in China and Japan and provides clinical trials operational support in the European Union. We expect to continue to rely on third parties,
including clinical data management organizations, medical institutions and clinical investigators, to conduct these clinical trials. Any of these third parties
may terminate their engagements with us, some in the event of an uncured material breach and some at any time for convenience. If any of our
relationships with these third parties terminate, we may not be able to timely enter into arrangements with alternative third parties or to do so on
commercially reasonable terms, if at all. Switching or adding CROs involves substantial cost and requires management time and focus. In addition, there is
a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired
clinical development timelines. Though we intend to carefully manage our relationships with our CROs, there can be no assurance that we will not
encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition
and prospects. Further, the performance of our CROs may also be interrupted by the ongoing COVID-19 pandemic, including due to travel or quarantine
policies, heightened exposure of CRO staff who are healthcare providers to COVID-19 or prioritization of resources toward the pandemic.
In addition, any third parties conducting our clinical trials will not be our employees, and except for remedies available to us under our
agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our clinical programs. If these third
parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or
accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons,
our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our
product candidates. Consequently, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could
increase substantially and our ability to generate revenue could be delayed significantly.
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We rely on these parties for execution of our preclinical studies and clinical trials, and generally do not control their activities. Our reliance on
these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. For
example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and
protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly referred to as good clinical practices, or GCPs, for conducting,
recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and
confidentiality of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a
government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and
criminal sanctions. If we or any of our CROs or other third parties, including trial sites, fail to comply with applicable GCPs, the clinical data generated in
our clinical trials may be deemed unreliable and the FDA, EMA or comparable foreign regulatory authorities may require us to perform additional clinical
trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority
will determine that any of our clinical trials complies with GCP regulations. In addition, our clinical trials must be conducted with product produced under
cGMP conditions. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.
In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive
compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA. The
FDA may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation
of the trial. The FDA may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself
may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA and may ultimately lead to the denial
of marketing approval of bentracimab, PB6440 or any other product candidates.
We also expect to rely on other third parties to store and distribute product supplies for our clinical trials. Any performance failure on the part
of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, producing
additional losses and depriving us of potential revenue.
We currently rely, and expect to continue to rely, on third parties for the cGMP manufacture of bentracimab, PB6440 and any other product candidates
that we may pursue for clinical development as well as for commercial manufacturing, if we receive marketing approval. This reliance on third parties
increases the risk that we will not have sufficient quantities of our product candidates or such quantities at an acceptable cost, which could delay,
prevent or impair our development or commercialization efforts.
We do not have any cGMP manufacturing facilities. We currently rely, and expect to continue to rely, on third parties for the cGMP
manufacture of bentracimab, PB6440 and any other product candidates that we may pursue, for clinical development as well as for commercial
manufacture of bentracimab, PB6440 and any other product candidates which we may pursue, if we receive marketing approval. We also rely on a
proprietary E. coli strain owned by Wacker, which we have licensed for the production of bentracimab. Our reliance on Wacker’s E. coli strain increases the
risk that we will not have sufficient quantities of bentracimab or be able to obtain quantities at an acceptable cost or quality, which could delay, prevent or
impair our ability to timely conduct our clinical trials or our other development or commercialization efforts.
With respect to bentracimab, we initially relied upon Wacker for manufacture of drug substance for use in our clinical trials. We completed a
technology transfer of our current manufacturing process for bentracimab from Wacker to BioVectra, another cGMP contract manufacturer. We have
engaged BioVectra to manufacture drug substance for our ongoing clinical trials and to manufacture commercial supply of bentracimab following
regulatory approval, if obtained. We will need to perform analytical and other tests to demonstrate that the new materials produced by BioVectra, or any
other future third-party manufacturer that we engage, are comparable in all respects to the product utilized in our previous clinical trials. There is no
assurance that any such product will pass the required comparability testing in a timely manner, or at all, that any other future third-party manufacturer that
we engage will be successful in producing bentracimab or that any materials produced by BioVectra or any other third-party manufacturer that we engage
will have the same effect in patients that we have observed to date with respect to materials used in our previous clinical trials. Moreover, if supplies are
interrupted or produced in poor yield or quality, it would materially harm our business. BioVectra will be required to scale up the manufacturing process to
meet our future needs of bentracimab for later-stage clinical development and, if approved, commercialization. If BioVectra is unable to successfully scale
up the manufacturing process, we would need to find alternative manufacturing facilities or an alternative manufacturing process, which we may not be
able to do on a timely basis or on commercially reasonable terms, if at all, and which could adversely affect the clinical development of bentracimab.
49
We also expect to rely on third-party manufacturers or third-party collaborators for the manufacture of commercial supply of bentracimab,
PB6440 and any other product candidates for which we obtain marketing approval. The facilities used by our contract manufacturers to manufacture our
product candidates must be inspected by the FDA or other regulatory authorities after we submit our BLA or comparable marketing application to the FDA
or other regulatory authority. We do not have control over a supplier’s or manufacturer’s compliance with laws, regulations and applicable cGMP standards
or similar regulatory requirements and other laws and regulations, such as those related to environmental health and safety matters. If our contract
manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or other
regulatory authorities, we may be unable to obtain regulatory approval of our marketing applications. In addition, we have no control over the ability of our
contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory
authority finds deficiencies with or does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in
the future, 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, if approved.
We may be unable to enter into any agreements with future third-party manufacturers or to do so on acceptable terms. Even if we enter into
such agreements, qualifying and validating such manufacturers may take a significant period of time and reliance on third-party manufacturers entails
additional risks, including:
•
reliance on the third party for regulatory compliance and quality assurance;
•
the possible breach of the manufacturing agreement by the third party;
•
the incurrence of upfront scale-up costs prior to commercial approval;
•
the possible misappropriation of our proprietary information, including our trade secrets and know-how;
•
the possible increase in costs for the raw materials for our product candidates; and
•
the possible termination or nonrenewal of any agreement by any third party at a time that is costly or inconvenient for us.
Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on
us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of
product candidates or drugs, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supply of our products.
Our product candidates, and any drugs that we may develop, may compete with other product candidates and drugs for access to
manufacturing facilities. The performance of our third-party manufacturers have been and may in the future be interrupted by production shortages or other
supply interruptions resulting from the ongoing COVID-19 pandemic. There are no assurances we would be able to enter into similar commercial
arrangements with other manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us in a timely manner. Any
performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval.
We are collaborating with SFJ for the development of bentracimab and with Alfasigma for the commercialization of bentracimab in Europe and
certain other geographic areas, and we may seek additional collaborations with third parties for the development or commercialization of our product
candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.
We are collaborating with SFJ for the development of bentracimab and with Alfasigma for the commercialization of bentracimab in Europe
and certain other geographic regions. We may seek additional third-party collaborators for the development and commercialization of our product
candidates, including for the commercialization of any of our product candidates that are approved for marketing outside the United States. Our likely
collaborators for any such arrangements include regional and national pharmaceutical companies and biotechnology companies. If we enter into any
additional such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our collaborators
dedicate to the development or commercialization of our product candidates. Our ability to generate revenue from these arrangements will depend on our
collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.
Collaborations involving our product candidates would pose the following risks to us:
•
collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;
50
•
collaborators may not perform their obligations as expected;
•
collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may
elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the
collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create
competing priorities;
•
collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a
product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
•
to the extent they are not otherwise prohibited in our agreements with them, collaborators could independently develop, or develop
with third parties, products that compete directly or indirectly with our product candidates if the collaborators believe that
competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically
attractive than ours;
•
product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product
candidates or drugs, which may cause collaborators to cease to devote resources to the commercialization of our product candidates;
•
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;
•
disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of
development, might cause delays or termination of the research, development or commercialization of product candidates, might lead
to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would
be time-consuming and expensive;
•
collaborators may not properly maintain or defend our or their intellectual property rights or may use our or their proprietary
information in such a way as to invite litigation that could jeopardize or invalidate such intellectual property or proprietary
information or expose us to potential litigation;
•
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;
and
•
collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise additional
capital to pursue further development or commercialization of the applicable product candidates.
Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If
SFJ, Alfasigma or any future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product
development or commercialization program could be delayed, diminished or terminated.
We may seek to establish additional collaborations, and if we are unable to do so, we may have to alter our development and commercialization plans.
Our product development programs and the potential commercialization of our product candidates will require substantial additional capital.
We are collaborating with SFJ for the development of bentracimab and with Alfasigma for the commercialization of bentracimab in Europe and certain
other geographic regions. For our other product candidates, we may decide to establish additional collaborations with pharmaceutical and biotechnology
companies for the development and potential commercialization of those product candidates.
We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for any collaboration will
depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and
the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, 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
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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. Collaborations are complex and time-consuming to negotiate and document. 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 additional 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 such product candidate, 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 sales or marketing 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 revenue.
Risks Related to Our Intellectual Property
If we are unable to obtain or protect intellectual property rights related to any of our product candidates, we may not be able to compete effectively in
our market.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our
product candidates and our ELP technology. Our success depends in large part on our ability to obtain and maintain patent and other intellectual property
protection in the United States and in other countries with respect to our proprietary technology and product candidates.
As of the date of this Annual Report on Form 10-K, our patent estate contained at least 22 patent families that we own or in-license that
protect various aspects of our product candidates or our ELP technology platform. We own or have rights in 26 United States patents, 16 United States
patent applications, 135 foreign patents and 75 foreign patent applications. We cannot offer any assurances about which of our patent applications will
issue, the breadth of any resulting patent or whether any of the issued patents will be found invalid and unenforceable or will be threatened by third parties.
We cannot offer any assurances that the breadth of our granted patents will be sufficient to stop a competitor from developing and commercializing a
product, including a biosimilar product that would be competitive with one or more of our product candidates. Furthermore, any successful challenge to
these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful commercialization
of any of our product candidates. Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product
candidate under patent protection could be reduced.
The patent prosecution process is expensive and time-consuming. We may not be able to prepare, file and prosecute all necessary or desirable
patent applications at a commercially reasonable cost or in a timely manner or in all jurisdictions. It is also possible that we may fail to identify patentable
aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them.
Moreover, depending on the terms of any future in-licenses to which we may become a party, we may not have the right to control the preparation, filing
and prosecution of patent applications, or to maintain the patents, covering technology in-licensed from third parties. Therefore, these patents and patent
applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
In addition to the protection provided by our patent estate, we rely on trade secret protection and confidentiality agreements to protect
proprietary know-how that is not amenable to patent protection. Although we generally require all of our employees to assign their inventions to us, and all
of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information, or technology to enter into
confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed, or that our trade secrets and other
confidential proprietary information will not be disclosed. Moreover, our competitors may independently develop knowledge, methods and know-how
equivalent to our trade secrets. Competitors could purchase our products, if approved, and replicate some or all of the competitive advantages we derive
from our development efforts for technologies on which we do not have patent protection. If any of our trade secrets were to be lawfully obtained or
independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or
information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position
would be harmed.
We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and
physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, our
agreements or security measures may be breached, and we may not have
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adequate remedies for any breach. Also, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against
third parties for misappropriating the trade secret. In addition, others may independently discover our trade secrets and proprietary information. For
example, the FDA is considering whether to make additional information publicly available on a routine basis, including information that we may consider
to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future. If we
are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that
we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could
materially adversely affect our business, results of operations and financial condition.
Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time, and if we do not obtain protection
under the Hatch-Waxman Amendments and similar non-United States legislation for extending the term of patents covering each of our product
candidates, our business may be materially harmed.
Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such
candidates might expire before or shortly after such candidates are commercialized. Depending upon the timing, duration and conditions of FDA marketing
approval of our product candidates, one or more of our United States patents may be eligible for limited patent term extension under the Drug Price
Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, and similar legislation in the European Union. The
Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective
patent term lost during product development and the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent
beyond a total of 14 years from the date of product approval. Only one patent may be extended, and only those claims covering the approved drug, a
method for using it, or a method for manufacturing it may be extended. However, we may not receive an extension if we fail to apply within applicable
deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension
could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during
which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner.
As a result, our revenue from applicable products could be reduced and could have a material adverse effect on our business.
If we fail to comply with our obligations in our current and future intellectual property licenses with third parties, including the SFJ Agreement and
the Alfasigma Sublicense, we could lose rights that are important to our business.
We are heavily reliant upon licenses to certain patent rights and proprietary technology for the development of bentracimab, and our ELP
technology. These license agreements impose diligence, development and commercialization timelines and milestone payments, royalties, insurance and
other obligations on us. If we fail to comply with our obligations, our licensors may have the right to terminate our licenses, in which event we might not be
able to develop, manufacture or market any product that is covered by the intellectual property we in-license from such licensor and may face other
penalties. Such an occurrence would materially adversely affect our business prospects.
Licenses to additional third-party technology and materials that may be required for our development programs may not be available in the
future or may not be available on commercially reasonable terms, or at all, which could have a material adverse effect on our business and financial
condition. Although we control the prosecution, maintenance and enforcement of the licensed and sublicensed intellectual property relating to bentracimab,
we may require the cooperation of our licensors and any upstream licensor, which may not be forthcoming. Therefore, we cannot be certain that the
prosecution, maintenance and enforcement of these patent rights will be in a manner consistent with the best interests of our business. If we or our licensor
fail to maintain such patents, or if we or our licensor lose rights to those patents or patent applications, the rights we have licensed may be reduced or
eliminated and our right to develop and commercialize any of our product candidates that are the subject of such licensed rights could be adversely
affected. In addition to the foregoing, the risks associated with patent rights that we license from third parties will also apply to patent rights we may own in
the future. Further, if we fail to comply with our development obligations under our license agreements, we may lose our patent rights with respect to such
agreement on a territory-by-territory basis, which would affect our patent rights worldwide.
Termination of our current or any future license agreements would reduce or eliminate our rights under these agreements and may result in
our having to negotiate new or reinstated agreements with less favorable terms or cause us to lose our rights under these agreements, including our rights to
important intellectual property or technology. Any of the foregoing could prevent us from commercializing our other product candidates, which could have
a material adverse effect on our operating results and overall financial condition.
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In addition, intellectual property rights that we in-license in the future may be sublicenses under intellectual property owned by third parties,
in some cases through multiple tiers. The actions of our licensors may therefore affect our rights to use our sublicensed intellectual property, even if we are
in compliance with all of the obligations under our license agreements. Should our licensors or any of the upstream licensors fail to comply with their
obligations under the agreements pursuant to which they obtain the rights that are sublicensed to us, or should such agreements be terminated or amended,
our ability to develop and commercialize our product candidates may be materially harmed.
Further, we have granted SFJ a security interest in all of our assets related to bentracimab, pursuant to the SFJ Agreement. If we are unable to
meet our payment obligations to SFJ, SFJ may exercise its remedies as a holder of a first priority security interest, which would result in a loss of our
bentracimab intellectual property rights and our business would be materially harmed.
Additionally, in connection with the Alfasigma Sublicense, in June 2021 we and Alfasigma entered into an Acknowledgement of Grant of
Sublicense with MedImmune, which provides for, among other things, a potential assignment of the Alfasigma Sublicense from us to MedImmune or a
potential assignment of the Medimmune License from us to Alfasigma, in either case in the event that we breach certain obligations under the Medimmune
License that are not cured or remedied and SFJ has grounds to execute a “Program Transfer” (as defined in the SFJ Agreement) but elects not to do so,
which could result in a loss of our bentracimab intellectual property rights and related revenue streams and our business would be materially harmed. See
“— Risks Related to Our Financial Position and Capital Needs —If we receive regulatory approval for bentracimab, or alternatively if the SFJ Agreement
were to be terminated, we will be required to make substantial payments to SFJ pursuant to the SFJ Agreement. If we do not have sufficient funding or cash
flow from our business to meet our payment obligations under the SFJ Agreement, SFJ could exercise its remedies as a holder of a first-priority security
interest in our assets and our business could be materially harmed.”
Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or
defense of our future patents.
Our ability to obtain patents is highly uncertain because, to date, some legal principles remain unresolved, and there has not been a consistent
policy regarding the breadth or interpretation of claims allowed in patents in the United States. Furthermore, the specific content of patents and patent
applications that are necessary to support and interpret patent claims is highly uncertain due to the complex nature of the relevant legal, scientific, and
factual issues. Changes in either patent laws or interpretations of patent laws in the United States and other countries may diminish the value of our
intellectual property or narrow the scope of our patent protection.
For example, on September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith
Act included a number of significant changes to United States patent law. These included provisions that affect the way patent applications will be
prosecuted and may also affect patent litigation. The United States Patent and Trademark Office, or USPTO, has developed new and untested regulations
and procedures to govern the full implementation of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-
Smith Act, and in particular, the first to file provisions, became effective in March 2013. The Leahy-Smith Act has also introduced procedures making it
easier for third parties to challenge issued patents, as well as to intervene in the prosecution of patent applications. Finally, the Leahy-Smith Act contained
new statutory provisions that require the USPTO to issue new regulations for their implementation, and it may take the courts years to interpret the
provisions of the new statute. It is unclear what, if any, impact the Leahy-Smith Act will have on the operation of our business and the protection and
enforcement of our intellectual property. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the
prosecution of our patent applications and the enforcement or defense of our future patents. Further, the United States Supreme Court has ruled on several
patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in
certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created
uncertainty with respect to the value of patents, once obtained. Depending on actions by the United States Congress, the federal courts and the USPTO, the
laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that
we have owned or licensed or that we might obtain in the future. An inability to obtain, enforce, and defend patents covering our proprietary technologies
would materially and adversely affect our business prospects and financial condition.
Similarly, changes in patent laws and regulations in other countries or jurisdictions, changes in the governmental bodies that enforce them or
changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents
that we may obtain in the future. Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as
the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United
States and abroad. For example, if the issuance in a given country of a patent covering an invention is not followed by the issuance in other countries of
patents covering the same invention, or if any judicial interpretation of the validity, enforceability or scope of
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the claims or the written description or enablement, in a patent issued in one country is not similar to the interpretation given to the corresponding patent
issued in another country, our ability to protect our intellectual property in those countries may be limited. Changes in either patent laws or in
interpretations of patent laws in the United States and other countries may materially diminish the value of our intellectual property or narrow the scope of
our patent protection.
We may be involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming and unsuccessful.
Competitors may infringe the patents we have applied for. To counter infringement or unauthorized use, we may be required to file
infringement claims, which can be expensive and time-consuming. If we initiate legal proceedings against a third party to enforce a patent covering one of
our product candidates, the defendant could counterclaim that the patent covering our product or product candidate is invalid and/or unenforceable. In
patent litigation in the United States, counterclaims alleging invalidity and/or unenforceability are common, and there are numerous grounds upon which a
third party can assert invalidity or unenforceability of a patent. In an infringement proceeding, a court may decide that the patent claims we are asserting
are invalid and/or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patent claims do not cover
the technology in question. Third parties may also 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 (for
example, opposition proceedings). Such proceedings could result in revocation 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. With respect to the validity question, for
example, we cannot be certain that there is no invalidating prior art of which we, our patent counsel, and the patent examiner were unaware during
prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the
patent protection on our product candidates. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being
invalidated or interpreted narrowly, could put our patent applications at risk of not issuing and could have a material adverse impact on our business.
Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to
our patent applications. An unfavorable outcome could require us to cease using the related technology or force us to take a license under the patent rights
of the prevailing party, if available. Furthermore, our business could be harmed if the prevailing party does not offer us a license on commercially
reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our
management and other employees. We may not be able to prevent misappropriation of our intellectual property rights, particularly in countries where the
laws may not protect those rights as fully as in the United States.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that
some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the
results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could
have a material adverse effect on the price of our common stock.
We may be unsuccessful in licensing or acquiring intellectual property from third parties that may be required to develop and commercialize our
product candidates.
A third party may hold intellectual property, including patent rights that are important or necessary to the development and commercialization
of our product candidates. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our product candidates,
in which case we would be required to acquire or obtain a license to such intellectual property from these third parties, and we may be unable to do so on
commercially reasonable terms or at all. The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more
established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These
established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and
commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may
be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at
all. If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we
have, we may have to abandon development of the relevant program or product candidate, which could have a material adverse effect on our business.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain.
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As our current and future product candidates progress toward commercialization, the possibility of a patent infringement claim against us
increases. We cannot provide any assurance that our current and future product candidates do not infringe other parties’ patents or other proprietary rights,
and competitors or other parties may assert that we infringe their proprietary rights in any event. We may become party to, or threatened with, adversarial
proceedings or litigation regarding intellectual property rights with respect to our current and future product candidates, including interference or derivation
proceedings before the USPTO. 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 have a negative impact on our ability to commercialize bentracimab, PB6440 or any future product
candidates. In order to successfully challenge the validity of any such United States patent in federal court, we would need to overcome a presumption of
validity. As this burden is high and requires us to present clear and convincing evidence as to the invalidity of any such United States patent claim, there is
no assurance that a court of competent jurisdiction would agree with us and invalidate the claims of any such United States patent. Moreover, given the vast
number of patents in our field of technology, we cannot be certain that we do not infringe existing patents or that we will not infringe patents that may be
granted in the future.
While we may decide to initiate proceedings to challenge the validity of these or other patents in the future, we may be unsuccessful, and
courts or patent offices in the United States and abroad could uphold the validity of any such patent. Furthermore, because patent applications can take
many years to issue and may be confidential for 18 months or more after filing, and because pending patent claims can be revised before issuance, there
may be applications now pending which may later result in issued patents that may be infringed by the manufacture, use or sale of our product candidates.
Regardless of when filed, we may fail to identify relevant third-party patents or patent applications, or we may incorrectly conclude that a third-party patent
is invalid or not infringed by our product candidates or activities. If a patent holder believes that one of our product candidates infringes its patent, the
patent holder may sue us even if we have received patent protection for our technology. Moreover, we may face patent infringement claims from non-
practicing entities that have no relevant drug revenue and against whom our own patent portfolio may thus have no deterrent effect. If a patent infringement
suit were threatened or brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the drug or product
candidate that is the subject of the actual or threatened suit.
If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to
continue commercializing our product candidates. However, we may not be able to obtain any required license on commercially reasonable terms or at all.
Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could give our competitors access to the same technology or
intellectual property rights licensed to us. If we fail to obtain a required license, we may be unable to effectively market product candidates based on our
technology, which could limit our ability to generate revenue or achieve profitability and possibly prevent us from generating revenue sufficient to sustain
our operations. Alternatively, we may need to redesign our infringing products, which may be impossible or require substantial time and monetary
expenditure. Under certain circumstances, we could be forced, including by court orders, to cease commercializing our product candidates. In addition, in
any such proceeding or litigation, we could be found liable for substantial monetary damages, potentially including treble damages and attorneys’ fees, if
we are found to have willfully infringed the patent at issue. A finding of infringement could prevent us from commercializing our product candidates or
force us to cease some of our business operations, which could harm our business. Any claims by third parties that we have misappropriated their
confidential information or trade secrets could have a similar negative impact on our business.
The cost to us in defending or initiating any litigation or other proceeding relating to patent or other proprietary rights, even if resolved in our
favor, could be substantial, and litigation would divert our management’s attention. Some of our competitors may be able to sustain the costs of complex
patent litigation more effectively than we can because they have substantially greater resources. Uncertainties resulting from the initiation and continuation
of patent litigation or other proceedings could delay our research and development efforts and limit our ability to continue our operations.
We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of
third parties.
We employ individuals who were previously employed at other biotechnology or biopharmaceutical companies. 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 we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed confidential information of our
employees’ former employers or other third parties. We may also be subject to claims that former employers or other third parties have an ownership
interest in our future patents. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and
even if we are successful, litigation could result in substantial cost and be a distraction to our management and other employees.
We may be subject to claims challenging the inventorship or ownership of our future patents and other intellectual property.
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We may also be subject to claims that former employees, collaborators, or other third parties have an ownership interest in our patent
applications, our future patents, or other intellectual property. We may be subject to ownership disputes in the future arising, for example, from conflicting
obligations of consultants or others who are involved in developing our product candidates. Although it is our policy to require our employees and
contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us,
we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our
own, and we cannot be certain that our agreements with such parties will be upheld in the face of a potential challenge, or that they will not be breached, for
which we may not have an adequate remedy. The assignment of intellectual property rights may not be self-executing or the assignment agreements may be
breached, and litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such
claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable
intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims,
litigation could result in substantial costs and be a distraction to management and other employees.
Reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade
secrets will be misappropriated or disclosed.
If we continue to rely on third parties to manufacture or commercialize bentracimab, PB6440 or any future product candidates, or if we
continue to collaborate with additional third parties for the development of bentracimab, PB6440 or any future product candidates, we must, at times, share
trade secrets with them. We may also continue to conduct joint research and development programs that may require us to share trade secrets under the
terms of our research and development partnerships or similar agreements. We seek to protect our proprietary technology in part by entering into
confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors,
employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the
rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when
working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our
competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our
proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or
disclosure could have an adverse effect on our business and results of operations.
In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data
potentially relating to our trade secrets. Despite our efforts to protect our trade secrets, we may not be able to prevent the unauthorized disclosure or use of
our technical know-how or other trade secrets by the parties to these agreements. Moreover, we cannot guarantee that we have entered into such agreements
with each party that may have or have had access to our confidential information or proprietary technology and processes. Monitoring unauthorized uses
and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. If any of the
collaborators, scientific advisors, employees, contractors and consultants who are parties to these agreements breaches or violates the terms of any of these
agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets as a result. Moreover, if confidential
information that is licensed or disclosed to us by our partners, collaborators, or others is inadvertently disclosed or subject to a breach or violation, we may
be exposed to liability to the owner of that confidential information. Enforcing a claim that a third party illegally obtained and is using our trade secrets,
like patent litigation, is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less
willing to protect trade secrets.
We may enjoy only limited geographical protection with respect to certain patents, and we may not be able to protect our intellectual property rights
throughout the world.
Filing and prosecuting patent applications and defending patents covering our product candidates in all countries throughout the world would
be prohibitively expensive. 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 where enforcement rights are not as
strong as that in the United States or Europe. These products may compete with our product candidates, and our future patents or other intellectual property
rights may not be effective or sufficient to prevent them from competing.
In addition, we may decide to abandon national and regional patent applications before they are granted. The examination of each national or
regional patent application is an independent proceeding. As a result, patent applications in the same family may issue as patents in some jurisdictions, such
as in the United States, but may issue as patents with claims of different scope or may even be refused in other jurisdictions. It is also quite common that
depending on the country, the scope of patent protection may vary for the same product candidate or technology.
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While we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate
or maintain similar efforts in all jurisdictions in which we may wish to market our product candidates. Accordingly, our efforts to protect our intellectual
property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our product candidates
in all of our expected significant foreign markets. If we encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the
intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished, and we may face additional
competition from others in those jurisdictions.
The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or rules and regulations in the United
States and Europe, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. The legal
systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property
rights, which could make it difficult for us to stop the infringement of our future patents or marketing of competing products in violation of our proprietary
rights generally. Proceedings to enforce our patent rights in other jurisdictions, whether or not successful, could result in substantial costs and divert our
efforts and attention from other aspects of our business, could put our future patents at risk of being invalidated or interpreted narrowly and our patent
applications at risk of not issuing as patents, 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 develop or license.
Some countries also have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In
addition, some countries limit the enforceability of patents against government agencies or government contractors. In those countries, the patent owner
may have limited remedies, which could materially diminish the value of such patents. If we are forced to grant a license to third parties with respect to any
patents relevant to our business, our competitive position may be impaired.
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 and/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 patents and/or applications and any patent rights
we may obtain in the future. Furthermore, the USPTO and various non-United States 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 of a patent or
patent application 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 patents or patent applications, 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, which could have a material adverse effect on our business.
Any trademarks we have obtained or may obtain may be infringed or otherwise violated, or successfully challenged, resulting in harm to our business.
We expect to rely on trademarks as one means to distinguish our product candidates, if approved for marketing, from the drugs of our
competitors. Once we select new trademarks and apply to register them, our trademark applications may not be approved. Third parties may oppose or
attempt to cancel our trademark applications or trademarks, or otherwise challenge our use of the trademarks. In the event that our trademarks are
successfully challenged, we could be forced to rebrand our drugs, which could result in loss of brand recognition and could require us to devote resources
to advertising and marketing new brands. Our competitors may infringe or otherwise violate our trademarks and we may not have adequate resources to
enforce our trademarks. Any of the foregoing events may have a material adverse effect on our business.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
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. The following examples are illustrative:
•
others may be able to make products that are similar to or otherwise competitive with our product candidates but that are not covered
by the claims of our current or future patents;
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•
an in-license necessary for the manufacture, use, sale, offer for sale or importation of one or more of our product candidates may be
terminated by the licensor;
•
we or future collaborators might not have been the first to make the inventions covered by our issued or future issued patents or our
pending patent applications;
•
we or future collaborators might not have been the first to file patent applications covering certain of our inventions;
•
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our
intellectual property rights;
•
it is possible that our pending patent applications will not lead to issued patents;
•
issued patents that we own or in-license may be held invalid or unenforceable as a result of legal challenges by our competitors;
•
issued patents that we own or in-license may not provide coverage for all aspects of our product candidates in all countries;
•
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; and
•
the patents of others may have an adverse effect on our business.
Should any of these events occur, they could significantly harm our business, results of operations and prospects.
Risks Related to Legal and Regulatory Compliance Matters
Our relationships with customers, healthcare providers, physicians and third-party payors are subject, directly or indirectly, to federal and state
healthcare fraud and abuse laws, false claims laws, health information privacy and security laws, and other healthcare laws and regulations. If we are
unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
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 current and future arrangements with healthcare professionals,
principal investigators, consultants, customers and third-party payors subject us to various federal and state fraud and abuse laws and other healthcare laws,
including, without limitation, the federal Anti-Kickback Statute, the federal civil and criminal false claims laws, health information privacy laws, and the
law commonly referred to as the Physician Payments Sunshine Act and regulations promulgated under such laws. These laws will impact, among other
things, our clinical research, proposed sales, marketing and educational programs, and other interactions with healthcare professionals. In addition, we may
be subject to patient privacy laws by both the federal government and the states in which we conduct or may conduct our business. The laws that will affect
our operations include, but are not limited to:
•
the federal Anti-Kickback Statute, which prohibits, among other things, individuals or entities from knowingly and willfully
soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or
covertly, in cash or in kind in return for, or to induce, either the referral of an individual, or the purchase, lease, order or arrangement
for or recommendation of the purchase, lease, order or arrangement for any good, facility, item or service for which payment may be
made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. The term
“remuneration” has been broadly interpreted to include anything of value. Although there are a number of statutory exceptions and
regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly.
Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be
subject to scrutiny if they do not qualify for an exception or safe harbor. A person does not need to have actual knowledge of this
statute or specific intent to violate it in order to have committed a violation. In addition, the Patient Protection and Affordable Care
Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, signed into law in 2010, provides
that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback
Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act;
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•
the federal civil and criminal false claims laws, including, without limitation, the federal False Claims Act, which can be enforced by
private citizens through civil whistleblower or qui tam actions, and civil monetary penalty laws which prohibit, among other things,
individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from the federal
government, including Medicare, Medicaid and other government payors, that are false or fraudulent or knowingly making, using or
causing to be made or used a false record or statement material to a false or fraudulent claim or to avoid, decrease or conceal an
obligation to pay money to the federal government. A claim includes “any request or demand” for money or property presented to
the United States federal government. Several pharmaceutical and other healthcare companies have been prosecuted under these laws
for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product.
Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of products for
unapproved, and thus non-reimbursable, uses;
•
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes
that prohibit, among other things, a person from knowingly and willfully executing, or attempting to execute, a scheme to defraud
any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering
up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for
healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual
knowledge of the statute or specific intent to violate it in order to have committed a violation;
•
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their
implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually
identifiable health information on health plans, healthcare clearinghouses and certain healthcare providers, known as “covered
entities”, and their respective HIPAA “business associates”, which are independent contractors that perform certain services
involving the use or disclosure of individually identifiable health information and their subcontractors that use, disclose or otherwise
process individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to
make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file
civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorneys’ fees and costs associated with
pursuing federal civil actions;
•
the federal transparency laws, including the federal Physician Payments Sunshine Act, which requires certain manufacturers of
drugs, medical devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the State
Children’s Health Insurance Program, with specific exceptions, to report annually to CMS, information related to: (1) payments or
other “transfers of value’’ made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other
healthcare professionals (such as physician assistants and nurse practitioners) and teaching hospitals, and (2) ownership and
investment interests held by physicians and their immediate family members;
•
state and foreign law equivalents of each of the above federal laws and regulations; state laws that require manufacturers to report
information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures or
drug pricing; 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 that otherwise restrict payments that
may be made to healthcare providers; state and local laws that require the registration of pharmaceutical sales representatives; and
•
state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from
each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. For example, the
General Data Protection Regulation (EU) 2016/679, or GDPR, imposes privacy and security obligations on any entity that collects
and/or processes data from individuals located in the European Economic Area, or EEA. Under the GDPR, fines of up to 20 million
Euros or up to 4% of the annual global turnover of the infringer, whichever is greater, could be imposed for significant non-
compliance. In addition, on June 28, 2018, California enacted the California Consumer Privacy Act, or CCPA, which took effect on
January 1, 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of
certain personal
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information sharing, and receive detailed information about how their personal information is used. 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.
Further, California voters approved a new privacy law, the California Privacy Rights Act, or CPRA, in the November 3, 2020
election. Effective starting on January 1, 2023, the CPRA will significantly modify the CCPA, including by expanding consumers’
rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with
authority to implement and enforce the CCPA and the CPRA. New legislation proposed or enacted in various other states will
continue to shape the data privacy environment nationally. For example, on March 2, 2021, Virginia enacted the Virginia Consumer
Data Protection Act, or CDPA, which becomes effective on January 1, 2023, and on June 8, 2021, Colorado enacted the Colorado
Privacy Act, or CPA, which takes effect on July 1, 2023. The CPA and CDPA are similar to the CCPA and CPRA but aspects of these
state privacy statutes remain unclear, resulting in further legal uncertainty. Complying with the GDPR, CCPA, CPRA, CDPA, CPA,
or other laws, regulations, amendments to or re-interpretations of existing laws and regulations, and contractual or other obligations
relating to privacy, data protection, data transfers, data localization, or information security may require us to make changes to our
services to enable us to meet new legal requirements, incur substantial operational costs, modify our data practices and policies, and
restrict our business operations. Some observers have noted that the CCPA could mark the beginning of a trend toward more
stringent state privacy legislation in the United States, which could increase our potential liability and adversely affect our business.
As well as complicating our compliance efforts, non-compliance with these laws could result in penalties or significant legal liability.
Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that
some of our business activities could be subject to challenge under one or more of such laws. It is possible that governmental authorities will conclude that
our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws
and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be
subject to significant penalties, including, without limitation, civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment,
exclusion from participating in federal and state funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and
oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws,
contractual damages, diminished profits and future earnings, reputational harm and the curtailment or restructuring of our operations, any of which could
harm our business.
The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the
regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Efforts to ensure that our business arrangements with third
parties will comply with applicable healthcare laws and regulations will involve substantial costs. Any action against us for violation of these laws, even if
we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our
business. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions
with different compliance and/or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the
requirements.
Even if we obtain regulatory approval for bentracimab, PB6440 or any future product candidates, they will remain subject to ongoing regulatory
oversight.
Even if we obtain any regulatory approval for bentracimab, PB6440 or any future product candidates, such product candidates, once
approved, will be subject to ongoing regulatory requirements applicable to manufacturing, labeling, packaging, storage, advertising, promoting, sampling,
record-keeping and submitting of safety and other post-market information, among other things. Any regulatory approvals that we receive for bentracimab,
PB6440 or any future product candidates may also be subject to a risk evaluation and mitigation strategy, limitations on the approved indicated uses for
which the drug may be marketed or to the conditions of approval, or requirements that we conduct potentially costly post-marketing testing, including
Phase 4 trials, and in the event that we receive accelerated approval of bentracimab, the completion of a Phase 3 trial, and surveillance to monitor the
quality, safety and efficacy of the drug. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of
marketing approval. We will further be required to immediately report any serious and unexpected adverse events and certain quality or production
problems with our products to regulatory authorities along with other periodic reports.
Any new legislation addressing drug safety issues could result in delays in product development or commercialization, or increased costs to
assure compliance. We will also have to comply with requirements concerning
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advertising and promotion for our products. Promotional communications with respect to prescription drug products are subject to a variety of legal and
regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we will not be allowed to promote our
products for indications or uses for which they do not have approval, commonly known as off-label promotion. The holder of an approved BLA must
submit new or supplemental applications and obtain prior approval for certain changes to the approved product, product labeling, or manufacturing process.
In addition, drug manufacturers are subject to payment of user fees and continual review and periodic inspections by the FDA and other
regulatory authorities for compliance with cGMP requirements and adherence to commitments made in the BLA or NDA or foreign marketing application.
If we, or a regulatory authority, discover previously unknown problems with a drug, such as adverse events of unanticipated severity or frequency, or
problems with the facility where the drug is manufactured or if a regulatory authority disagrees with the promotion, marketing or labeling of that drug, a
regulatory authority may impose restrictions relative to that drug, the manufacturing facility or us, including requesting a recall or requiring withdrawal of
the drug from the market or suspension of manufacturing.
If we fail to comply with applicable regulatory requirements following approval of bentracimab, PB6440 or any future product candidates, a
regulatory authority may:
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issue an untitled letter or warning letter asserting that we are in violation of the law;
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seek an injunction or impose administrative, civil or criminal penalties or monetary fines;
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suspend or withdraw regulatory approval;
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suspend any ongoing clinical trials;
•
refuse to approve a pending BLA, NDA or comparable foreign marketing application (or any supplements thereto) submitted by us
or our strategic partners;
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restrict the marketing or manufacturing of the drug;
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seize or detain the drug or otherwise require the withdrawal of the drug from the market;
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refuse to permit the import or export of product candidates; or
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refuse to allow us to enter into supply contracts, including government contracts.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could
generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize bentracimab, PB6440 or any
future product candidates and harm our business, financial condition, results of operations and prospects.
Healthcare legislative or regulatory reform measures may have a negative impact on our business and results of operations.
In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and
proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval
activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval.
Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems
with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been
a particular focus of these efforts and has been significantly affected by major legislative initiatives. In March 2010, the ACA was passed, which
substantially changed the way healthcare is financed by both the government and private insurers and significantly impacts the United States
pharmaceutical industry. The ACA, among other things contains a number of provisions of particular import to the pharmaceutical and biotechnology
industries, including, but not limited to, those governing enrollment in federal healthcare programs, a new methodology by which rebates owed by
manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, and annual fees
based on pharmaceutical companies’ share of sales to federal health care programs.
There have been executive, judicial and Congressional challenges to certain aspects of the ACA. While Congress has not passed
comprehensive repeal legislation, several 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, effective January 1, 2019, 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.” In addition, the
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2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored
health coverage and medical device tax and, effective January 1, 2021, also eliminated the health insurer tax. The Bipartisan Budget Act of 2018, or the
BBA, among other things, amended the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as
the “donut hole.” On June 17, 2021, the U.S. Supreme Court dismissed on procedural grounds a challenge that argued that the ACA is unconstitutional in
its entirety because the “individual mandate” was repealed by Congress. Thus, the ACA will remain in effect in its current form.
Further, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special
enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began February 15, 2021 and remained open
through August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that
limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and
policies that create unnecessary barriers to obtaining access to health insurance through Medicaid or the ACA. It is unclear how the Supreme Court ruling,
other such litigation and the healthcare reform measures of the Biden administration will impact the ACA and our business.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to
Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013, and due to subsequent legislative
amendments to the statute, including the BBA and the Infrastructure Investment and Jobs Act, will remain in effect through 2031, unless additional
Congressional action is taken. However, COVID-19 relief legislation suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2022.
Under current legislation the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester. The
American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer
treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These
laws may result in additional reductions in Medicare and other healthcare funding, which could have an adverse effect on customers for our product
candidates, if approved, and, accordingly, our financial operations.
Additionally, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising
cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state
legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient
programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration used several means
to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24,
2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that sought to implement
several of the administration’s proposals. As a result, the FDA concurrently released a final rule and guidance in September 2020 providing pathways for
states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health & Human Services, or
HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either
directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden
administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions
reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the
implementation of which have also been delayed until January 1, 2023. On November 20, 2020, CMS issued an interim final rule implementing President
Trump’s Most Favored Nation, or MFN, executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest
price paid in other economically advanced countries, effective January 1, 2021. As a result of litigation challenging the MFN model, on December 27,
2021, CMS published a final rule that rescinded the MFN Model interim final rule. In July 2021, the Biden administration released an executive order,
“Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to the executive order, on
September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a
variety of potential legislative policies that Congress could pursue to advance these principles. In addition, Congress is considering drug pricing as part of
other reform initiatives. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical
and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost
disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
We expect that these and other healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and
in additional downward pressure on the price that we receive for any approved drug. Any reduction in reimbursement from Medicare or other government
programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms
may prevent us from being able
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to generate revenue, attain profitability, or commercialize our drugs. Further, it is possible that additional governmental action may be taken in response to
the COVID-19 pandemic.
Any new regulations or guidance, or revisions or reinterpretations of existing regulations or guidance, may impose additional costs or
lengthen FDA review times for bentracimab, PB6440 or any future product candidates. We cannot determine how changes in regulations, statutes, policies,
or interpretations when and if issued, enacted or adopted, may affect our business in the future. Such changes could, among other things, require:
•
additional clinical trials to be conducted prior to obtaining approval;
•
changes to manufacturing methods;
•
recalls, replacements, or discontinuance of one or more of our products; and
•
additional recordkeeping.
Such changes would likely require substantial time and impose significant costs, or could reduce the potential commercial value of
bentracimab, PB6440 or other product candidates, and could materially harm our business and our financial results. In addition, delays in receipt of or
failure to receive regulatory clearances or approvals for any other products would harm our business, financial condition, and results of operations.
Risks Related to Employee Matters and Managing Our Growth
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
We are highly dependent on the management, development, clinical, financial and business development expertise of our executive officers,
particularly Jonathan P. Mow, our Chief Executive Officer. Each of our executive officers may currently terminate their employment with us at any time.
We do not maintain “key person” insurance for any of our executives or employees.
Recruiting and retaining qualified scientific and clinical personnel and, if we progress the development of our product pipeline toward scaling
up for commercialization, manufacturing and sales and marketing personnel, will also be critical to our success. The loss of the services of our executive
officers or other key employees could impede the achievement of our development and commercialization objectives and seriously harm our ability to
successfully implement our business strategy. We may also experience employee turnover in the future that may have an adverse effect on our business
strategy. New hires require significant training and, in most cases, take significant time before they achieve full productivity. New employees may not
become as productive as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals. In addition, the foregoing may be
exacerbated by employees unwilling to work due to choosing not to comply with vaccine mandates for healthcare workers or for government contractors.
Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of
individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize
products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable
terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the
hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific
and clinical advisors, to assist us in formulating our development and commercialization strategy. Our consultants and advisors may be employed by
employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we
are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.
We expect to expand our clinical development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and
as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
As of December 31, 2021, we had 60 employees. As our development progresses, we expect to experience continued growth in the number of
our employees and the scope of our operations, particularly in the areas of clinical product development, regulatory affairs and, if any of our product
candidates receives marketing approval, sales, marketing and distribution. To manage our anticipated future growth, we must continue to implement and
improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our
limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able
to effectively manage the expansion of our operations or recruit and train additional qualified personnel.
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The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to
manage growth could delay the execution of our business plans or disrupt our operations.
Our employees, independent contractors, consultants, commercial collaborators, principal investigators, CROs, suppliers and vendors may engage in
misconduct or other improper activities, including non-compliance with regulatory standards and requirements.
We are exposed to the risk that our employees, independent contractors, consultants, commercial collaborators, principal investigators, CROs,
suppliers and vendors may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or
negligent conduct or disclosure of unauthorized activities to us that violates FDA regulations, including those laws requiring the reporting of true, complete
and accurate information to the FDA, manufacturing standards, federal and state healthcare laws and regulations, and laws that require the true, complete
and accurate reporting of financial information or data. In particular, sales, marketing and business arrangements in the healthcare industry are subject to
extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or
prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.
Misconduct by these parties could also involve the improper use of individually identifiable information, including, without limitation, information
obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a code of business
conduct and ethics, but it is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent this activity may not be
effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming
from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending
ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and
administrative penalties, including, without limitation, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare
programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or
similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations.
Risks Related to Ownership of Our Common Stock and Our Status as a Public Company
The trading price of the shares of our common stock has and may be volatile, and purchasers of our common stock could incur substantial losses.
Our stock price has been, and may continue to be, volatile. Since our initial public offering, or IPO, and through March 21, 2022, our common
stock has traded at prices ranging from $0.96 to $16.65 per share. 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 of particular companies. As a result of this
volatility, investors may not be able to sell their common stock at or above the price paid for the shares. The market price for our common stock may be
influenced by many factors, including:
•
the commencement, enrollment or results of our clinical trials of bentracimab, PB6440 or any future clinical trials we may conduct,
or changes in the development status of our product candidates;
•
any delay in our regulatory filings for bentracimab, PB6440 or any other product candidate we may develop, 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 from, delays in or termination of clinical trials;
•
adverse regulatory decisions, including failure to receive regulatory approval of our product candidates;
•
unanticipated serious safety concerns related to the use of bentracimab, PB6440 or any other product candidate;
•
changes in financial estimates by us or by any equity research analysts who might cover our stock;
•
investors' general perception of our company and our business;
•
conditions or trends in our industry;
•
changes in the market valuations of similar companies;
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•
stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the biopharmaceutical
industry;
•
publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage
by securities analysts;
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announcements by us or our competitors of significant acquisitions, strategic partnerships or divestitures;
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progress under our collaboration with SFJ for the development of bentracimab;
•
announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;
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recruitment or departure of key personnel;
•
overall performance of the equity markets;
•
trading volume of our common stock;
•
disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent
protection for our technologies;
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significant lawsuits, including patent or stockholder litigation;
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changes in the structure of healthcare payment systems;
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general political and economic conditions; and
•
other events or factors, many of which are beyond our control.
The stock market in general has, and the Nasdaq Global Market 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, including in connection with
the ongoing COVID-19 pandemic, which has resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in
their underlying business models or prospects. Broad market and industry factors, including potentially worsening economic conditions and other adverse
effects or developments relating to the ongoing COVID-19 pandemic, 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 section, could have
a significant and material adverse impact on the market price of our common stock.
In addition, in the past, stockholders have initiated class action lawsuits against pharmaceutical and biotechnology companies following
periods of volatility in the market prices of these companies’ stock. Such litigation, if instituted against us, could cause us to incur substantial costs and
divert management’s attention and resources from our business.
There can be no assurance that we will be able to comply with the continued listing standards of the Nasdaq Global Market.
Our common stock is currently listed on Nasdaq under the symbol “PHAS.” To maintain the listing of our common stock on the Nasdaq
Global Market, we are required to meet certain listing requirements. If the Nasdaq Global Market delists our securities from trading on its exchange for
failure to meet the listing standards, we and our stockholders could face significant negative consequences including:
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limited availability of market quotations for our securities;
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a determination that the common stock is a “penny stock” which will require brokers trading in the common stock to adhere to more
stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of common stock;
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a limited amount of analyst coverage; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
An active trading market for our common stock may not continue to be developed or sustained.
Prior to our IPO, there was no public market for our common stock, and we cannot assure you that an active trading market for our shares will
continue to develop or be sustained. As a result, it may be difficult for you to sell shares at an attractive price or at all.
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A significant portion of our total outstanding shares are available for immediate resale. This could cause the market price of our common stock to drop
significantly, even if our business is doing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. If our stockholders sell, or the
market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market, the market price of our common stock
could decline significantly.
In addition, we have filed registration statements on Form S-8 registering the issuance of common stock subject to options or other equity
awards issued or reserved for future issuance under our equity incentive plans. Shares registered under these 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.
Additionally, the holders of approximately 2.2 million shares of our common stock, or their transferees, have rights, subject to some
conditions, to require us to file one or more registration statements covering their shares or to include their shares in registration statements that we may file
for ourselves or other stockholders. If we were to register the resale of these shares, they could be freely sold in the public market. If these additional shares
are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.
The issuance of additional stock in connection with financings, acquisitions, investments, our equity incentive plan or otherwise will dilute all other
stockholders.
Our certificate of incorporation authorizes us to issue up to 200,000,000 shares of common stock and up to 10,000,000 shares of preferred
stock with such rights and preferences as may be determined by our board of directors. Subject to compliance with applicable rules and regulations, in the
future we may issue common stock or other securities convertible into shares of our common stock from time to time in connection with a financing,
acquisition, investment, our equity incentive plan or otherwise. The number of new shares of our common stock issued in connection with raising
additional capital could constitute a material portion of the then outstanding shares of our common stock, which could result in substantial dilution to our
existing stockholders and cause the market price of our common stock to decline.
Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our
management and hinder efforts to acquire a controlling interest in us, and the market price of our common stock may be lower as a result.
There are provisions in our certificate of incorporation and bylaws that may make it difficult for a third party to acquire, or attempt to acquire,
control of our company, even if a change of control was considered favorable by you and other stockholders. 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.
Our charter documents also contain other provisions that could have an anti-takeover effect, including:
•
only one of our three classes of directors is elected each year;
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stockholders are not entitled to remove directors other than by a 66 2⁄3% vote and only for cause;
•
stockholders are not permitted to take actions by written consent;
•
stockholders cannot call a special meeting of stockholders; and
•
stockholders must give advance notice to nominate directors or submit proposals for consideration at stockholder meetings.
In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which regulates
corporate acquisitions by prohibiting Delaware corporations from engaging in specified business combinations with particular stockholders of those
companies. These provisions could discourage potential acquisition proposals and could delay or prevent a change of control transaction. They could also
have the effect of discouraging others from making tender offers for our common stock, including transactions that may be in your best interests. These
provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.
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Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new
investors from influencing significant corporate decisions.
Our executive officers, directors and current beneficial owners of 5% or more of our common stock and their respective affiliates beneficially
own a significant percentage of our outstanding common stock. As a result, these persons, acting together, would be able to significantly influence all
matters requiring stockholder approval, including the election and removal of directors, any merger, consolidation, sale of all or substantially all of our
assets, or other significant corporate transactions.
Some of these persons or entities may have interests different than yours. For example, because many of these stockholders purchased their
shares at prices substantially below the current market price of our common stock and have held their shares for a longer period, they may be more
interested in selling our company to an acquirer than other investors, or they may want us to pursue strategies that deviate from the interests of other
stockholders.
We are an “emerging growth company” and a “smaller reporting company” and, as a result of the reduced disclosure and governance requirements
applicable to emerging growth companies and smaller reporting companies, our common stock may be less attractive to investors.
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we intend to
take advantage of some of the exemptions from reporting requirements that are applicable to other public companies that are not emerging growth
companies, including:
•
not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial
reporting;
•
not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board
regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and
the financial statements;
•
reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration
statements; and
•
not being required to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved.
We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our
common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may
take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the
earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of our IPO, which would be December 31, 2023, (b) in which
we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of
our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than
$1.0 billion in non-convertible debt during the prior three-year period.
Under Section 107(b) of the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time
as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting
standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth
companies. Even after we no longer qualify as an emerging growth company, we may, under certain circumstances, still qualify as a “smaller
reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure
obligations regarding executive compensation in our periodic reports and proxy statements and, if we are a smaller reporting company with less than $100
million in annual revenue, we would not be required to obtain an attestation report on internal control over financial reporting issued by our independent
registered public accounting firm. We may qualify as a “smaller reporting company” for so long as (i) the market value of our voting and non-voting
common stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is
less than $100 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-
affiliates is less than $700 million measured on the last business day of our second fiscal quarter.
We have broad discretion in the use of our cash and cash equivalents.
We have broad discretion over the use of our cash and cash equivalents, including the net proceeds from our recent public offerings. You may
not agree with our decisions, and our use of these cash and cash equivalents may not yield any return on your investment. We expect to use our existing
cash and cash equivalents to advance bentracimab and PB6440, fund
68
development of our ELP technology and preclinical programs and for working capital and general corporate purposes. In addition, we may use a portion of
our cash and cash equivalents to pursue our strategy to in-license or acquire additional product candidates. Our failure to apply our cash and cash
equivalents effectively could compromise our ability to pursue our growth strategy and we might not be able to yield a significant return, if any, on our
investment of these cash and cash equivalents. You will not have the opportunity to influence our decisions on how to use these cash and cash equivalents.
Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole
source of gains and you may never receive a return on your investment.
You should not rely on an investment in our common stock to provide dividend income. We have not declared or paid cash dividends on our
common stock to date. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms
of the SFJ Agreement preclude us from paying dividends, and any existing or future debt agreements may preclude us from paying dividends. As a result,
capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. Investors seeking cash dividends should not
purchase our common stock.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of
the United States of America will be the exclusive forums for substantially all disputes between us and 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 certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for
(1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim for breach of a fiduciary duty owed by any of our directors,
officers or other employees to us or our stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General
Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws or (4) any action asserting a claim governed by
the internal affairs doctrine. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore,
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and
federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or
contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation further provides that the federal
district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the
Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to
bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity
and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs
associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other
jurisdictions.
These exclusive forum provisions 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 other employees, which may discourage such lawsuits against us and our directors, officers and other employees. If a court
were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we
may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business.
General Risk Factors
Our business activities will be subject to the Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery and anti-corruption laws.
As we expand our business activities outside of the United States, including our clinical trial efforts, we will be subject to the FCPA and
similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate. The FCPA generally prohibits offering, promising,
giving, or authorizing others to give anything of value, either directly or indirectly, to a non-United States government official in order to influence official
action, or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly
reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated
and therefore requires significant interaction with public officials, including officials of non-United States governments. Additionally, in many other
countries, the healthcare providers who prescribe pharmaceuticals are employed by their government, and the purchasers of pharmaceuticals are
government entities; therefore, our dealings with these prescribers
69
and purchasers will be subject to regulation under the FCPA. Recently the Securities and Exchange Commission, or 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. 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 include 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.
If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business or our market, our
stock price and trading volume could decline.
The trading market for our common stock is influenced by the research and reports that equity research analysts publish about us and our
business and we have limited research coverage by equity research analysts. Equity research analysts may elect not to initiate or continue to provide
research coverage of our common stock, and such lack of research coverage may adversely affect the market price of our common stock. Even if we do
have equity research analyst coverage, we will not have any control over the analysts or the content and opinions included in their reports. The price of our
stock could decline if one or more equity research analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity
research analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which in turn could
cause our stock price or trading volume to decline.
If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley
Act, and the rules and regulations of the stock market on which our common stock is listed. The Sarbanes-Oxley Act requires, among other things, that we
maintain effective disclosure controls and procedures and internal control over financial reporting.
We may identify weaknesses in our system of internal financial and accounting controls and procedures that could result in a material
misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system,
no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of
the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud will be detected.
If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to
maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If that were to happen, the market
price of our stock could decline and we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the
SEC, or other regulatory authorities.
New or future changes to tax laws could materially adversely affect our company.
The tax regimes we are subject to or operate under, including with respect to income and non-income taxes, are unsettled and may be subject
to significant change. Changes in tax laws, regulations, or rulings, or changes in interpretations of existing laws and regulations, could materially adversely
affect our company. For example, the 2017 Tax Cuts and Jobs Act, or the Tax Act, together with the CARES Act that was enacted March 27, 2020, made
broad and complex changes to the U.S. tax code, including changes to U.S. federal tax rates, additional limitations on the deductibility of interest, both
positive and negative changes to the utilization of future net operating loss, or NOL, carryforwards, allowing for the expensing of certain capital
expenditures, and putting into effect the migration from a “worldwide” system of taxation to a territorial system. In addition, many countries in Europe, as
well as a number of other countries and organizations (including the Organization for Economic Cooperation and Development and the European
Commission), have recently proposed, recommended, or (in the case of countries) enacted or otherwise become subject to changes to existing tax laws or
new tax laws that could significantly increase our tax obligations in the countries where we do business or require us to change the manner in which we
operate our business. Recently, in the United States, Congress and the Biden administration proposed legislation (which has not yet been enacted) to make
various tax law changes, including to increase U.S. taxation of international business operations and impose a
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global minimum tax. These proposals, recommendations and enactments include changes to the existing framework in respect of income taxes that could
apply to our business.
We might not be able to utilize a significant portion of our net operating loss carryforwards.
As of December 31, 2021, we had federal and state NOL carryforward balances of $259.1 million and $227.6 million, respectively. The
federal NOLs generated prior to 2018 may be used to offset up to 100% of future taxable income and will begin to expire in 2022, unless previously
utilized or limited by other provisions within the tax law. These NOL carryforwards could expire unused and be unavailable to offset future income tax
liabilities. Under the Tax Act, as modified by the CARES Act, federal NOLs incurred in taxable years beginning after December 31, 2017 and in future
years may be carried forward indefinitely, but the deductibility of such federal NOLs incurred in taxable years beginning after December 31, 2020 is
limited. It is uncertain how various states will respond to the Tax Act and CARES Act. In addition, under Section 382 of the Internal Revenue Code of
1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater
than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and
other pre-change tax attributes to offset its post-change income or taxes may be limited. We may have experienced, and may in the future experience,
ownership changes as a result of shifts in our stock ownership, some of which may be outside of our control. If an ownership change has occurred or occurs
in the future, and our ability to use our NOL carryforwards is materially limited, it would harm our future operating results by effectively increasing our
future tax obligations.
Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.
We are subject to taxation in more than one tax jurisdiction. As a result, our effective tax rate is derived from a combination of applicable tax
rates in the various places that we operate. In preparing our financial statements, we estimate the amount of tax that will become payable in each of such
places. Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including passage of the newly enacted
federal income tax law, changes in the mix of our profitability from jurisdiction to jurisdiction, the results of examinations and audits of our tax filings, our
inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for income taxes and changes in tax laws. Any of these
factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations and may result in tax
obligations in excess of amounts accrued in our financial statements.
We incur significant costs and demands upon management as a result of being a public company.
As a public company listed in the United States, we incur significant legal, accounting and other costs that could negatively affect our
financial results. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations
implemented by the SEC and the Nasdaq Stock Market, may increase legal and financial compliance costs and make some activities more time-consuming.
These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new
guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this
investment may result in increased general and administrative expense and a diversion of management’s time and attention from revenue-generating
activities to compliance activities. If notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory
authorities may initiate legal proceedings against us and our business may be harmed.
Failure to comply with these rules might also make it more difficult for us to obtain some types of insurance, including director and officer
liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar
coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on
committees of our board of directors or as members of senior management.
Our business and operations would suffer in the event of computer system failures, cyberattacks or a deficiency in our cybersecurity.
Maintaining the security of our computer information systems and communication systems is a critical issue for us. We devote considerable
internal and external resources to network security and other security measures to protect our systems and users, but these security measures cannot provide
absolute security. The multitude and complexity of our computer systems may make them susceptible to service interruption, breaches of security,
disruption of data integrity, inadvertent errors that expose our data or systems, malicious intrusion, or random attacks.
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Our internal computer systems, and those of third parties on which we rely, are also vulnerable to damage from computer viruses, malware,
natural disasters, terrorism, war, telecommunication and electrical failures, cyberattacks or cyber-intrusions over the Internet, attachments to emails,
persons inside our organization, or persons with access to systems inside our organization. We have in the past and may in the future identify defects,
errors, or vulnerabilities, which could inadvertently permit access to or exposure of customer data. The risk of a security breach or disruption, particularly
through cyberattacks or cyber intrusion, 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. If any such 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. To the extent that any disruption, security incident, or breach was to result in a loss of or damage to our data or applications, or
inappropriate access to or disclosure of confidential or proprietary information, we could incur material legal claims and liability and damage to our
reputation, and the further development of our product candidates could be delayed.
The effects of a security breach or privacy violation could be further amplified during the current COVID-19 pandemic. In addition, the cost
and operational consequences of implementing further data protection measures could be significant and theft of our intellectual property or proprietary
business information could require substantial expenditures to remedy. Further, we cannot be certain that (a) our liability insurance will be sufficient in type
or amount to cover us against claims related to security breaches, cyberattacks and other related breaches; (b) such coverage will cover any indemnification
claims against us relating to any incident, will continue to be available to us on economically reasonable terms, or at all; or (c) any insurer will not deny
coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence
of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely
affect our reputation, business, financial condition and results of operations.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We lease 25,000 square feet of research and development and administrative space at two locations in Malvern, Pennsylvania, pursuant to
lease agreements that both expire in September 2023. We also lease 4,000 square feet of administrative space in San Diego, California, pursuant to a lease
agreement that expires in October 2022. We believe that our existing facilities are suitable and adequate to meet our current needs. We intend to add new
facilities or expand existing facilities as we add employees, and we believe that suitable additional or substitute space will be available as needed to
accommodate any such expansion of our operations.
Item 3. Legal Proceedings.
We are not subject to any material legal proceedings. From time to time, we may be involved in various claims and legal proceedings relating
to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a
material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs,
diversion of management resources and other factors.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information for Common Stock
Our common stock is listed on The Nasdaq Global Market under the symbol “PHAS."
Holders of Record
As of March 21, 2022, we had 50 holders of record of our common stock, which excludes stockholders whose shares were held in nominee or
street name by brokers. The actual number of common stockholders is greater than the number of record holders, and includes stockholders 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
stockholders whose shares may be held in trust by other entities.
Dividend Policy
We have never paid cash dividends on any of our capital stock and currently intend to retain our future earnings, if any, to fund the
development and growth of our business.
Unregistered Sales of Equity Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial
statements and related notes and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this
Annual Report on Form 10-K.
Overview
We are a clinical-stage biopharmaceutical company focused on the development and commercialization of novel therapies for cardiovascular
diseases. Our lead product candidate, bentracimab (also known as PB2452), is a novel reversal agent for the antiplatelet drug ticagrelor. Bentracimab has
been generally well tolerated in our completed trials, with no drug-related serious adverse events, or SAEs. In our completed Phase 2a and Phase 2b clinical
trials of bentracimab, we observed immediate and complete reversal of ticagrelor’s antiplatelet activity within five minutes following initiation of infusion
and sustained reversal for over 20 hours. We are currently conducting our pivotal Phase 3 REVERSE-IT trial of bentracimab. In a prespecified interim
analysis of 150 enrolled patients (142 of whom enrolled required urgent surgery or an invasive procedure and eight of whom enrolled with uncontrolled
major or life-threatening bleeding), bentracimab achieved the primary endpoint of the trial by immediately and sustainably reversing the antiplatelet effects
of ticagrelor. We are developing bentracimab pursuant to a co-development agreement, or the SFJ Agreement, with SFJ Pharmaceuticals X, Ltd., an SFJ
Pharmaceuticals Group company, or SFJ. We are also developing our preclinical product candidate, PB6440, for treatment-resistant hypertension. Except
for the rights that we granted to Alfasigma S.p.A., or Alfasigma, for bentracimab, we retain worldwide commercial rights to all of our product candidates.
Based on feedback from the United States Food and Drug Administration, or FDA, we intend to seek approval of bentracimab in the United
States through an accelerated approval process. We are targeting to submit a Biologics License Application, or BLA, to the FDA for bentracimab in mid-
2022, although this timing could be impacted by the continued scope
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and duration of the COVID-19 pandemic. In addition, our IND for bentracimab was recently approved by the Center for Drug Evaluation, or CDE, of the
China National Medical Products Administration, or NMPA, in August 2021. We expect to begin enrolling patients in China in the first half of 2022.
As we advance our clinical programs for bentracimab with site activations and patient enrollment, we remain in close contact with our clinical
research organizations, clinical sites and suppliers to attempt to assess the impacts that COVID-19 and its variants may have on our clinical trials and
current timelines and to consider whether we can implement appropriate mitigating measures to help lessen such impacts. At this time, however, we cannot
fully forecast the scope of impacts that COVID-19 may have on our ability to initiate trial sites, enroll and assess patients, supply study drug and report trial
results or our ability to develop PB6440.
Since our inception in 2002, our operations have focused on developing our clinical and preclinical product candidates and our proprietary
ELP technology, organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and conducting
clinical trials and preclinical studies. We do not have any product candidates approved for sale and have not generated any revenue from product sales.
Since inception, we have financed our operations primarily through the sale of equity and debt securities, our term loans with Silicon Valley Bank, or SVB,
and WestRiver Innovation Lending Fund VIII, L.P., or WestRiver, funds we have received under the SFJ Agreement and funds we have received pursuant
to the Alfasigma Sublicense.
Since our inception, we have incurred significant operating losses. Our net loss was $131.1 million for the year ended December 31, 2021. As
of December 31, 2021, we had an accumulated deficit of $391.8 million. We expect to continue to incur significant expenses and operating losses for the
foreseeable future. We anticipate that our expenses will increase substantially in connection with our ongoing activities, as we:
•
continue our ongoing clinical trials of bentracimab, as well as initiate and complete additional clinical trials, as needed;
•
seek to expand our geographical reach through the SFJ Agreement and the Alfasigma Sublicense and the corresponding clinical
development support fees and milestone payments that we will incur or may receive;
•
pursue regulatory approvals for bentracimab as a reversal agent for the antiplatelet drug ticagrelor;
•
develop PB6440 for treatment-resistant hypertension;
•
seek to discover and develop additional clinical and preclinical product candidates;
•
scale up our clinical and regulatory capabilities;
•
establish a commercialization infrastructure and scale up external manufacturing and distribution capabilities to commercialize any
product candidates for which we may obtain regulatory approval, including bentracimab;
•
adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;
•
maintain, expand and protect our intellectual property portfolio;
•
hire additional clinical, manufacturing and scientific personnel;
•
add operational, financial and management information systems and personnel, including personnel to support our product
development and possible future commercialization efforts; and
•
incur additional legal, accounting and other expenses in operating as a public company.
FINANCIAL OVERVIEW
Components of Results of Operations
Revenue
Sublicense Revenue
Sublicense revenue relates to the revenue we recognized in relation to the Alfasigma Sublicense, which contains multiple components
including (i) sublicenses; (ii) research and development activities; and (iii) the manufacturing and supply of certain materials. Payments pursuant to this
arrangement include a non-refundable upfront payment, milestone payments upon the achievement of significant regulatory and development events, sales
of product at certain agreed-upon amounts, sales
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milestones and royalties on product sales. The amount of variable consideration is constrained until it is probable that the revenue is not at a significant risk
of reversal in a future period.
In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under the sublicense agreement, we perform
the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are
performance obligations, including whether they are capable of being distinct; (iii) measurement of the transaction price, including the constraint on
variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue as we satisfy each performance
obligation.
Grant Revenue
Grant revenue is derived from government grants that support our efforts on specific research projects. We recognize grant revenue when
there is reasonable assurance of compliance with the conditions of the grant and reasonable assurance that the grant revenue will be received.
Operating Expenses
Research and Development Expense
Research and development expense consists of expenses incurred in connection with the discovery and development of our product
candidates. We expense research and development costs as incurred. These expenses include:
•
expenses incurred under agreements with contract research organizations, or CROs, as well as investigative sites and consultants that
conduct our clinical trials and preclinical studies;
•
manufacturing and supply scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial supply and
potential commercial supply, including manufacturing validation batches;
•
clinical development support fees that we incur related to the SFJ Agreement;
•
outsourced professional scientific development services;
•
employee-related expenses, which include salaries, benefits and stock-based compensation;
•
expenses relating to regulatory activities; and
•
laboratory materials and supplies used to support our research activities.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally
have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical
trials. We expect our research and development expense to increase significantly over the next several years as we increase personnel costs, including
stock-based compensation, conduct our later-stage clinical trials for bentracimab, develop PB6440, conduct other preclinical studies and clinical trials,
prepare regulatory filings and, if we receive regulatory approval for one or more product candidates, prepare for commercialization efforts. We previously
pursued development of pemziviptadil for the treatment of pulmonary arterial hypertension, or PAH, but after a strategic review, have decided to stop
further development of pemziviptadil in order to reprioritize resources and capital towards pre-commercialization activities for bentracimab and the
advancement of other pipeline programs, including PB6440 for resistant hypertension.
The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature,
timing and costs of the efforts that will be necessary to complete the remainder of the development of our product candidates, or when, if ever, material net
cash inflows may commence from those candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of
clinical trials, which vary significantly over the life of a project as a result of many factors, including:
•
delays in regulators or institutional review boards authorizing us or our investigators to commence our clinical trials or in our ability
to negotiate agreements with clinical trial sites or contract research organizations;
•
our ability to secure adequate supply of product candidates for our trials;
•
the number of clinical sites included in the trials;
•
the length of time required to enroll suitable patients;
•
the number of patients that ultimately participate in the trials;
•
the number of doses patients receive;
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•
any side effects associated with our product candidates;
•
the impacts of the COVID-19 pandemic on our ability to initiate trial sites, enroll and assess patients, supply study drug and report
trial results;
•
the duration of patient follow-up; and
•
the results of our clinical trials.
Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals, and the expense of filing,
prosecuting, defending and enforcing any patent claims or other intellectual property rights. We may never succeed in achieving regulatory approval for our
product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of our product
candidates. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in
the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us
to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could
be required to expend significant additional financial resources and time on the completion of clinical development. Product commercialization will take
several years and millions of dollars in development costs.
General and Administrative Expense
General and administrative expense consists principally of salaries and related costs for personnel in executive and administrative functions,
including stock-based compensation, travel expenses and recruiting expenses. Other general and administrative expense includes professional fees for legal,
accounting and tax-related services and insurance costs.
We expect that general and administrative expenses will increase over the next several years to support our continued research and
development activities of our current and future product candidates, manufacturing activities, potential commercialization of bentracimab and the increased
costs operating as a public company. We believe that these increases likely will include increased costs for director and officer liability insurance, costs
related to the hiring of additional personnel and increased fees for outside consultants, lawyers and accountants. We also expect to incur increased costs to
comply with corporate governance, internal controls, investor relations, disclosure and similar requirements applicable to public reporting companies.
Other (Expense) Income
Loss From Remeasurement of Development Derivative Liability
Loss from remeasurement of development derivative liability reflects the revaluation at each reporting date of our development derivative
liability based on the present value of the estimated consideration to be received and the estimated consideration to be paid pursuant to the contractual
terms under the SFJ Agreement, which is determined to be fair value. The liability is remeasured at the end of each quarter as a Level 3 derivative, with the
change in fair value recorded in the statements of operations.
Interest Income
Interest income consists of interest income from funds held in our cash and cash equivalent accounts.
Interest Expense
Interest expense consists of interest expense on our term loan with SVB and WestRiver.
Provision for Income Taxes
Income tax expense consists of international withholding tax on the initial payment from Alfasigma.
License, Co-Development and Other Agreements
MedImmune Limited License Agreement
76
In November 2017, we entered into an exclusive license agreement, or the MedImmune License, with MedImmune Limited, or MedImmune,
a wholly owned subsidiary of AstraZeneca plc. Pursuant to the MedImmune License, MedImmune granted us an exclusive, worldwide license under
certain patent rights owned or controlled by MedImmune to develop and commercialize any products covered by the MedImmune License, or the
MedImmune Licensed Products, for the treatment, palliation, diagnosis or prevention of any human disorder or condition. Under the MedImmune License,
we paid MedImmune an upfront fee of $0.1 million. We are also required to pay MedImmune: quarterly fees relating to technical services provided by
MedImmune; up to $18.0 million in clinical and regulatory milestone fees, $3.0 million of which had been incurred as of December 31, 2021; up to $50.0
million in commercial milestone fees; and mid-single digit to low-teen royalty percentages on net sales of MedImmune Licensed Products, subject to
reduction in specified circumstances. In addition, the MedImmune License offers an option for third-party product storage costs. From the inception of the
MedImmune License through December 31, 2021, we have incurred costs of $3.6 million under the MedImmune License.
Co-Development Agreement with SFJ Pharmaceuticals
In January 2020, we entered into the SFJ Agreement, pursuant to which SFJ provides us funding to support the global development of
bentracimab as a reversal agent for the antiplatelet drug ticagrelor in patients with uncontrolled major or life-threatening bleeding or requiring urgent
surgery or an invasive procedure. In March 2020, we obtained the consent of Silicon Valley Bank, or SVB, to grant SFJ a security interest in all of the
assets owned or controlled by us that are necessary for the manufacture, use or sale of bentracimab. Under the SFJ Agreement, SFJ has agreed to pay us up
to $120.0 million to support the clinical development of bentracimab. In addition to the $90.0 million of initial funding, we have elected to receive an
additional $30.0 million of funding having met specific, pre-defined clinical development milestones for bentracimab. From the inception of the SFJ
Agreement through December 31, 2021, SFJ has provided funding and paid for amounts on our behalf in the aggregate amount of $91.3 million under the
SFJ Agreement. We also expect that SFJ will fund or reimburse an additional $28.7 million of clinical trial costs and other expenses. During the term of the
SFJ Agreement, we have primary responsibility for clinical development and regulatory activities for bentracimab in the United States and the European
Union, while SFJ has primary responsibility for clinical development and regulatory activities for bentracimab in China and Japan and will provide clinical
trials operational support in the European Union.
Under the terms of the SFJ Agreement, following the FDA approval of a BLA for bentracimab, we will pay SFJ an initial payment of $5.0
million and an additional $325.0 million in the aggregate in seven additional annual payments. If the EMA or the national regulatory authority in certain
European countries approve the equivalent of a BLA, known as a Marketing Authorization Application, or MAA, for bentracimab, we will pay SFJ an
initial payment of $5.0 million and an additional $205.0 million in the aggregate in seven additional annual payments. If either the PMDA of Japan or the
China NMPA approves a marketing application for bentracimab, we will pay SFJ an initial payment of $1.0 million and then an additional $59.0 million in
the aggregate in eight additional annual payments.
Within 120 days following approval of a BLA or MAA for bentracimab in one of the jurisdictions described above, we have the right, at our
option, to make a one-time cash payment to SFJ to buy out all or a portion of the future unpaid approval payments for such jurisdiction (i.e., the U.S.
Approval Payments, EU Approval Payments or Japan/China Approval Payments, as applicable) for a price reflecting a mid-single-digit discount rate.
Within 120 days following a change of control of our company, we or our successor have the right, at its option, to make a one-time cash payment to SFJ to
buy out all or a portion of the future unpaid approval payments in any of the jurisdictions in which a BLA or MAA for bentracimab was approved prior to
the change of control for a price reflecting a mid-single-digit discount rate, provided that SFJ has not previously assigned the right to receive such
payments to a third party (in which event we or our successor shall not have such right).
If following termination of the SFJ Agreement we continue to develop bentracimab and obtain BLA approval in the United States, the
European Union, Japan or China, we will make the applicable approval payments for such jurisdiction to SFJ as if the SFJ Agreement had not been
terminated, less any payments made upon termination, except that if we terminate the SFJ Agreement for SFJ’s failure to make any payment to us when
due, or SFJ terminates the SFJ Agreement due to a material adverse event, as defined in the SFJ Agreement, then our obligation to make such approval
payments would be reduced by 50%.
Duke License Agreement
In October 2006, we entered into an exclusive license agreement with Duke University, or Duke, which was most recently amended in April
2019, or the Duke License. Pursuant to the Duke License, Duke granted us an exclusive, worldwide license under certain patent rights owned or controlled
by Duke, and a non-exclusive, worldwide license under certain know-how of Duke, to develop and commercialize any products covered by the Duke
License, or Duke licensed products, relating to ELPs. Under the Duke License, we paid Duke an upfront fee of $37,000, additional fees in connection with
amendments to the Duke License of $0.2 million and other additional licensing fees of $0.2 million. In consideration for license rights granted to
77
us, we initially issued Duke 24,493 shares of our common stock. Until we reached a certain stipulated equity milestone, which we reached in October 2007,
we were obligated to issue additional shares of common stock to Duke from time to time so that its aggregate ownership represented 7.5% of our issued
and outstanding capital stock. We are also required to pay Duke: up to $2.2 million in regulatory and clinical milestone fees; up to $0.4 million in
commercial milestone fees; low single-digit royalty percentages on net sales of Duke licensed products, with minimum aggregate royalty payments of
$0.2 million payable following our achievement of certain commercial milestones; and up to the greater of $0.3 million or a low double-digit percentage of
the fees we receive from a third party in consideration of forming a strategic alliance with respect to certain patent rights covered under the Duke License.
We also must pay Duke the first $1.0 million of non-royalty payments we receive from a sublicensee, and thereafter a low double-digit percentage of any
additional non-royalty payments we receive, subject to certain conditions. From the inception of the Duke License through December 31, 2021, we have
incurred royalty costs of $0.3 million under the Duke License. We are also required to apply for, prosecute and maintain all U.S. and foreign patent rights
under the Duke License.
Alfasigma Sublicense Agreement
In June 2021, we entered into the Alfasigma Sublicense with Alfasigma under which we granted to Alfasigma exclusive rights to develop,
use, sell, have sold, offer for sale and import any product composed of or containing bentracimab, or Licensed Products, in the Sublicense Territory. Under
the terms of the Alfasigma Sublicense, in July 2021, we received a $20.0 million upfront payment from Alfasigma and we will be eligible to receive up to
$35.0 million upon the achievement of certain pre-revenue regulatory milestones, up to $190.0 million upon the achievement of certain commercial
milestones and tiered royalty payments on net sales, with percentages starting in the low double digits and escalating to the mid-twenties.
With respect to the up to $35.0 million of regulatory milestone payments: (i) $10.0 million is payable following acceptance by the EMA of
the filing of the first drug approval application for a Licensed Product; (ii) $12.5 million is payable following achievement of conditional regulatory
approval from the EMA; and (iii) the remaining $12.5 million is payable following achievement of unconditional regulatory approval from the EMA
allowing for prescribing of a Licensed Product for the reversal of the antiplatelet effects of ticagrelor in both (a) patients with uncontrolled major or life-
threatening bleeding and (b) patients requiring urgent surgery or an invasive procedure.
Under the Alfasigma Sublicense, we are responsible for developing the Licensed Products and securing regulatory approval with the EMA
and the MHRA, including in accordance with the SFJ Agreement, after which any marketing authorizations will be assigned to Alfasigma. Alfasigma is
obligated to obtain and maintain any regulatory approvals necessary to market and sell the Licensed Products (including pricing approvals and post-
marketing commitments) and is also responsible for securing regulatory approval in countries outside of Europe and the United Kingdom. We have also
agreed to provide Licensed Products to Alfasigma at the lower of cost or a price not to exceed certain agreed amounts. We recognized $10.8 million and
zero in revenue under the Alfasigma Sublicense for the years ended December 31, 2021 and 2020, respectively.
Wacker License Agreement
In April 2019, we entered into a license agreement, or the Wacker License Agreement, with Wacker Biotech GmbH, or Wacker, pursuant to
which Wacker granted us an exclusive license under certain of Wacker’s intellectual property rights to use Wacker’s proprietary E. coli strain for the
manufacture of bentracimab worldwide outside of specified Asian countries and to commercialize bentracimab, if approved, manufactured by us or on our
behalf using Wacker’s proprietary E. coli strain throughout the world. We have the right to grant sublicenses under the license, subject to certain conditions
as specified in the Wacker License Agreement. Under the terms of the agreement, we are required to pay a fixed, nominal per-unit royalty, which is subject
to adjustment, and an annual license fee in a fixed Euro amount in the low to mid six digits. The agreement will be in force for an indefinite period of time,
and upon the expiration of our royalty obligations, the license will be considered fully paid and will convert to a non-exclusive license. Either party may
terminate the Wacker License Agreement for breach if such breach is not cured within a specified number of days. We completed a technology transfer of
our current manufacturing process for bentracimab from Wacker to BioVectra, another cGMP manufacturer, and have engaged BioVectra to manufacture
drug substance for our ongoing clinical trials and to manufacture commercial supply of bentracimab following regulatory approval, if obtained. From the
inception of the Wacker License Agreement through December 31, 2021, we have incurred $0.9 million in costs.
Viamet Asset Purchase Agreement
In January 2020, we entered into a purchase agreement, or the PB6440 Agreement, with Viamet Pharmaceuticals Holdings, LLC and its
wholly-owned subsidiary, Selenity Therapeutics (Bermuda), Ltd., or the Sellers, pursuant to which we
78
acquired all of the assets and intellectual property rights related to the Sellers’ proprietary CYP11B2 inhibitor compound, formerly known as SE-6440 or
VT-6440, and certain other CYP11B2 inhibitor compounds that are covered by the patent rights acquired by us under the PB6440 Agreement, or together,
the Compounds. Under the terms of the PB6440 Agreement, we paid the Sellers an upfront fee of $0.1 million upon the closing of the transaction, and we
are required to pay the Sellers up to $5.1 million upon the achievement of certain development and intellectual property milestones with respect to certain
product candidates that contain a Compound, up to $142.5 million upon the achievement of certain commercial milestones with respect to any approved
product that contains a Compound and low- to mid-single digit royalty percentages on the net sales of approved products that contain a Compound, subject
to customary reductions and offsets in specified circumstances. From the inception of the PB6440 Agreement through December 31, 2021, we have
incurred $0.1 million in costs under the PB6440 Agreement.
BioVectra Supply Agreement
In March 2021, we entered into a supply agreement with BioVectra, or the BioVectra Agreement, for the manufacture and supply by
BioVectra of bulk drug substance for bentracimab for commercial distribution following regulatory approval, if obtained. We have also engaged BioVectra
to manufacture drug substance for our ongoing clinical trials.
Under the terms of the BioVectra Agreement, BioVectra has committed to maintaining capacity to manufacture an agreed number of batches
of product each year for commercial distribution, and we have committed to purchase a specified minimum number of batches of product per year, or the
Minimum Annual Commitment, although we are free to contract with third parties for the manufacture of bentracimab. We will pay a supply price per
batch of bentracimab to be determined after the manufacturing process for the product is validated in accordance with the BioVectra Agreement, or
Validation, plus the cost of certain consumables, raw materials, and third-party testing.
Pursuant to the Minimum Annual Commitments, we are obligated to purchase a minimum of (i) approximately $14.0 million of batches of
bentracimab in years 2022 through 2023, (ii) approximately $37.0 million of batches of bentracimab in 2024, and (iii) approximately $48.0 million of
batches of bentracimab in each of years 2025 through 2031. In the event we do not purchase the applicable Minimum Annual Commitment in a given year,
we will be obligated to make a payment to BioVectra in an amount equal to the then-applicable supply price per batch multiplied by the difference between
the Minimum Annual Commitment for such year and the number of batches of bentracimab we actually purchased in such year, or the Minimum Shortfall
Payment, except in the event that BioVectra was unable to deliver the number of batches ordered by us in such year. In the event of certain serious or
extended failures by BioVectra to supply product in the quantities ordered by us in a given year, our Minimum Annual Commitment for such year (and
potentially one or more subsequent years) will be subject to reduction, and our obligation to make a Minimum Shortfall Payment for such year (and
potentially one or more subsequent years) will be waived. We will have the right to reduce the Minimum Annual Commitments for the year 2026 and
subsequent years by up to a specified maximum percentage per year. Further, if we are only able to obtain regulatory approval for products incorporating
bentracimab in only one of the U.S. or Europe, BioVectra and we have agreed to discuss in good faith an amendment to the BioVectra Agreement to reflect
decreased requirements for product and impacts to the supply price to reflect lower volume commitments.
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Results of Operations
Comparison of the Years Ended December 31, 2021 and 2020
The following table summarizes our results of operations (in thousands):
Year Ended December 31,
2021
2020
Change
Revenue:
Sublicense revenue
$
10,831
$
—
$
10,831
Grant revenue
—
320
(320)
Total revenue
10,831
320
10,511
Operating expenses:
Research and development
102,107
72,088
30,019
General and administrative
16,086
13,088
2,998
Total operating expenses
118,193
85,176
33,017
Loss from operations
(107,362)
(84,856)
(22,506)
Other (expense) income:
Loss from remeasurement of development derivative liability
(21,182)
(12,507)
(8,675)
Interest income
14
237
(223)
Interest expense
(947)
(1,445)
498
Foreign exchange gain
6
6
—
Total other expense
(22,109)
(13,709)
(8,400)
Net loss before income taxes
(129,471)
(98,565)
(30,906)
Provision for income taxes
1,600
—
1,600
Net loss
$
(131,071)
$
(98,565)
$
(32,506)
Sublicense Revenue
Sublicense revenue was $10.8 million for the year ended December 31, 2021, compared to zero for the year ended December 31, 2020. The
increase was attributable to the revenue we recognized from the initial payment pursuant to the Alfasigma Sublicense.
Grant Revenue
Grant revenue was zero for the year ended December 31, 2021, compared to $0.3 million for the year ended December 31, 2020. All $2.8
million in funding available under the Small Business Innovation Research grants from the National Institutes of Health to support the clinical development
of pemziviptadil for the treatment of PAH was received as of December 31, 2020.
Research and Development Expense
Research and development expense was $102.1 million for the year ended December 31, 2021, compared to $72.1 million for the year ended
December 31, 2020. The increase of $30.0 million was primarily attributable to increases in clinical
80
and drug production activities related to bentracimab, depreciation costs for equipment related to the manufacturing of bentracimab, personnel costs due to
additional headcount and costs associated with our general research efforts.
The following table summarizes our research and development expense by functional area (in thousands):
Year Ended
December 31,
2021
2020
Change
Preclinical and clinical development
$
88,717
$
62,166
$
26,551
Compensation and related benefits
8,003
7,023
980
Stock-based compensation
759
643
116
Facilities expense
1,722
1,149
573
Other
2,906
1,107
1,799
Total research and development expense
$
102,107
$
72,088
$
30,019
The following table summarizes our research and development expense by product candidate (in thousands):
Year Ended
December 31,
2021
2020
Change
External research and development expense by program
Bentracimab
$
77,964
$
48,539
$
29,425
Pemziviptadil
9,571
12,284
(2,713)
Unallocated research and development expense:
Compensation and stock-based compensation
8,762
7,666
1,096
Other research and development
5,810
3,599
2,211
Total research and development expense
$
102,107
$
72,088
$
30,019
We have ceased development of pemziviptadil and plan to reprioritize resources and capital towards pre-commercialization activities of bentracimab and
the advancement of other pipeline programs, including PB6440 for resistant hypertension.
General and Administrative Expense
General and administrative expense was $16.1 million for the year ended December 31, 2021, compared to $13.1 million for the year ended
December 31, 2020. The increase of $3.0 million was primarily attributable to professional services related to consulting and legal services and increases in
personnel expense due to additional headcount.
Loss From Remeasurement of Development Derivative Liability
Loss from remeasurement of development derivative liability was $21.2 million for the year ended December 31, 2021, compared to $12.5
million for the year ended December 31, 2020. The liability was initially recorded at the present value of the estimated consideration to be received and the
estimated consideration to be paid pursuant to the contractual terms of the SFJ Agreement, which was determined to have been fair value. The derivative
liability was subsequently remeasured at year end as a Level 3 derivative and the increase in expense reflects the change from that remeasurement.
Interest Income
Interest income was $14 thousand for the year ended December 31, 2021, compared to $237 thousand for the year ended December 31, 2020.
The decrease of $223 thousand was attributable to higher balances of cash and cash equivalents and higher interest rates during 2020.
Interest Expense
Interest expense was $0.9 million for the year ended December 31, 2021, compared to $1.4 million for the year ended December 31, 2020.
The decrease of $0.5 million was attributable to increased borrowings in 2020 under the 2019 Loan.
81
See "Note 6. Debt" in "Notes to Financial Statements" in this Annual Report on Form 10-K for information concerning the 2019 Loan.
Provision for Income Taxes
Provision for income taxes was $1.6 million for the year ended December 31, 2021, compared to zero for the year ended December 31, 2020.
The increase was attributable to taxes paid in Italy for the $20.0 million upfront payment made pursuant to the Alfasigma Sublicense.
Liquidity and Capital Resources
Cash Requirements and Going Concern
Funding Requirements
Our primary uses of capital have been, and we expect will continue to be, advancing our clinical and preclinical development programs. We
have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect.
Because of the numerous risks and uncertainties associated with the development and commercialization of product candidates, we are unable to estimate
the amounts of increased capital outlays and operating expenditures necessary to complete the development of product candidates.
Our short-term and long-term material cash requirements consist of operational and capital expenditures, some of which contain contractual
obligations. Our primary uses of cash relate to paying salaries and benefits, administering clinical trials, and providing the technology and facilities
necessary to support our operations. The most significant contractual obligations are the operating leases at our facilities in Pennsylvania and California.
Our future minimum lease payments as of December 31, 2021 totaled $0.5 million related to short-term lease liabilities, and $1.1 million related to long-
term lease liabilities. See "Note 10. Leases" in "Notes to the Financial Statements" in this Annual Report on Form 10-K for additional information about
our lease liabilities. We expect to fund these requirements with current cash and cash equivalents as well as anticipated and potential milestone payments.
To date, we have not generated any revenues from the commercial sale of approved drug products, and we do not expect to generate
substantial revenues for at least the next several years. If we fail to complete the development of our product candidates in a timely manner or fail to obtain
their regulatory approval, our ability to generate future revenue will be compromised. We cannot guarantee when, or if, we will generate any revenue from
our product candidates, and we do not expect to generate significant revenue unless and until we obtain regulatory approval of, and commercialize, our
product candidates. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development
of, continue or initiate clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain approval for any of our product
candidates, we expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution. We anticipate that we
will need substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms,
we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.
We have experienced net losses and negative cash flows from operations and, as of December 31, 2021, had an accumulated deficit of $391.8
million. We expect to continue to incur net losses for at least the next several years. We believe that our existing cash and cash equivalents as of
December 31, 2021, in addition to the $28.7 million of clinical trial costs and other expenses that we expect SFJ will fund or reimburse, will not be
sufficient to fund our operating expenses and capital requirements for 12 months from the date of the issuance of the financial statements included in this
Annual Report on Form 10-K. These factors raise substantial doubt about our ability to continue as a going concern. See "Risk Factors— The auditor's
opinion on our audited financial statements for the fiscal year ended December 31, 2021 included in this Annual Report on Form 10-K contains an
explanatory paragraph relating to our substantial doubt about our ability to continue as a going concern. Further, under the SFJ Agreement, SFJ may elect
to have our business related to bentracimab transferred to SFJ if we do not remedy such going concern condition within the periods specified in the SFJ
Agreement and our ability to share in any revenues from the commercialization of bentracimab will be materially and adversely affected. We may be forced
to delay or reduce the scope of our development programs and/or limit or cease our operations if we are unable to obtain additional funding to support our
current operating plan." We intend to devote our existing cash and cash equivalents to advance our clinical and preclinical development programs. We have
based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because
of the numerous risks and uncertainties associated with the development and commercialization of product candidates, we are unable to estimate the
amounts of increased capital outlays and operating expenditures necessary to complete the development and potential commercialization of product
candidates. See also Note 1 to the financial statements appearing elsewhere in this Annual Report for information about our assessment.
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Our short-term and long-term future capital requirements will depend on many factors, including:
•
the progress and results of our ongoing and planned future clinical trials of bentracimab, PB6440 and our other preclinical programs;
•
the timing and amount of payments we receive under the SFJ Agreement and the Alfasigma Sublicense;
•
the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for any future product
candidates we may decide to pursue;
•
the extent to which we develop, in-license or acquire other product candidates and technologies;
•
the number and development requirements of other product candidates that we may pursue;
•
the costs, timing and outcome of regulatory review of our product candidates;
•
the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for
any of our product candidates for which we receive marketing approval;
•
the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;
•
our ability to establish collaborations to commercialize bentracimab, or any of our other product candidates outside of the United
States; and
•
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property
rights and defending any intellectual property-related claims.
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain
process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve
product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from
sales of product candidates that we do not expect to be commercially available in the near term, if at all.
Our future commercial revenue, if any, will be derived from sales of products that we do not expect to be commercially available until 2023,
if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be
available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the terms
of these equity securities or this debt may restrict our ability to operate. Any future debt financing and equity financing, if available, may involve
agreements that include covenants limiting and restricting our ability to take specific actions, such as incurring additional debt, making capital
expenditures, entering into profit-sharing or other arrangements or declaring dividends. 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 technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. Further, our
ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility
in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic.
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, that have or are reasonably
likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations,
liquidity, cash requirements or capital resources.
Sources of Liquidity
Since our inception, we have not generated any revenue from product sales and have incurred net losses and negative cash flows from our
operations. We have financed our operations primarily through public offerings of our common stock, private placements of convertible debt and
convertible preferred stock, borrowings under our term loans and funds we have received under the SFJ Agreement and pursuant to the Alfasigma
Sublicense. In future periods we expect SFJ to provide up to an additional $28.7 million of funding pursuant to the SFJ Agreement based upon the
achievement of specified milestones with respect to our clinical development of bentracimab. As of December 31, 2021, we had cash and cash equivalents
of $41.8 million.
We plan to address our liquidity needs through the pursuit of additional funding through a combination of equity or debt financings, or
government or other third-party financing, marketing and distribution agreements and other collaborations, strategic alliances and licensing agreements.
There is no assurance that we will be able to obtain additional funding on acceptable terms or at all. If we are not able to secure adequate additional
funding, we will be required to make
83
reductions in certain spending to extend our current funds. If we are unable to raise adequate funds, we may have to liquidate some or all of our assets, or
we may have to delay, reduce the scope of, or eliminate some or all of our development programs or clinical trials. We may also have to delay development
or commercialization of our products or license to third parties the rights to commercialize products or technology that we would otherwise seek to
commercialize. Further, under the SFJ Agreement, if we fail to remedy such going concern condition within the periods specified in the agreement, SFJ
may elect to have our business related to bentracimab transferred to SFJ. If our business related to bentracimab is transferred to SFJ, we will not share in
any revenues from the commercialization of bentracimab until SFJ has received a 300% return on its investment in bentracimab, after which we will be
entitled to a mid-single-digit royalty on net sales of bentracimab in the United States and certain European countries, and after SFJ has received an
aggregate 500% return on its investment in bentracimab, we will be entitled to a mid-single-digit royalty on net sales of bentracimab in the rest of the
world. Any of these factors could harm our operating results and future prospects.
In December 2019, we filed a shelf registration statement on Form S-3, or the 2019 Shelf Registration Statement, which became effective in
January 2020. The 2019 Shelf Registration Statement permits: (i) the offering, issuance and sale by us of up to a maximum aggregate offering price
of $200.0 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination; and (ii) the offering,
issuance and sale by us of up to a maximum aggregate offering price of $60.0 million of our common stock that may be issued and sold under an “at-the-
market” sales agreement, or ATM Program. The $60.0 million of common stock that may be issued and sold under the ATM Program is included in the
$200.0 million of securities that may be issued and sold under the 2019 Shelf Registration Statement. During the year ended December 31, 2020, we raised
net proceeds of $2.9 million pursuant to the ATM Program from the sale of 561,848 shares of our common stock at a weighted-average price of $5.41 per
share. During the year ended December 31, 2021, we raised net proceeds of $60.4 million from the March 2021 underwritten public offering. Further, on
January 10, 2022, we issued 500,000 shares of common stock through the ATM Program, providing net proceeds of $1.2 million.
In January 2020, we entered into the SFJ Agreement, pursuant to which SFJ agreed to provide funding to support the development of
bentracimab as a reversal agent for the antiplatelet drug ticagrelor. Under the SFJ Agreement, SFJ has agreed to pay us up to $120.0 million to support the
clinical development of bentracimab. In addition to the $90.0 million of initial funding, we have elected to receive an additional $30.0 million of funding
having met specific, pre-defined clinical development milestones for bentracimab. From the inception of the SFJ Agreement through December 31, 2021,
SFJ has provided funding and paid for amounts on our behalf in the aggregate amount of $91.3 million under the SFJ Agreement. We also expect that SFJ
will fund or reimburse an additional $28.7 million of clinical trial costs and other expenses.
In March 2021, pursuant to the 2019 Shelf Registration Statement, we completed an underwritten public offering of our common stock, which
resulted in the issuance and sale of an aggregate of 18,400,000 shares of common stock at a public offering price of $3.50 per share, generating net
proceeds of $60.2 million, after deducting underwriting discounts and commissions and other offering costs. As of December 31, 2021, we have $132.6
million of common stock remaining that can be sold under the 2019 Shelf Registration Statement, of which $57.0 million may be sold under the ATM
Program.
In July 2021, pursuant to the Alfasigma Sublicense, we received an upfront payment of $20.0 million from Alfasigma. We are eligible to
receive up to $35.0 million upon the achievement of certain pre-revenue regulatory milestones, up to $190.0 million upon the achievement of certain
commercial milestones and tiered royalty payments on net sales, with percentages starting in the low double digits and escalating to the mid-twenties.
Cash Flows
The following table summarizes our cash flows for each of the periods set forth below (in thousands):
Year Ended
December 31,
2021
2020
Net cash used in operating activities
$
(47,416)
$
(59,957)
Net cash used in investing activities
(2,679)
(1,412)
Net cash provided by financing activities
63,773
15,466
Net increase (decrease) in cash and cash equivalents
$
13,678
$
(45,903)
Operating Activities
Net cash used in operating activities was $47.4 million during the year ended December 31, 2021. The use of cash primarily related to our net
loss of $131.1 million, partially offset by non-cash expenses of $54.3 million, and a $29.4 million change in our operating assets and liabilities. Non-cash
expenses consisted primarily of $28.7 million in research and
84
development expenses paid for on our behalf by SFJ, $21.2 million from the loss from remeasurement of development derivative liability, $2.3 million in
stock-based compensation and $1.8 million in depreciation and amortization. The net cash flow from changes in our operating assets and liabilities was
principally due to increases in our deferred sublicense revenue of $9.2 million, $9.0 million in accounts payable and $3.7 million in accrued expenses and
other current liabilities, and a decrease of $7.5 million in prepaid expenses and other assets. The increase in accounts payable was driven by manufacturing
of drug product and increased clinical study activity for bentracimab. The decrease in prepaid expenses was primarily due to the timing of payments related
to drug manufacturing for bentracimab.
Net cash used in operating activities was $60.0 million during the year ended December 31, 2020. The use of cash primarily related to our net
loss of $98.6 million, in addition to a $4.3 million change in our operating assets and liabilities. The use of cash was partially offset by non-cash expenses,
primarily $27.0 million in research and development expenses paid for on our behalf by SFJ, $12.5 million from the loss from remeasurement of
development derivative liability and $2.2 million in stock-based compensation. The change in our operating assets and liabilities was principally due to an
$8.4 million increase in prepaid expenses as a result of drug manufacturing payments related to bentracimab, partially offset by increases of $1.9 million in
accrued expenses and $1.0 million in accounts payable and by a $1.2 million decrease in other receivables due to timing of the receipt of grant revenue.
Investing Activities
Net cash used in investing activities was $2.7 million and $1.4 million for the purchase of property and equipment during the years ended
December 31, 2021 and 2020, respectively.
Financing Activities
Net cash provided by financing activities was $63.8 million during the year ended December 31, 2021, due primarily to the $60.4 million in
net proceeds from the March 2021 underwritten public offering, $8.2 million received under the SFJ Agreement and $0.4 million in proceeds from the
exercise of stock options and $0.3 million in proceeds from shares purchased through the employee stock purchase program, partially offset by $5.5 million
in repayments of long-term debt.
Net cash provided by financing activities was $15.5 million during the year ended December 31, 2020, due primarily to the receipt of $15.2
million under the SFJ Agreement and $2.9 million in proceeds from sales under the ATM Program, partially offset by $2.7 million in repayments of long-
term debt.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which
have been prepared in accordance with United States generally accepted accounting policies, or GAAP. The preparation of these financial statements
requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with GAAP, we evaluate
our estimates and judgments on an ongoing basis.
Significant estimates include assumptions we have used in the determination of accrued research and development costs and those used for
the inputs in our valuation of for sublicense revenue and development derivative liability. We base our estimates on 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. Actual results may differ from these estimates under different assumptions or
conditions.
We believe the following accounting policies are the most critical to the judgments and estimates used in the preparation of our financial
statements. See Note 2 to the financial statements appearing elsewhere in this Annual Report for a discussion of our significant accounting policies.
Accrued Research and Development Expense
The majority of our operating expenses to date have been incurred in research and development activities. As part of the process of preparing
our financial statements, we are required to estimate expenses resulting from obligations under contracts with vendors, consultants and research
organizations, in connection with conducting clinical and preclinical activities. The financial terms of these contracts are subject to negotiations which vary
from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts.
We reflect preclinical study and clinical trial expenses in our financial statements by matching those expenses with the period in which services and efforts
are expended. We account for these expenses according to the progress of the preclinical study or clinical
85
trial as measured by the timing of various aspects of the preclinical study or clinical trial, or related activities. Our accrual estimates are determined through
review of the underlying contracts along with preparation of financial models taking into account discussions with research and other key personnel as to
the progress of preclinical studies or clinical trials, or other services being conducted. During the course of a preclinical study or clinical trial, we will
adjust the rate of expense recognition if actual results differ from our original estimates.
Development Derivative Liability
In January 2020, we entered into the SFJ Agreement, pursuant to which SFJ provides funding to support the global development of
bentracimab as a reversal agent for the antiplatelet drug ticagrelor in patients with uncontrolled major or life-threatening bleeding or requiring urgent
surgery or an invasive procedure. Under the SFJ Agreement, SFJ has agreed to pay us up to $120.0 million to support the clinical development of
bentracimab.
If the FDA approves a BLA for bentracimab, we have agreed to pay to SFJ an initial payment of $5.0 million and an additional $325.0 million
in the aggregate in seven additional annual payments, or the U.S. Approval Payments. If the EMA or the national regulatory authorities in certain European
countries provide marketing approval of bentracimab, we will pay SFJ an initial payment of $5.0 million and an additional $205.0 million in the aggregate
in seven additional annual payments, or the EU Approval Payments. The majority of the U.S. Approval Payments and the EU Approval Payments will be
made from the third anniversary to the seventh anniversary of marketing approval in the applicable jurisdiction. If either the Pharmaceuticals and Medical
Devices Agency, or the PMDA, of Japan or the China NMPA provides marketing approval of bentracimab, we will pay SFJ an initial payment of $1.0
million and then an additional $59.0 million in the aggregate in eight additional annual payments, or the Japan/China Approval Payments, with the majority
of the payments to be made from the fifth anniversary to the eighth anniversary of marketing approval. The Japan/China Approval Payments will only be
paid once regardless of receipt of marketing approval in both Japan and China. The U.S. Approval Payments, EU Approval Payments and Japan/China
Approval Payments will be proportionately adjusted in the event that the actual funding from SFJ is lower or greater than $120.0 million. We will not be
obligated to make the U.S. Approval Payments if we do not receive marketing approval for bentracimab from the FDA, the EU Approval Payments if we
do not receive marketing approval for bentracimab from the EMA or the national regulatory authority in certain European countries or the Japan/China
Approval Payments if we do not receive marketing approval for bentracimab from either the PMDA or the NMPA.
We account for the SFJ Agreement as a derivative instrument that increases and decreases as consideration is received and repayments are
made, respectively. The derivative is further adjusted at each reporting period to its estimated fair value. The derivative is valued using a scenario-based
discounted cash flow method, whereby each scenario makes assumptions about the probability and timing of cash flows, and such cash flows are present
valued using a risk-adjusted discount rate. The valuation method incorporates certain unobservable Level 3 key inputs including (i) the probability and
timing of funding, (ii) the probability and timing of achieving regulatory approvals, (iii) our cost of borrowing (16.00% plus the risk free borrowing rate)
and (iv) SFJ's cost of borrowing (2.50% plus the risk free borrowing rate). The derivative is presented as a liability in our balance sheet. Any changes in
fair value are recorded as a loss or gain from remeasurement of development derivative liability on the statements of operations.
Sublicense Revenue
In June 2021, we entered into the Alfasigma Sublicense, pursuant to which Alfasigma will provide funding in exchange for the exclusive
rights to develop, use, sell, have sold, offer for sale and import any product composed of or containing bentracimab in the Sublicense Territory.
Sublicensing arrangements may contain multiple components, which may include (i) sublicenses; (ii) research and development activities; and
(iii) the manufacturing and supply of certain materials. Payments pursuant to these arrangements may include non-refundable upfront payments, milestone
payments upon the achievement of significant regulatory and development events or sales of product at certain agreed-upon amounts, sales milestones and
royalties on product sales. The amount of variable consideration is constrained until it is probable that the revenue is not at a significant risk of reversal in a
future period.
In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under the sublicense agreement, we perform
the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are
performance obligations, including whether they are capable of being distinct; (iii) measurement of the transaction price, including the constraint on
variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue as we satisfy each performance
obligation.
86
We must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance
obligation, which determines how the transaction price is allocated among the performance obligations. The estimation of the stand-alone selling price may
include such estimates as forecasted revenues and costs, development timelines, discount rates and probabilities of regulatory and commercial success. We
also apply significant judgment when evaluating whether contractual obligations represent distinct performance obligations, allocating transaction price to
performance obligations within a contract, determining when performance obligations have been met, assessing the recognition and future reversal of
variable consideration and determining and applying appropriate methods of measuring progress for performance obligations satisfied over time.
Recent Accounting Pronouncements
See Note 2 to the financial statements appearing elsewhere in this Annual Report for information concerning recent accounting
pronouncements.
JOBS Act Transition Period
In April 2012, the Jumpstart Our Business Startups Act, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an
“emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with
new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will
adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act.
Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation, (i) not providing
an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, or
the Sarbanes-Oxley Act and (ii) not complying with any requirement that may be adopted by the Public Company Accounting Oversight Board. We will
remain an emerging growth company until the earliest to occur of (1) the last day of the fiscal year (a) ending December 31, 2023, which is the end of the
fiscal year following the fifth anniversary of the completion our initial public offering, (b) in which we have total annual gross revenues of at least
$1.07 billion or (c) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common
stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-
convertible debt during the prior three-year period.
We are a “smaller reporting company” (and may continue to qualify as such even after we no longer qualify as an emerging growth company)
and accordingly may provide less public disclosure than larger public companies, including the inclusion of only two years of audited financial statements
and management’s discussion and analysis of financial condition and results of operations disclosure. As a result, the information that we provide to our
stockholders may be different than what they might receive from other public reporting companies in which they hold equity interests.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required
under this item.
Item 8. Financial Statements and Supplementary Data.
The information required by this Item 8 is set forth in our financial statements included in Part IV, Item 15 of this Annual Report on Form 10-
K.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
87
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are
designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our
management, including our principal executive and our principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
With respect to the year ended December 31, 2021, under the supervision and with the participation of our management, we conducted an
evaluation of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2021 to provide
reasonable assurance that the information required to be disclosed by us in this Annual Report was (a) reported within the time periods specified by SEC
rules and regulations and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely
decisions regarding any required disclosure.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control is defined
in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company's principal
executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles and includes those policies and procedures that:
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the
assets of the company;
•
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and
•
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
company's assets that could have a material effect on the financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control -
Integrated Framework (2013 framework) (COSO). Based on its assessment, management believes that, as of December 31, 2021, our internal control over
financial reporting is effective at the reasonable assurance level.
This Annual Report does not include an attestation report of our independent registered public accounting firm as allowed by Section 404(b)
of the Sarbanes-Oxley Act, as amended by Section 103 of the JOBS Act.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during the fiscal year ended December 31, 2021 which have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Item 9B. Other Information.
PhaseBio Pharmaceuticals, Inc. Severance Benefit Plan
On March 23, 2022, the compensation committee of our board of directors approved an amendment to the PhaseBio Pharmaceuticals, Inc.
Severance Benefit Plan, or the Severance Plan, which provides for severance benefits for
88
Table of Contents
eligible employees, including our named executive officers, upon (i) a “change in control termination” or (ii) a “regular termination” (each as defined
below). The severance benefits provided under the terms of the Severance Plan remain materially unchanged from those described under the caption
“Executive Compensation” in our Definitive Proxy Statement on Schedule 14A filed with SEC on April 29, 2021, except as follows:
•
Upon a change in control termination, our Chief Executive Officer is entitled to payment of 1.5 times the target amount of his annual
bonus;
•
Employees at the senior vice president level are eligible to receive the same benefits under the Severance Plan as executive officers,
other than the Chief Executive Officer; and
•
Our Chief Executive Officer is authorized to designate employees below the vice president level to be eligible to receive benefits
under the Severance Plan. Upon a change in control termination, such designated employees are entitled to a lump sum payment
equal to six months’ annual base salary, payment of 0.5 times the target amount of such employee’s annual bonus, accelerated
vesting of all outstanding equity awards, payment of COBRA premiums for six months and an extension of the post-termination
exercise period applicable to such employee’s outstanding equity awards for up to one year following such termination. Such
designated employees are not entitled to receive benefits under the Severance Plan upon a regular termination.
For purposes of the Severance Plan, the following definitions apply:
•
a “change in control termination” is an “involuntary termination” that occurs one month before or twelve months following a change
in control (as defined in our 2018 Equity Incentive Plan);
•
a “regular termination” is an “involuntary termination” that does not occur within the one month before or twelve months following
a change in control; and
•
an “involuntary termination” is (i) a termination by the Company without “cause” (as defined in our 2018 Equity Incentive Plan), or
(ii) the employee’s resignation for “good reason” (as defined in the Severance Plan).
The foregoing summary of the Severance Plan does not purport to be complete and is qualified in its entirety by reference to the full text of
the Severance Plan, a copy of which is filed as Exhibit 10.9 to this Annual Report on Form 10-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
89
PART III
We intend to file a definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, or the Proxy Statement, with the SEC, pursuant
to Regulation 14A, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has been omitted under
General Instruction G(3) to Form 10-K. Only those sections of the 2022 Proxy Statement that specifically address the items set forth herein are
incorporated by reference.
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this Item 10 will be included in our Proxy Statement under the captions “Information Regarding the Board of
Directors and Corporate Governance,” “Election of Directors,” “Executive Officers” and “Delinquent Section 16(a) Reports” and is incorporated herein by
reference.
Item 11. Executive Compensation.
The information required by this Item 11 will be included in our Proxy Statement under the captions “Executive Compensation” and “Director
Compensation” and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item 12 will be included in our Proxy Statement under the captions “Security Ownership of Certain
Beneficial Owners and Management” and “Securities Authorized for Issuance under Equity Compensation Plans” and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item 13 will be included in our Proxy Statement under the captions “Transactions with Related Persons and
Indemnification” and “Independence of the Board of Directors” and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
The information required by this Item 14 will be included in our Proxy Statement under the caption “Ratification of Selection of Independent
Registered Public Accounting Firm” and is incorporated herein by reference.
90
PART IV
Item 15. Exhibit and Financial Statement Schedules.
(a)(1) Financial Statements
91
PhaseBio Pharmaceuticals, Inc.
Index to Financial Statements
Contents
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 185)
F-2
Balance Sheets as of December 31, 2021 and 2020
F-3
Statements of Operations for the years ended December 31, 2021 and 2020
F-4
Statements of Stockholders’ Deficit for the years ended December 31, 2021 and 2020
F-5
Statements of Cash Flows for the years ended December 31, 2021 and 2020
F-6
Notes to Financial Statements
F-7
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
PhaseBio Pharmaceuticals, Inc.:
Opinion on the Financial Statements
We have audited the accompanying balance sheets of PhaseBio Pharmaceuticals, Inc. (the Company) as of December 31, 2021 and 2020, the related
statements of operations, stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively, the financial statements). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the
results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has experienced net losses and negative cash flows from operations and has an accumulated deficit of $391.8 million as
of December 31, 2021 that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2010.
Philadelphia, Pennsylvania
March 24, 2022
F-2
PHASEBIO PHARMACEUTICALS, INC.
BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31,
2021
2020
Assets
Current assets:
Cash and cash equivalents
$
41,800
$
28,122
Prepaid expenses and other assets
6,984
12,027
Total current assets
48,784
40,149
Property and equipment, net
10,230
8,224
Operating lease right-of-use assets
1,469
1,927
Other assets
57
57
Total assets
$
60,540
$
50,357
Liabilities and stockholders' deficit
Current liabilities:
Current portion of long-term debt
$
5,413
$
5,355
Current portion of deferred sublicense revenue
1,547
—
Accounts payable
12,570
3,674
Accrued expenses and other current liabilities
8,353
5,931
Total current liabilities
27,883
14,960
Long-term debt, net
1,359
6,773
Operating lease liabilities, net
1,073
1,548
Long-term portion of deferred sublicense revenue
7,622
—
Development derivative liability
114,843
51,719
Other long-term liabilities
794
559
Total liabilities
153,574
75,559
Commitments and contingencies (Notes 9, 10, 13)
Stockholders’ deficit:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; zero shares issued and outstanding at
December 31, 2021 and 2020
—
—
Common stock, $0.001 par value; 200,000,000 shares authorized; 48,220,557 shares issued and 48,190,590 shares
outstanding at December 31, 2021; 29,471,854 shares issued and 29,441,887 shares outstanding at
December 31, 2020
48
29
Treasury stock, at cost, 29,967 shares as of December 31, 2021 and 2020
(24)
(24)
Additional paid-in capital
298,736
235,516
Accumulated deficit
(391,794)
(260,723)
Total stockholders’ deficit
(93,034)
(25,202)
Total liabilities and stockholders' deficit
$
60,540
$
50,357
See accompanying notes to financial statements.
F-3
PHASEBIO PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Year Ended December 31,
2021
2020
Revenue:
Sublicense revenue
$
10,831
$
—
Grant revenue
—
320
Total revenue
10,831
320
Operating expenses:
Research and development
102,107
72,088
General and administrative
16,086
13,088
Total operating expenses
118,193
85,176
Loss from operations
(107,362)
(84,856)
Other (expense) income:
Loss from remeasurement of development derivative liability
(21,182)
(12,507)
Interest income
14
237
Interest expense
(947)
(1,445)
Foreign exchange gain
6
6
Total other expense
(22,109)
(13,709)
Net loss before income taxes
(129,471)
(98,565)
Provision for income taxes
1,600
—
Net loss
$
(131,071)
$
(98,565)
Net loss per common share, basic and diluted
$
(2.98)
$
(3.39)
Weighted-average common shares outstanding, basic and diluted
43,918,996
29,056,304
See accompanying notes to financial statements.
F-4
PHASEBIO PHARMACEUTICALS, INC.
STATEMENTS OF STOCKHOLDERS’ DEFICIT
(in thousands, except share amounts)
Common Stock
Treasury Stock
Additional
Paid-in
Accumulated
Total
Stockholders'
(Deficit)
Shares
Amount
Shares
Amount
Capital
Deficit
Equity
Balance at December 31, 2019
28,796,371
$
29
(29,967)
$
(24)
$
222,131
$
(162,158)
$
59,978
Issuance of common stock warrants
—
—
—
—
7,925
—
7,925
Issuance of common stock in public offering, net
561,848
—
—
—
2,942
—
2,942
Issuance of common stock through employee stock purchase
plan
62,063
—
—
—
186
—
186
Exercises of stock options
51,572
—
—
—
95
—
95
Stock-based compensation
—
—
—
—
2,237
—
2,237
Net loss
—
—
—
—
—
(98,565)
(98,565)
Balance at December 31, 2020
29,471,854
29
(29,967)
(24)
235,516
(260,723)
(25,202)
Issuance of common stock in public offering, net
18,400,000
19
—
—
60,222
—
60,241
Issuance of common stock through employee stock purchase
plan
138,952
—
—
—
336
—
336
Exercises of stock options
209,751
—
—
—
394
—
394
Stock-based compensation
—
—
—
—
2,268
—
2,268
Net loss
—
—
—
—
—
(131,071)
(131,071)
Balance at December 31, 2021
48,220,557
$
48
(29,967)
$
(24)
$
298,736
$
(391,794)
$
(93,034)
See accompanying notes to financial statements.
F-5
PHASEBIO PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31
2021
2020
Operating activities
Net loss
$
(131,071)
$
(98,565)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
1,793
508
Stock-based compensation
2,268
2,237
Loss from remeasurement of development derivative liability
21,182
12,507
Non-cash interest expense
304
491
Non-cash research and development expense
28,740
27,027
Other non-cash transactions
—
100
Changes in operating assets and liabilities:
Other receivables
—
1,233
Prepaid expenses and other assets
7,505
(8,375)
Accounts payable
9,010
974
Accrued expenses and other current liabilities
3,684
1,906
Deferred sublicense revenue
9,169
—
Net cash used in operating activities
(47,416)
(59,957)
Investing activities
Purchases of property and equipment
(2,679)
(1,312)
Acquisition of intellectual property rights
—
(100)
Net cash used in investing activities
(2,679)
(1,412)
Financing activities
Proceeds from development derivative liability
8,184
15,169
Proceeds from issuance of common stock in public offering, net
60,354
2,942
Payments of deferred stock offering costs
(40)
(199)
Proceeds from exercise of stock options
394
95
Shares purchased through employee stock purchase plan
336
186
Repayments of long-term debt
(5,455)
(2,727)
Net cash provided by financing activities
63,773
15,466
Net increase (decrease) in cash and cash equivalents
13,678
(45,903)
Cash and cash equivalents at the beginning of the year
28,122
74,025
Cash and cash equivalents at the end of the year
$
41,800
$
28,122
Supplemental disclosure for cash flow
Cash paid for interest
$
517
$
954
Supplemental disclosure of cash flow information
Right-of-use assets obtained in exchange for new operating lease liabilities
$
—
$
576
Issuance of warrants in conjunction with development derivative liability
$
—
$
7,925
Purchases of property and equipment in conjunction with development derivative liability
$
2,482
$
4,941
Purchases of property and equipment included in accounts payable and accrued expenses
$
16
$
1,378
See accompanying notes to financial statements.
F-6
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. Organization and Description of Business
Description of Business
PhaseBio Pharmaceuticals, Inc. (the “Company”) was incorporated as a Delaware corporation on January 10, 2002. The Company is a
clinical-stage biopharmaceutical company focused on the development and commercialization of novel therapies for cardiovascular diseases. The
Company’s lead product candidate, bentracimab (also known as PB2452), is a novel reversal agent for the antiplatelet drug ticagrelor. The Company is also
developing its preclinical product candidate, PB6440, for treatment-resistant hypertension.
Going Concern
The Company has experienced net losses and negative cash flows from operations and, as of December 31, 2021, had an accumulated deficit
of $391.8 million. The Company expects to continue to incur net losses for at least the next several years. As of December 31, 2021, the Company had cash
and cash equivalents of $41.8 million and working capital of $20.9 million. In January 2020, the Company entered into a co-development agreement (the
"SFJ Agreement") with SFJ Pharmaceuticals X, Ltd., an SFJ Pharmaceuticals Group company ("SFJ"), pursuant to which SFJ provides funding and
operational support for the clinical development of bentracimab. Management believes that its existing cash and cash equivalents as of December 31, 2021,
in addition to the $28.7 million in clinical trial costs and other expenses that the Company expects SFJ will fund or reimburse pursuant to the SFJ
Agreement, will not be sufficient to fund operating expenses and capital requirements for 12 months from the date of the issuance of these financial
statements. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. Under the SFJ Agreement, if the Company fails to remedy such going concern condition
during the periods specified in the agreement, SFJ may elect to have the Company's business related to bentracimab transferred to SFJ.
The Company plans to address its liquidity needs through the pursuit of additional funding through a combination of equity or debt
financings, or other third-party financing, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements.
However, there is no assurance that these funding efforts will be successful. In this regard, the Company currently has an effective shelf registration
statement on Form S-3 (the "2019 Shelf Registration Statement") on file with the Securities and Exchange Commission ("SEC"), which expires in January
2023. The 2019 Shelf Registration Statement currently permits (i) the offering, issuance and sale by the Company of up to a maximum aggregate offering
price of $200.0 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination, and (ii) the
offering, issuance and sale by the Company of up to a maximum aggregate offering price of $60.0 million of common stock that may be issued and sold
under an "at-the-market" sales agreement (the "ATM Program"). The $60.0 million of common stock that may be issued and sold under the ATM Program
is included in the $200.0 million of securities that may be issued and sold under the 2019 Shelf Registration Statement. As of December 31, 2021, the
Company had $132.6 million of common stock remaining that can be sold under the 2019 Shelf Registration Statement, of which $57.0 million may be
sold under the ATM Program.
Subsequent to year end, on January 10, 2022, the Company issued 500,000 shares of common stock through the ATM Program for net
proceeds of $1.2 million.
The Company is continuing to assess the effect that the COVID-19 pandemic may have on its business and operations. The extent to which
COVID-19 may impact the Company's business and operations will depend on future developments that are highly uncertain and cannot be predicted with
confidence, such as the geographic distribution of the disease and its variants over time, the efficacy and availability and pace of administration of vaccines
and antiviral agents against the disease, the continued duration of the outbreak, the duration and effect of business disruptions and the short-term effects and
ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to
contain and treat the disease. While the potential economic impact brought by, and the continued duration of, the COVID-19 pandemic may be difficult to
assess or predict, a continued and growing pandemic could result in significant disruption of global financial markets, reducing the Company's ability to
access capital, which could in the future negatively affect its liquidity. In addition, a recession or market correction resulting from the spread of COVID-19
could materially affect the Company's business and the value of its common stock.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with United States generally accepted accounting principles
(“GAAP”) and the rules and regulations of the SEC. Any reference in these notes to applicable guidance
F-7
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) promulgated by the
Financial Accounting Standards Board (“FASB”).
The Company manages its operations as a single reportable segment for the purposes of assessing performance and making operating
decisions.
2. Significant Accounting Policies
Use of Estimates
The preparation of the Company’s financial statements requires management to make estimates and assumptions that impact the reported
amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s financial statements and
accompanying notes. The most significant estimates in the Company’s financial statements relate to the valuation of the development derivative liability,
the clinical trial accruals, and the deferral and recognition of revenue under the exclusive sublicense agreement (the "Alfasigma Sublicense") entered into
with Alfasigma S.p.A ("Alfasigma"). Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in
the future, actual results could differ materially from those estimates and assumptions.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash
equivalents. The Company maintains certain deposits in federally insured financial institutions in excess of federally insured limits. The Company could
experience losses on the money market funds in the future.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash
equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts.
Fair Value of Financial Instruments
The carrying amounts of prepaid expenses and other assets, accounts payable and accrued expenses and other current liabilities are reasonable
estimates of their fair value because of the short maturity of these items. Based on the borrowing rates currently available to the Company for loans with
similar terms, the Company believes the fair values of the term loan and operating lease liabilities and corresponding right-of-use assets approximate their
respective carrying values.
Deferred Sublicense Revenue
When consideration is received, or such consideration is unconditionally due, from a customer prior to the Company completing its
performance obligation to the customer under the terms of a contract, a contract liability is recorded as deferred revenue. Deferred revenues expected to be
recognized as revenue within the 12 months following the balance sheet date are classified as current liabilities. Deferred revenues not expected to be
recognized as revenue within the 12 months following the balance sheet date are classified as long-term liabilities.
Development Derivative Liability
Development derivative liability is recorded based on the present value of the estimated consideration to be received and the estimated
consideration to be paid pursuant to contractual terms of the SFJ Agreement, which was determined to have been fair value. The liability is remeasured
quarterly, as a Level 3 derivative, with any change in fair value recorded in the form of a gain (loss) from remeasurement of development derivative
liability on the statements of operations.
Property and Equipment
Property and equipment are recorded at cost and depreciated over the estimated useful lives of the assets (three to five years) using the
straight-line method. Leasehold improvements are amortized over the shorter of their estimated useful lives or the lease term.
F-8
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
Leases
At lease commencement, the Company records a lease liability based on the present value of lease payments over the expected lease term
including any options to extend the lease that the Company is reasonably certain to exercise. The Company calculates the present value of lease payments
using an incremental borrowing rate as the Company’s leases do not provide an implicit interest rate. The Company’s incremental borrowing rate for a lease
is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. At the lease
commencement date, the Company records a corresponding right-of-use lease asset based on the lease liability, adjusted for any lease incentives received
and any initial direct costs paid to the lessor prior to the lease commencement date. The Company may enter into leases with an initial term of 12 months or
less (“Short-Term Leases”). For any Short-Term Leases, the Company records the rent expense on a straight-line basis and does not record the leases on the
balance sheet. The Company had no Short-Term Leases as of December 31, 2021 and 2020.
After lease commencement, the Company measures its leases as follows: (i) the lease liability based on the present value of the remaining
lease payments using the discount rate determined at lease commencement and (ii) the right-of-use lease asset based on the remeasured lease liability,
adjusted for any unamortized lease incentives received, any unamortized initial direct costs and the cumulative difference between rent expense and
amounts paid under the lease agreement. Any lease incentives received and any initial direct costs are amortized on a straight-line basis over the expected
lease term. Rent expense is recorded on a straight-line basis over the expected lease term.
Long-Lived Assets
The Company regularly reviews the carrying value and estimated lives of all of its long-lived assets, including property and equipment and
right-of-use assets to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. The
determinants used for this evaluation include management’s estimate of the asset’s ability to generate net positive cash flow in future periods as well as the
strategic significance of the assets to the Company’s business objectives. Should an impairment exist, the impairment loss would be measured based on the
extent that the estimated fair value is less than its carrying value. The Company did not recognize any impairment losses in the years ended December 31,
2021 and 2020.
Preclinical and Clinical Trial Accruals
The Company accrues and expenses amounts incurred in connection with preclinical studies and clinical trial activities performed by third
parties based upon estimates of the proportion of work completed over the life of the individual trial and subject enrollment rates in accordance with
agreements with clinical research organizations, contract manufacturing organizations and clinical trial sites. The Company determines the estimates by
reviewing contracts, vendor agreements and purchase orders, and through discussions with internal clinical personnel and external service providers as to
the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. However, actual costs and timing of clinical
trials are highly uncertain, subject to risks and may change depending upon a number of factors, including the Company’s clinical development plan.
Management makes estimates of the Company’s accrued expenses as of each balance sheet date in the Company’s financial statements based
on facts and circumstances known to the Company at that time. If the actual timing of the performance of services or the level of effort varies from the
estimate, the Company will adjust the accrual accordingly. Nonrefundable advance payments for goods and services, including fees for process
development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and
recognized as expense in the period that the related goods are consumed or services are performed.
Revenue Recognition
Sublicense Revenue
Sublicensing arrangements may contain multiple components, which may include (i) sublicenses; (ii) research and development activities; and
(iii) the manufacturing and supply of certain materials. Payments pursuant to these arrangements may include non-refundable payments, upfront payments,
milestone payments upon the achievement of significant regulatory and development events or sales of product at certain agreed-upon amounts, sales
milestones and royalties on product sales. The
F-9
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
amount of variable consideration is constrained until it is probable that the revenue is not at a significant risk of reversal in a future period.
In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under a sublicense agreement, the
Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised
goods or services are performance obligations, including whether they are capable of being distinct; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue as the
Company satisfies each performance obligation.
The Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each
performance obligation, which determines how the transaction price is allocated among the performance obligations. The estimation of the stand-alone
selling price may include such estimates as forecasted revenues and costs, development timelines, discount rates and probabilities of regulatory and
commercial success. The Company also applies significant judgment when evaluating whether contractual obligations represent distinct performance
obligations, allocating transaction price to performance obligations within a contract, determining when performance obligations have been met, assessing
the recognition and future reversal of variable consideration and determining and applying appropriate methods of measuring progress for performance
obligations satisfied over time.
Grant Revenue
Grant revenue is derived from government grants that support the Company’s efforts on specific research projects. The Company has
determined that the government agencies providing grants to the Company are not customers. The Company recognizes grant revenue when there is
reasonable assurance of compliance with the conditions of the grant and reasonable assurance that the grant revenue will be received.
Research and Development Expense
Research and development costs are expensed as incurred. Costs incurred in obtaining technology licenses are charged to research and
development expense if the technology has no alternative future use.
Stock-Based Compensation
The Company measures and recognizes compensation expense for all stock-based compensation based on the estimated fair value at the date of
grant. Currently, the Company’s stock-based awards consist only of stock options; however, future grants under the Company’s equity compensation plan
may also consist of shares of restricted stock, restricted stock units, stock appreciation rights, performance awards and performance units. The Company
also maintains the 2018 Employee Stock Purchase Plan (the "ESPP") under which it may issue shares of common stock. The Company estimates the fair
value of stock options and shares that will be issued under the ESPP using the Black-Scholes option-pricing model, which requires the use of estimates.
The Company recognizes stock-based compensation cost for ratably vesting stock options and for shares that it will issue under the ESPP on a straight-line
basis over the requisite service period of the award and records forfeitures in the period in which they occur.
The Black-Scholes option-pricing model requires the input of subjective assumptions, including the risk-free interest rate, the expected
dividend yield of the Company’s common stock, the expected volatility of the price of the Company’s common stock, and the expected term of the option.
These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, the
Company’s stock-based compensation expense could be materially different in the future.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and
liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in
income in the period that includes the enactment date.
The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized.
In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable
temporary differences, projected future taxable income, tax-planning
F-10
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
strategies, and results of recent operations. If management determines that the Company would be able to realize its deferred tax assets in the future in
excess of their net recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the
provision for income taxes.
The Company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely
than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-
than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate
settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits, if any, within income tax
expense, and any accrued interest and penalties are included within the related tax liability line.
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the
period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and common share equivalents
outstanding for the period. Common stock equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities, which
include outstanding stock options under the Company’s stock option plan, warrants issued from time to time and shares of common stock to be potentially
issued under the ESPP, have been excluded from the computation of diluted net loss per share as they would be anti-dilutive. For all periods presented,
there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position.
The following table sets forth the outstanding, potentially dilutive securities that have been excluded in the calculation of diluted net loss per
share because their inclusion would be anti-dilutive:
As of December 31,
2021
2020
Common stock options
4,466,801
3,598,160
Warrants to purchase common stock
2,323,711
2,323,711
Employee stock purchase plan
347,566
634,654
Total
7,138,078
6,556,525
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which among
other things, eliminates certain exceptions in the current rules regarding the approach for intraperiod tax allocations and the methodology for calculating
income taxes in an interim period, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard became
effective for the Company in the first quarter of 2021. Adoption of this new standard did not have a material impact on the Company's financial statements
and related disclosures.
3. Fair Value Measurement
Fair value is defined as an 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 at the measurement date. As such, fair value is a market-based measurement that should be determined based on
assumptions that market participants would use in pricing an asset or a liability.
The Company classifies fair value measurements in one of the following three categories for disclosure purposes:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.
Level 3: Unobservable inputs that are supported by little or no market activity and values determined using pricing models, discounted cash
flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant
judgment or estimation.
F-11
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
The Company’s cash equivalents are classified using Level 1 inputs within the fair value hierarchy because they are valued using quoted
market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. None of the Company’s non-financial
assets or liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.
The fair value of the Company's financial commitment to SFJ in conjunction with the SFJ Agreement is presented as a development
derivative liability based on Level 3 inputs.
The following table summarizes the Company’s assets and liabilities that require fair value measurements on a recurring basis and their
respective input levels based on the fair value hierarchy (in thousands):
Fair Value Measurements at Reporting Date
Total
Level 1
Level 2
Level 3
As of December 31, 2021:
Assets
Cash equivalents
$
41,550
$
41,550
$
—
$
—
Liabilities
Development derivative liability (Note 8)
$
114,843
$
—
$
—
$
114,843
As of December 31, 2020:
Assets
Cash equivalents
$
27,872
$
27,872
$
—
$
—
Liabilities
Development derivative liability (Note 8)
$
51,719
$
—
$
—
$
51,719
4. Property and Equipment
The following table presents the composition of property and equipment, net (in thousands):
As of December 31,
2021
2020
Lab equipment
$
12,995
$
8,994
Computer hardware, software and telephone
148
140
Furniture and fixtures
221
107
Leasehold improvements
105
67
Construction in progress
681
1,042
14,150
10,350
Less accumulated depreciation
(3,920)
(2,126)
Property and equipment, net
$
10,230
$
8,224
Depreciation expense was $1.8 million and $0.5 million for the years ended December 31, 2021 and 2020, respectively.
F-12
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
5. Accrued Expenses and Other Current Liabilities
The following table presents the composition of accrued expenses and other current liabilities (in thousands):
As of December 31,
2021
2020
Accrued clinical and related costs
$
3,985
$
2,753
Accrued compensation and related costs
2,850
2,260
Accrued interest
38
69
Accrued other
1,005
459
Operating lease liability, short-term
475
390
Accrued expenses and other current liabilities
$
8,353
$
5,931
6. Debt
In March 2019, the Company entered into a loan (the "2019 Loan") with Silicon Valley Bank ("SVB") and WestRiver Innovation Lending
Fund VIII, L.P. (“WestRiver”), pursuant to which the Company could borrow up to $15.0 million, issuable in three separate tranches (“Advances”), of $7.5
million (“Tranche 1”), which was issued upon execution of the 2019 Loan, $2.5 million, which was issued in May 2019 (“Tranche 2”) and $5.0 million,
which was issued in October 2019 (“Tranche 3”), which the Company was required to draw upon the achievement of certain regulatory milestones (the
“Tranche 3 Milestones”).
The maturity date of the 2019 Loan is March 1, 2023. Under the terms of the 2019 Loan, the Company made interest-only payments through
June 30, 2020 with respect to Tranche 1, Tranche 2 and Tranche 3 at a rate equal to the greater of the Prime Rate plus 1.00%, as defined in the 2019 Loan,
or 6.5%, followed by an amortization period of 33 months of equal monthly payments of principal plus interest until paid in full. In addition to and not in
substitution for the Company’s regular monthly payments of principal plus accrued interest, the Company is required to make a final payment equal to 6%
of the aggregate principal amount of the advances (“Final Payment”) on the maturity date.
Upon execution of the 2019 Loan and the draw of Tranche 1, the Company issued to SVB and WestRiver warrants to purchase an aggregate
of 37,606 shares of common stock with an exercise price of $4.73 per share. In May 2019, upon the draw of Tranche 2, the Company issued to SVB and
WestRiver warrants to purchase an aggregate of 12,130 shares of common stock with an exercise price of $10.86 per share. In October 2019, upon the draw
of Tranche 3, the Company issued to SVB and WestRiver warrants to purchase an aggregate of 24,262 shares of common stock with an exercise price of
$3.88 per share. All warrants are immediately exercisable and expire ten years from the date of issuance.
The Company’s obligations under the 2019 Loan are secured by a first-priority security interest in substantially all of the Company’s current
and future assets. The Company is also obligated to comply with various other customary covenants, including restrictions on the Company’s ability to
encumber its intellectual property assets. The Company was in compliance with all covenants under the 2019 Loan as of December 31, 2021.
The Company recorded a debt discount of $0.4 million for the estimated fair value of warrants and debt issuance costs upon the borrowing of
Tranches 1, 2 and 3. The balance of the Final Payment liability was $0.8 million as of December 31, 2021 and is included in other long-term liabilities on
the balance sheet. The debt discount and the Final Payment liability are being amortized to interest expense over the term of the 2019 Loan using the
effective-interest method. Interest expense, including amortization of the debt discount related to the term debt and the Final Payment liability, totaled $0.9
million and $1.4 million for the years ended December 31, 2021 and 2020, respectively.
The following table sets forth by year the Company’s required future principal payments as of December 31, 2021 (in thousands):
Years Ending December 31,
2022
$
5,455
2023
1,363
Total principal payments
6,818
Less unamortized loan fees
(46)
Total term loan borrowings
$
6,772
F-13
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
7. Deferred Sublicense Revenue
In June 2021, the Company entered into the Alfasigma Sublicense with Alfasigma, under which the Company granted to Alfasigma exclusive
rights to develop, use, sell, have sold, offer for sale and import any product composed of or containing bentracimab (the "Licensed Products") in the
European Union and European Economic Area, as well as the United Kingdom, Russia, Ukraine and certain other countries within the Commonwealth of
Independent States, Europe and central Asia (the "Sublicense Territory"). Under the terms of the Alfasigma Sublicense, the Company received a
$20.0 million upfront payment from Alfasigma in July 2021 and will be eligible to receive up to $35.0 million upon the achievement of certain pre-revenue
regulatory milestones, up to $190.0 million upon the achievement of certain commercial milestones and tiered royalty payments based on net sales, with
percentages starting in the low double digits and escalating to the mid-twenties. Also, as part of the overall arrangement, the Company has agreed to supply
the Licensed Products to Alfasigma at the lower of cost or a price not to exceed certain agreed amounts.
Under the Alfasigma Sublicense, the Company is responsible for developing the Licensed Products and securing regulatory approval with the
European Medicines Agency (the “EMA”), and the Medicines and Healthcare products Regulatory Agency (the “MHRA”), including in accordance with
the SFJ Agreement, after which any marketing authorizations will be assigned to Alfasigma. Alfasigma is obligated to obtain and maintain any regulatory
approvals necessary to market and sell the Licensed Products (including pricing approvals and post-marketing commitments) and is also responsible for
securing regulatory approval in the countries within the Sublicense Territory outside of the European Union and the United Kingdom.
The Company first assessed the Alfasigma Sublicense under ASC 808, Collaborative Arrangements (“ASC 808”) to determine whether the
Alfasigma Sublicense or units of accounts within the Alfasigma Sublicense represent a collaborative arrangement based on the risks and rewards and
activities of the parties. The Company concluded that Alfasigma represented a customer and applied relevant guidance from ASC 606, Revenue from
Contracts with Customers (“ASC 606”) to evaluate the appropriate accounting under the Alfasigma Sublicense. In accordance with this guidance, the
Company identified the following commitments under the arrangement: (i) exclusive sublicense rights to develop, use, sell, have sold, offer for sale and
import Licensed Products (the “License”); (ii) development and regulatory activities (“Development and Regulatory Activities”); and (iii) the requirement
to supply Alfasigma with the Licensed Product at the lower of cost or a price not to exceed certain agreed amounts (the “Supply of Licensed Product”). The
Company determined that these three commitments represent distinct performance obligations for purposes of recognizing revenue and will recognize
revenue as it fulfills these performance obligations.
The Company determined that the upfront payment of $20.0 million constitutes the transaction price as of the outset of the Alfasigma
Sublicense. Future potential regulatory and development milestone payments were fully constrained as the risk of significant revenue reversal related to
these amounts has not yet been resolved. The achievement of the future potential milestones is not within the Company’s control and is subject to certain
research and development success or regulatory approvals and therefore carry significant uncertainty. The Company will reevaluate the likelihood of
achieving these milestones at the end of each reporting period and adjust the transaction price in the period the risk is resolved. In addition, the Company
will recognize any consideration related to sales-based milestones and royalties when the subsequent sales occur since those payments relate primarily to
the License, which was delivered by the Company to Alfasigma upon entering into the Alfasigma Sublicense.
The transaction price was allocated to the three performance obligations based on the estimated stand-alone selling prices at contract
inception. The stand-alone selling price of the License was based on a discounted cash flow approach and considered several factors including, but not
limited to, discount rate, development timeline, regulatory risks, estimated market demand and future revenue potential using an adjusted market approach.
The stand-alone selling price of the Development and Regulatory Activities and the Supply of Licensed Product was estimated using the expected cost-plus
margin approach. The Company allocated the upfront portion of the transaction price to the performance obligations as of December 31, 2021 as follows
(in thousands):
Transaction Price
Cumulative Sublicense
Revenue Recognized
Deferred Sublicense
Revenue
License
$
10,223
$
10,223
$
—
Development and Regulatory Services
2,647
608
2,039
Supply of License Product
7,130
—
7,130
$
20,000
$
10,831
$
9,169
Less current portion of long-term deferred sublicense revenue
(1,547)
Total long-term deferred sublicense revenue
$
7,622
F-14
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
The Company reevaluates the transaction price and the total estimated costs expected to be incurred to satisfy the performance obligations and
adjusts the deferred sublicense revenue at the end of each reporting period. Such changes will result in a change to the amount of sublicense revenue
recognized and deferred sublicense revenue.
8. Development Derivative Liability
In January 2020, the Company entered into the SFJ Agreement, pursuant to which SFJ has agreed to provide up to $120.0 million in funding
and project management services in connection with the REVERSE-IT trial, a global Phase 3 clinical trial of bentracimab. During the term of the SFJ
Agreement, the Company has primary responsibility for clinical development and regulatory activities for bentracimab in the United States and the
European Union, while SFJ has primary responsibility for clinical development and regulatory activities for bentracimab in China and Japan and provides
clinical trials operational support in the European Union.
In addition to the $90.0 million of initial funding, the Company has elected to receive an additional $30.0 million of funding having met
specific, pre-defined clinical development milestones for bentracimab. From the inception of the SFJ Agreement through December 31, 2021, SFJ has
provided funding and paid for amounts on the Company's behalf in the aggregate amount of $91.3 million under the SFJ Agreement. The Company also
expects that SFJ will fund or reimburse an additional $28.7 million of clinical trial costs and other expenses.
If the United States Food and Drug Administration ("FDA") approves a Biologics License Application for bentracimab, the Company has
agreed to pay to SFJ an initial payment of $5.0 million and an additional $325.0 million in the aggregate in seven additional annual payments (the “U.S.
Approval Payments”). If the EMA or the national regulatory authorities in certain European countries provide marketing approval of bentracimab, the
Company will pay SFJ an initial payment of $5.0 million and an additional $205.0 million in the aggregate in seven additional annual payments (the “EU
Approval Payments”). The majority of the U.S. Approval Payments and the EU Approval Payments will be made from the third anniversary to the seventh
anniversary of marketing approval in the applicable jurisdiction. If either the Pharmaceuticals and Medical Devices Agency (the “PMDA”) of Japan or the
National Medical Products Administration (the “NMPA”) of China provides marketing approval of bentracimab, the Company will pay SFJ an initial
payment of $1.0 million and then an additional $59.0 million in the aggregate in eight additional annual payments (the “Japan/China Approval Payments”),
with the majority of the payments to be made from the fifth anniversary to the eighth anniversary of marketing approval. The Japan/China Approval
Payments will only be paid once regardless of receipt of marketing approval in both Japan and China. The U.S. Approval Payments, EU Approval
Payments and Japan/China Approval Payments will be proportionately adjusted in the event that the actual funding from SFJ is lower or greater than
$120.0 million. The Company will not be obligated to make the U.S. Approval Payments if it does not receive marketing approval for bentracimab from
the FDA, the EU Approval Payments if it does not receive marketing approval for bentracimab from the EMA or the national regulatory authority in certain
European countries or the Japan/China Approval Payments if it does not receive marketing approval for bentracimab from either the PMDA or the NMPA.
Upon execution of the SFJ Agreement, the Company issued to SFJ a warrant to purchase an aggregate of 2,200,000 shares of common stock
at an exercise price of $6.50 per share with a contractual term of ten years. The warrant is exercisable in two tranches: Tranche A and Tranche B. Tranche
A represents warrants for 1,100,000 shares that are immediately exercisable by SFJ. Tranche B represents warrants for 1,100,000 shares that are exercisable
at the earlier of (i) the achievement of certain development milestones or (ii) the consummation of an Acquisition, as defined in the SFJ Agreement. The
warrants are equity-classified and were valued at $7.9 million at issuance using a probability adjusted Black-Scholes valuation technique.
The Company accounts for the SFJ Agreement as a derivative instrument that increases and decreases as consideration is received and
repayments are made, respectively. The derivative is further adjusted at each reporting period to its estimated fair value. At December 31, 2021, the
derivative is presented as a liability in the Company's balance sheet. Any changes in fair value are recorded within the Company's statement of operations.
The liability was initially recorded at a value of $2.1 million, which incorporates the $10.0 million upfront payment from SFJ and the issuance of the
Company's common stock warrants to SFJ. During the year ended December 31, 2021, SFJ provided additional funding and paid for amounts on the
Company's behalf in the aggregate amount of $41.9 million, and the development derivative liability was subsequently remeasured at December 31, 2021,
as a Level 3 derivative. The change of fair value resulted in a $21.2 million loss from remeasurement of development derivative liability on the statement
of operations for the year ended December 31, 2021.
The development derivative liability is valued using a scenario-based discounted cash flow method, whereby each scenario makes
assumptions about the probability and timing of cash flows, and such cash flows are present valued using a risk-adjusted discount rate. The valuation
method incorporates certain unobservable Level 3 key inputs including (i) the probability and timing of funding, (ii) the probability and timing of achieving
regulatory approvals, (iii) the Company's cost of borrowing (16.00% plus the risk free borrowing rate) and (iv) SFJ's cost of borrowing (2.50% plus the risk
free borrowing rate).
F-15
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
The following table presents activity for the development derivative liability during the year ended December 31, 2021 (in thousands):
Development
Derivative
Liability
Balance at December 31, 2019
$
—
Initial payment, net of common stock warrants
2,075
Funding during the period
37,137
Change in fair value
12,507
Balance at December 31, 2020
$
51,719
Funding during the period
41,942
Change in fair value
21,182
Balance at December 31, 2021
$
114,843
9. Commitments and Contingencies
Legal Proceedings
The Company is not currently a party to any litigation, nor is management aware of any pending or threatened litigation against the Company,
that it believes would materially affect the Company’s business, operating results, financial condition or cash flows.
10. Leases
The Company leases office and research and development facilities and equipment under various non-cancellable operating lease agreements.
In January 2010, the Company entered into a lease for office and laboratory space in Malvern, Pennsylvania (the “Malvern Lease”). The
Malvern Lease commenced in March 2010 and was amended to extend its term to September 30, 2023, with an option to extend the lease for an additional
three years. This lease contains escalating rent payments. In December 2018, the Company entered into a lease for office space in San Diego, California,
which expires in October 2022. In June 2020, the Company entered into a lease for additional office space in Malvern, Pennsylvania, which expires in
September 2023. As of December 31, 2021, the weighted-average remaining lease term for the Company’s leases was 3.9 years, and the weighted-average
discount rate used to determine the right-of-use assets and corresponding operating lease liabilities was 5.9%.
Maturities of operating lease liabilities as of December 31, 2021 are as follows (in thousands):
Year Ending December 31,
2022
$
555
2023
419
2024
279
2025
283
2026
215
Total future minimum lease payments
1,751
Less: Present value adjustment
(202)
Operating lease liabilities
$
1,549
The Company recognizes rent expense for the operating leases on a straight-line basis. Rent expense was $0.7 million and $0.6 million for the
years ended December 31, 2021 and 2020, respectively.
F-16
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
11. Stockholders’ Equity
Shelf Registration Statement
In December 2019, the Company filed the 2019 Shelf Registration Statement on Form S-3, which became effective in January 2020. The
2019 Shelf Registration Statement, which expires in January 2023, permits: (i) the offering, issuance and sale by the Company of up to a maximum
aggregate offering price of $200.0 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination;
and (ii) the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $60.0 million of the Company's common stock that
may be issued and sold in “at-the-market” sales under the ATM Program. The $60.0 million of common stock that may be issued and sold under the ATM
Program is included in the $200.0 million of securities that may be issued and sold under the 2019 Shelf Registration Statement. As of December 31, 2021,
the Company has $132.6 million of common stock remaining that can be sold under the 2019 Shelf Registration Statement, of which $57.0 million may be
sold under the ATM Program.
Shares Sold Under the ATM Program
During the year ended December 31, 2021, the Company sold no shares of common stock pursuant to the ATM Program. During the year
ended December 31, 2020, the Company sold 561,848 shares of common stock pursuant to the ATM Program for net proceeds of $2.9 million.
March 2021 Offering
In March 2021, pursuant to the 2019 Shelf Registration Statement, the Company completed an underwritten public offering of its common
stock, which resulted in the issuance and sale of an aggregate of 18,400,000 shares of common stock at a public offering price of $3.50 per share,
generating net proceeds of $60.2 million, after deducting underwriting discounts and commissions and other offering costs.
12. Stock-Based Compensation
Stock Plans
In October 2018, the Company’s board of directors and stockholders adopted and approved the 2018 Equity Incentive Plan (the “2018 Plan”),
which is a successor to and continuation of the Amended and Restated 2002 Stock Plan (the "2002 Plan"). No further grants will be made under the 2002
Plan.
Initially, the maximum number of shares of the Company’s common stock that may be issued under the 2018 Plan was 3,231,626 shares. As
of December 31, 2021, the Company had 817,722 shares available for grant under the 2018 Plan. The number of shares of common stock reserved for
issuance under the 2018 Plan automatically increases on January 1 of each calendar year, starting on January 1, 2019 through January 1, 2028, in an amount
equal to 3% of the total number of shares of the Company’s capital stock outstanding on the last day of the calendar month before the date of each
automatic increase, or a lesser number of shares determined by the Company’s board of directors. In April 2021, the board of directors of the Company
approved an amendment to the 2018 Plan to increase the automatic increase to the share reserve that occurs on January 1st of each calendar year until (and
including) January 1, 2028 from 3% to 4% of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year.
Subject to this provision, the Company added 1,927,624 shares available for grant to the 2018 Plan effective January 1, 2022.
F-17
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
The following table summarizes stock option activity for the 2002 Plan and 2018 Plan for the year ended December 31, 2021:
Total
Options
Weighted-
Average
Exercise
Price Per
Share
Weighted-
Average
Remaining
Contractual
Term (in years)
Aggregate
Intrinsic
Value
Outstanding at December 31, 2019
2,577,718
$
3.29
7.9 $
7,914,459
Granted
1,227,159
$
5.09
Exercised
(51,572)
$
1.85
Cancelled or expired
(155,145)
$
4.89
Outstanding at December 31, 2020
3,598,160
$
3.85
7.5 $
1,737,432
Granted
1,271,836
$
3.91
Exercised
(209,751)
$
1.88
Cancelled or expired
(193,444)
$
4.53
Outstanding at December 31, 2021
4,466,801
$
3.93
7.2 $
700,875
Vested and expected to vest at December 31, 2021
4,466,801
$
3.93
7.2 $
700,875
Vested and exercisable at December 31, 2021
2,559,327
$
3.75
6.2 $
676,046
The weighted-average grant date fair value per share of options granted was $2.46 and $3.20 for the years ended December 31, 2021 and
2020, respectively. The aggregate intrinsic value of options exercised was $0.3 million and $0.1 million for the years ended December 31, 2021 and 2020,
respectively.
As of December 31, 2021, the total unrecognized compensation expense related to unvested employee and non-employee stock option awards
was $4.0 million, which is expected to be recognized in expense over a weighted-average period of 2.5 years.
In October 2018, the Company’s board of directors and stockholders approved the ESPP. The purpose of the ESPP is to secure the services of
new employees, to retain the services of existing employees and to provide incentives for such individuals to exert maximum efforts toward the Company’s
success and that of the Company’s affiliates. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of
the Code for United States employees.
Initially, the ESPP authorized the issuance of 196,000 shares of the Company’s common stock under purchase rights granted to the
Company’s employees or to employees of any of the Company’s designated affiliates. As of December 31, 2021, the Company had 822,051 shares
available for issuance under the ESPP. The number of shares of common stock reserved for issuance automatically increases on January 1 of each calendar
year, beginning on January 1, 2019 through January 1, 2028, by the lesser of (1) 1% of the total number of shares of the Company’s common stock
outstanding on the last day of the calendar month before the date of the automatic increase, and (2) 490,000 shares; provided that before the date of any
such increase, the Company’s board of directors may determine that such increase will be less than the amount set forth in clauses (1) and (2). Subject to
this provision, the Company added 481,906 shares available for issuance to the ESPP effective January 1, 2022.
In March 2020, the Company began allowing eligible employees to participate in the ESPP. Under the ESPP, eligible employees are granted
rights to purchase shares of the Company's common stock, which are funded through payroll deductions that cannot exceed 15% of each employee's
compensation. The ESPP generally provides for a 24-month offering period, which includes four six-month purchase periods. At the end of each purchase
period, eligible employees are permitted to purchase shares of the Company's common stock at 85% of the lower of fair market value at the beginning of
the offering period or fair market value at the end of the purchase period. The ESPP is considered a compensatory plan, and the Company recorded stock-
based compensation expense of $0.3 million and $0.1 million for the years ended December 31, 2021 and 2020, respectively. During the year ended
December 31, 2021, 138,952 shares of common stock were issued under the ESPP at a weighted-average price of $2.42 per share. During the year ended
December 31, 2020, 62,063 shares of common stock were issued under the ESPP at a weighted average price of $3.00 per share.
As of December 31, 2021, the total unrecognized compensation expense related to the ESPP was $0.1 million, which is expected to be
recognized over a weighted-average period of approximately 0.5 years.
See "Note 18. Subsequent Events" for a description of the Company's 2022 Inducement Plan.
F-18
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
Determining Fair Value of Stock Options
The fair value of each grant of stock options was determined by the Company using the methods and assumptions discussed below. Certain of
these inputs are subjective and generally require judgment to determine.
Expected Term—The expected term of stock options represents the weighted-average period the stock options are expected to be outstanding.
The Company uses the simplified method for estimating the expected term. The simplified method calculates the expected term as the average time-to-
vesting and the contractual life of the options.
Expected Volatility—Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the
expected volatility assumption was determined by examining the historical volatilities of a group of industry peers whose share prices are publicly
available.
Risk-Free Interest Rate—The risk-free rate assumption is based on the United States Treasury instruments, the terms of which were consistent
with the expected term of the Company’s stock options.
Expected Dividend—The Company has not paid and does not intend to pay dividends.
The fair value of each option was estimated on the date of grant using the weighted-average assumptions in the table below:
Year Ended December 31,
2021
2020
Risk-free interest rate
0.88 %
1.37 %
Expected term (in years)
6.0
6.0
Expected volatility
72 %
71 %
Expected dividend yield
—
—
Fair value of common stock
$
3.91
$
5.09
Stock-based compensation expense has been reported in the Company’s statements of operations for the years ended December 31, 2021 and
2020 as follows (in thousands):
Year Ended December 31,
2021
2020
General and administrative
$
1,509
$
1,594
Research and development
759
643
Total stock-based compensation
$
2,268
$
2,237
13. License and Other Agreements
MedImmune Limited License Agreement
In November 2017, the Company entered into a license agreement (“MedImmune License”) with MedImmune Limited (“MedImmune”).
MedImmune is a wholly-owned subsidiary of AstraZeneca plc (“AstraZeneca”). Pursuant to the terms of the MedImmune License, MedImmune granted
the Company exclusive global rights for the purpose of developing and commercializing products under the MedImmune License (“MedImmune licensed
product”). The Company has made contingent milestone payments of $3.0 million and is obligated to make remaining payments totaling up to an aggregate
of $15.0 million upon the achievement of clinical development and regulatory milestones. In addition, the Company will pay MedImmune tiered royalties
ranging from mid-single-digit to low-teen percentages of net sales of any MedImmune licensed products and additional payments of up to $50.0 million in
aggregate commercial milestones. The Company incurred no royalty costs in the years ended December 31, 2021 and 2020.
The Company also must pay quarterly fees relating to technical services provided by MedImmune. The MedImmune License requires the
Company to cooperate with MedImmune on commercial messaging of bentracimab and provides MedImmune with the return of rights to bentracimab if
certain commercial diligence requirements are not achieved by the Company. In addition, the MedImmune License offers an option for third-party product
storage costs. The Company incurred no third-party product storage costs during the years ended December 31, 2021 and 2020. AstraZeneca is a
stockholder of the Company.
F-19
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
Duke License Agreement
In October 2006, the Company entered into a license agreement with Duke University (“Duke”) (as amended, the “Duke License”). Pursuant
to the Duke License, Duke granted to the Company an exclusive, worldwide license under certain patent rights and a non-exclusive license to know-how
owned or controlled by Duke to develop and commercialize any products or processes covered under the Duke License (the “Duke licensed products”).
The Duke License was amended in February 2016 to allow Duke to use the Company’s technology in the area of small-molecule oncologics. The Duke
License is a worldwide, sublicensable agreement and remains in full effect for the life of the last-to-expire patents included in the patent rights, which is
estimated to be 2030. The Company is required to apply for, prosecute and maintain all United States and foreign patent rights under the Duke License.
The Company is obligated to pay up to $2.2 million upon the achievement of clinical development and regulatory milestones and up to $0.4
million upon the achievement of commercial milestones. The Duke License may be terminated by Duke if the Company fails to meet certain clinical
development and regulatory milestones within specified timeframes. As of December 31, 2021, the Company was in compliance with its development
obligations.
The Company is required to use commercially reasonable efforts to develop one or more products or processes and introduce them into
commercial markets. Duke will receive low single-digit royalty percentages on net sales of Duke licensed products by the Company or its sublicensee, with
minimum aggregate royalties of $0.2 million payable following the Company’s achievement of certain commercial milestones. No sales of Duke licensed
products or services have occurred since the effective date through December 31, 2021.
Certain alliance fee payments up to the greater of $0.3 million or a low double-digit percentage of the fees the Company receives from a third
party in consideration of forming a strategic alliance, may be required depending upon how the patent rights are commercialized. The Company must pay
Duke the first $1.0 million of non-royalty payments it receives from a sublicensee, and thereafter a specified percentage of any additional non-royalty
payments it receives, subject to certain conditions. If Duke receives revenue as a result of a license or sublicense to a third party in the field of small-
molecule oncologics, it will pay the Company a specified percentage of the amount of such revenue in excess of $1.0 million. The Company incurred no
costs under the Duke License for the years ended December 31, 2021 and 2020.
Alfasigma Sublicense
In June 2021, the Company entered into the Alfasigma Sublicense with Alfasigma under which the Company granted to Alfasigma exclusive
rights to develop, use, sell, have sold, offer for sale and import the Licensed Products in the Sublicense Territory. Under the terms of the Alfasigma
Sublicense, in July 2021, the Company received a $20.0 million upfront payment from Alfasigma and will be eligible to receive up to $35.0 million upon
the achievement of certain pre-revenue regulatory milestones, up to $190.0 million upon the achievement of certain commercial milestones and tiered
royalty payments on net sales, with percentages starting in the low double digits and escalating to the mid-twenties.
With respect to the up to $35.0 million of regulatory milestone payments: (i) $10.0 million is payable following acceptance by the EMA of
the filing of the first drug approval application for a Licensed Product; (ii) $12.5 million is payable following achievement of conditional regulatory
approval from the EMA; and (iii) the remaining $12.5 million is payable following achievement of unconditional regulatory approval from the EMA
allowing for prescribing of a Licensed Product for the reversal of the antiplatelet effects of ticagrelor in both (a) patients with uncontrolled major or life-
threatening bleeding and (b) patients requiring urgent surgery or an invasive procedure.
Under the Alfasigma Sublicense, the Company is responsible for developing the Licensed Products and securing regulatory approval with the
EMA and the MHRA, including in accordance with the SFJ Agreement, after which any marketing authorizations will be assigned to Alfasigma. Alfasigma
is obligated to obtain and maintain any regulatory approvals necessary to market and sell the Licensed Products (including pricing approvals and post-
marketing commitments) and is also responsible for securing regulatory approval in countries outside of Europe and the United Kingdom. Alfasigma will
purchase its requirements from the Company for a set period, after which the Company is obligated to supply a lesser amount of Alfasigma's requirements,
for Licensed Product at the lower of cost or a price not to exceed certain agreed amounts.
Unless earlier terminated, the Alfasigma Sublicense automatically expires, with respect to each Licensed Product and each country in the
Sublicense Territory, on the latest of (1) the tenth anniversary of the first commercial sale of such Licensed Product in such country, (2) the expiration of
the last out-licensed patent of such Licensed Product in such country and (3) the expiration of regulatory exclusivity, if any, of such Licensed Product in
such country.
In connection with the Alfasigma Sublicense, the Company and Alfasigma also entered into an Acknowledgement of Grant of Sublicense
with MedImmune (the “Acknowledgement of Grant”), which provides for, among other things, (i) a potential assignment of the Alfasigma Sublicense from
the Company to MedImmune or (ii) a potential assignment of the Medimmune License from the Company to Alfasigma, in either case in the event that the
Company breaches certain obligations
F-20
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
under the Medimmune License that are not cured or remedied and SFJ has grounds to execute a “Program Transfer” (as defined in the SFJ Agreement) but
elects not to do so. The Company recognized $10.8 million and zero in revenue under the Alfasigma Sublicense for the years ended December 31, 2021
and 2020, respectively.
Wacker License Agreement
In April 2019, the Company entered into a license agreement (“Wacker License Agreement”), with Wacker Biotech GmbH (“Wacker”),
pursuant to which Wacker granted the Company an exclusive license under certain of Wacker’s intellectual property rights to use Wacker’s proprietary E.
coli strain for the manufacture of bentracimab worldwide outside of specified Asian countries, and to commercialize bentracimab, if approved,
manufactured by the Company or on the Company’s behalf using Wacker’s proprietary E. coli strain throughout the world. The Company has the right to
grant sublicenses under the license, subject to certain conditions as specified in the Wacker License Agreement. Under the terms of the agreement, the
Company is required to pay a fixed, nominal per-unit royalty, which is subject to adjustment, and an annual license fee in a fixed Euro amount in the low to
mid six digits. The agreement will be in force for an indefinite period of time, and upon the expiration of the Company’s royalty obligations, the license
will be considered fully paid and will convert to a non-exclusive license. Either party may terminate the Wacker License Agreement for breach if such
breach is not cured within a specified number of days. The Company completed a technology transfer of its current manufacturing process for bentracimab
from Wacker to BioVectra Inc. (“BioVectra”), another manufacturer certified for good manufacturing practices (“cGMP”), and has engaged BioVectra to
manufacture drug substance for the Company’s ongoing clinical trials and to manufacture commercial supply of bentracimab following regulatory
approval, if obtained. The Company incurred $0.4 million and $0.3 million in costs under the Wacker License Agreement for the years ended December 31,
2021 and 2020, respectively.
Viamet Asset Purchase Agreement
In January 2020, the Company entered into a purchase agreement ("PB6440 Agreement") with Viamet Pharmaceuticals Holdings, LLC and its
wholly-owned subsidiary, Selenity Therapeutics (Bermuda), Ltd. (the "Sellers"), pursuant to which the Company acquired all of the assets and intellectual
property rights related to the Sellers’ proprietary CYP11B2 inhibitor compound, formerly known as SE-6440 or VT-6440, and certain other CYP11B2
inhibitor compounds that are covered by the patent rights acquired by the Company under the PB6440 Agreement (together, "Compounds"). Under the
terms of the PB6440 Agreement, the Company paid the Sellers an upfront fee of $0.1 million upon the closing of the transaction, and are required to pay
the Sellers up to $5.1 million upon the achievement of certain development and intellectual property milestones with respect to certain product candidates
that contain a Compound, up to $142.5 million upon the achievement of certain commercial milestones with respect to any approved product that contains
a Compound and low- to mid-single digit royalty percentages on the net sales of approved products that contain a Compound, subject to customary
reductions and offsets in specified circumstances. The Company incurred zero and $0.1 million in costs under the PB6440 Agreement for the years ended
December 31, 2021 and 2020, respectively.
BioVectra Supply Agreement
In March 2021, the Company entered into a supply agreement with BioVectra (the "BioVectra Agreement") for the manufacture and supply by
BioVectra of bulk drug substance for bentracimab for commercial distribution following regulatory approval, if obtained. The Company has also engaged
BioVectra to manufacture drug substance for the Company's ongoing clinical trials.
Under the terms of the BioVectra Agreement, BioVectra has committed to maintaining capacity to manufacture an agreed number of batches
of product each year for commercial distribution, and the Company has committed to purchase a specified minimum number of batches of product per year
(the "Minimum Annual Commitment"), although it is free to contract with third parties for the manufacture of bentracimab. The Company will pay a
supply price per batch of bentracimab to be determined after the manufacturing process for the bentracimab is validated in accordance with the BioVectra
Agreement, plus the cost of certain consumables, raw materials, and third-party testing.
Pursuant to the Minimum Annual Commitments, the Company is obligated to purchase a minimum of (i) approximately $14.0 million of
batches of bentracimab in years 2022 through 2023, (ii) approximately $37.0 million of batches of bentracimab in 2024, and (iii) approximately
$48.0 million of batches of bentracimab in each of years 2025 through 2031. In the event the Company does not purchase the applicable Minimum Annual
Commitment in a given year, it will be obligated to make a payment to BioVectra in an amount equal to the then-applicable supply price per batch
multiplied by the difference between the Minimum Annual Commitment for such year and the number of batches of product it actually purchased in such
year, except in the event that BioVectra was unable to deliver the number of batches ordered by the Company in such year. The Company will have the
right to reduce the Minimum Annual Commitments for the year 2026 and subsequent years by up to a
F-21
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
specified maximum percentage per year. Further, if the Company is only able to obtain regulatory approval for products incorporating bentracimab in only
one of the United States or Europe, BioVectra and the Company have agreed to discuss in good faith an amendment to the BioVectra Agreement to reflect
decreased requirements for product and impacts to the supply price to reflect lower volume commitments.
14. Revenue
Sublicense revenue
Sublicense revenue relates to the revenue that the Company recognized in relation to the Alfasigma Sublicense. The Company recognized
sublicense revenue of $10.8 million and zero for the years ended December 31, 2021 and 2020, respectively.
Grant revenue
In February 2018, the Company received Small Business Innovation Research (“SBIR”) grants from the National Institutes of Health in an
aggregate amount of $2.8 million to support the clinical development of pemziviptadil for the treatment of pulmonary arterial hypertension for the period
from February 17, 2018 to July 31, 2020. In connection with the SBIR grants, the United States government will receive a non-exclusive, royalty-free
license to use any technology the Company develops under such grants. As of March 31, 2020, the Company had received all $2.8 million in funding
available under the SBIR grant. The Company recognized zero and $0.3 million under the SBIR grants in the years ended December 31, 2021 and 2020,
respectively.
F-22
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
15. Income Taxes
The components of income tax expense (benefit) were as follows (in thousands):
Year Ended December 31,
2021
2020
Current
Federal
$
—
$
—
State
—
—
Foreign
1,600
—
Total current
1,600
—
Deferred
Federal
—
—
State
—
—
Foreign
—
—
Total deferred
—
—
Total income tax expense (benefit)
$
1,600
$
—
A reconciliation of income tax expense (benefit) to the amount computed by applying the statutory federal income tax rate to the loss from
operations is summarized as follows (in thousands):
Year Ended December 31,
2021
2020
Income tax benefit at statutory rate
$
(27,189)
$
(20,699)
State income tax, net of federal benefit
(7,065)
(6,823)
Permanent items
348
8
Stock-based compensation
174
215
Orphan drug credit
(1,827)
(2,544)
Research and development credits
(2,489)
(863)
Uncertain tax positions
1,125
785
Change in state rate
910
74
Change in valuation allowance
36,284
28,090
Other
1,329
1,757
$
1,600
$
—
F-23
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
Significant components of the Company’s deferred tax assets are shown below (in thousands):
As of December 31,
2021
2020
Deferred tax assets:
Net operating loss carryforwards
$
70,903
$
51,398
Research and development and orphan drug credits
12,061
8,662
Accrued expenses
921
936
Intangibles
31
43
Operating lease liabilities
411
562
Derivative liability
30,491
16,700
Other, net
615
628
Total deferred tax assets
115,433
78,929
Deferred tax liabilities:
Operating lease right-of-use assets
(390)
(540)
Property and equipment, net
(694)
(324)
Total deferred tax liabilities
(1,084)
(864)
Net deferred tax assets before valuation allowance
114,349
78,065
Valuation allowance
(114,349)
(78,065)
Net deferred tax assets
$
—
$
—
As of December 31, 2021 and 2020, management assessed the realizability of net deferred tax assets and evaluated the need for a valuation
allowance against the net deferred tax assets. This evaluation utilizes the framework contained in ASC 740, Income Taxes, whereby management considers
all available positive and negative evidence as of the balance sheet date to determine whether all or some portion of the Company’s net deferred tax assets
will be realized. Under this guidance, a valuation allowance must be established for net deferred tax assets when it is more-likely-than-not (a probability
level of more than 50%) that the asset will not be realized.
Management followed the guidance in ASC 740, which states that “a cumulative loss in recent years is a significant piece of negative
evidence that is difficult to overcome” and concluded that the Company’s net deferred tax assets were not realizable as of December 31, 2021 and 2020.
Accordingly, a valuation allowance of $114.3 million and $78.1 million has been recorded to offset the net deferred tax assets. The change in valuation
allowance for the years ended December 31, 2021 and 2020 was an increase of $36.3 million and an increase of $28.1 million, respectively.
At December 31, 2021, the Company had federal and state net operating loss (“NOL”) carryforwards of $259.1 million, and $227.6 million,
respectively. The federal NOLs generated prior to 2018 may be used to offset up to 100% of future taxable income and will begin to expire in 2022, unless
previously utilized or limited by other provisions within the tax law. The federal NOL generated post-2017 of $167.5 million may be available to offset up
to 80% of future taxable income and may be carried forward indefinitely unless limited by other provisions within the tax law. The state NOLs will begin to
expire in 2029, unless previously utilized. The Pennsylvania NOLs of $125.8 million may be used to offset 40% of future taxable income per year.
At December 31, 2021, the Company has federal and state research and development tax credit carryforwards totaling $7.0 million and $0.8
million, respectively. The federal and state research and development tax credit carryforwards will begin to expire in 2028 and 2029, respectively, unless
previously utilized. The California research tax credit carryovers do not expire.
At December 31, 2021, the Company also has federal orphan drug credit carryforwards of $8.5 million, which will begin to expire in 2036,
unless previously utilized.
Through December 31, 2021, the Company has generated a combination of research and development credits and orphan drug credits. Certain
of these credits were derived from tax credit studies to document the qualified activities and certain other credits were not derived from studies. For the
credits that were calculated through a study, the IRS, on audit, may disagree with the amount of credits calculated. When studies are ultimately performed
for the other credits, they may result in an adjustment to those specific credits.
F-24
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
Under the Internal Revenue Code, the utilization of a corporation’s net operating loss and tax credit carryforwards may be limited following a
greater than 50% change in ownership over a three-year period. Any unused annual limitation may be carried forward to future years for the balance of the
net operating loss and tax credit carryforward period. Under these rules, prior ownership changes may have created a limitation in the Company’s ability to
use certain tax carryforwards on a yearly basis. Additionally, certain state operating losses may also be similarly limited. The Company has not analyzed
the historical or potential impact of its equity financings on beneficial ownership and therefore no determination has been made as to whether the net
operating loss carryforward is subject to any Internal Revenue Code Section 382 limitation.
The Company applies the two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50%
likely of being realized upon ultimate settlement. Income tax positions must meet a more likely than not recognition threshold at the effective date to be
recognized upon the adoption of ASC 740 and in subsequent periods. This interpretation also provides guidance on measurement, derecognition,
classification, interest and penalties, accounting in interim periods, disclosure and transition.
The Company files income tax returns in the United States federal jurisdiction and various state jurisdictions. Tax years 2018 and forward
remain open for examination for federal tax purposes and tax years 2018 and forward remain open for examination for the Company’s more significant
state tax jurisdictions. To the extent utilized in future years’ tax returns, net operating loss carryforwards at December 31, 2021 will remain subject to
examination until the respective tax year is closed.
The following table summarizes the activity related to the Company’s gross unrecognized tax benefits (in thousands):
Year Ended December 31
2021
2020
Gross unrecognized tax benefits at the beginning of the year
$
3,345
$
2,560
Increases related to current year positions
1,236
871
Increases related to prior year positions
55
—
Decreases related to prior year positions
—
(86)
Expiration of unrecognized tax benefits
—
—
Gross unrecognized tax benefits at the end of the year
$
4,636
$
3,345
Due to the Company's valuation allowance, none of the unrecognized tax benefits, if recognized, would affect the Company's effective tax
rate.
As of December 31, 2021, and 2020, the Company had unrecognized tax benefits of $4.6 million and $3.3 million, respectively. The
Company recognizes interest and penalties related to uncertain tax positions in income tax expense. During the years ended December 31, 2021 and 2020,
the Company did not accrue any interest and penalties on uncertain tax positions. The Company does not expect its unrecognized tax benefits to change
significantly within the next 12 months.
On March 27, 2020, the Unites States enacted the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"). The CARES Act
is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to
curtail the effect of COVID-19. While the CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more
significant provisions which are expected to impact the Company's financial statements include removal of certain limitations on utilization of net
operating losses, increasing the loss carryback period for certain losses to five years, and increasing the ability to deduct interest expense, as well as
amending certain provisions of the previously enacted Tax Cuts and Jobs Act. The Company doesn't believe that the CARES Act will have a material
impact on its financial position, results of operations, or cash flows.
On December 27, 2020, the United States enacted the Consolidated Appropriations Act, which extended many of the benefits of the CARES
Act that were scheduled to expire. The Consolidated Appropriations Act did not have a material impact on the Company's consolidated financial statements
and related disclosures.
16. Employee Retirement Plan
The Company has an employee retirement plan pursuant to Section 401(k) of the Internal Revenue Code. All employees are eligible to
participate, provided they meet the requirements of this plan. The Company is not required to make matching contributions under the plan; however, in
2019, the Company began making matching contributions. The Company
F-25
PHASEBIO PHARMACEUTICALS, INC.
NOTES TO THE FINANCIAL STATEMENTS
voluntarily contributed $0.3 million and $0.2 million to the plan for the years ended December 31, 2021, and 2020, respectively.
17. Related Party Transactions
As described above in Note 13, the Company is party to the MedImmune License. AstraZeneca, the parent company of MedImmune, is a
related party of the Company.
18. Subsequent Events
On January 10, 2022, the Company issued 500,000 shares of common stock through the ATM Program for net proceeds of $1.2 million.
On January 13, 2022, the Company established the 2022 Inducement Plan (the "Inducement Plan"), which is a stock-based compensation plan
for inducement grants. On January 14, 2022, the Company reserved 1,400,000 shares of common stock for grant under the Inducement Plan.
F-26
(a)(2) Financial Statement Schedules
All financial statement schedules have been omitted as they are not required, not applicable, or the required information is included in the
financial statements or notes to the financial statements.
(a)(3) Exhibits
EXHIBIT INDEX
Incorporated by Reference
Exhibit
Number
Exhibit Title
Form
File No.
Exhibit
Filing Date
3.1
Amended and Restated Certificate of Incorporation
of PhaseBio Pharmaceuticals, Inc.
8-K
001-38697
3.1
October 22, 2018
3.2
Amended and Restated Bylaws of PhaseBio
Pharmaceuticals, Inc.
S-1/A
333-227474
3.4
October 5, 2018
4.1
Warrant to Purchase Shares of Series C-1
Redeemable Convertible Preferred Stock, issued by
PhaseBio Pharmaceuticals, Inc. to Silicon Valley
Bank on October 18, 2017.
S-1
333-227474
4.3
September 21, 2018
4.2
Fourth Amended and Restated Investor Rights
Agreement, by and among PhaseBio
Pharmaceuticals, Inc. and certain of its
stockholders, dated August 27, 2018.
S-1
333-227474
4.4
September 21, 2018
4.3
Warrant to Purchase Shares of Common Stock,
issued by PhaseBio Pharmaceuticals, Inc. to Silicon
Valley Bank on March 25, 2019.
10-K
001-38697
4.4
March 26, 2019
4.4
Warrant to Purchase Shares of Common Stock,
issued by PhaseBio Pharmaceuticals, Inc. to
WestRiver Innovation Lending Fund VIII, L.P. on
March 25, 2019.
10-K
001-38697
4.5
March 26, 2019
4.5
Warrant to Purchase Shares of Common Stock,
issued by PhaseBio Pharmaceuticals, Inc. to
WestRiver Innovation Lending Fund VIII, L.P. on
July 26, 2019.
10-Q
001-38697
4.6
August 14, 2019
4.6
Warrant to Purchase Shares of Common Stock,
issued by PhaseBio Pharmaceuticals, Inc. to Silicon
Valley Bank on July 26, 2019.
10-Q
001-38697
4.7
August 14, 2019
4.7
Warrant to Purchase Shares of Common Stock,
issued by PhaseBio Pharmaceuticals, Inc. to Silicon
Valley Bank on October 9, 2019.
10-Q
001-38697
4.8
November 14, 2019
100
Incorporated by Reference
Exhibit
Number
Exhibit Title
Form
File No.
Exhibit
Filing Date
4.8
Warrant to Purchase Shares of Common Stock,
issued by PhaseBio Pharmaceuticals, Inc. to
WestRiver Innovation Lending Fund VIII, L.P. on
October 9, 2019.
10-Q
001-38697
4.9
November 14, 2019
4.9
Warrant to Purchase Shares of Common Stock,
issued by PhaseBio Pharmaceuticals, Inc. to SFJ
Pharmaceuticals X, Ltd. on January 9, 2020.
10-K
001-38697
4.10
March 30, 2020
4.10
Description of PhaseBio Pharmaceuticals, Inc.
Common Stock.
10-K
001-38697
4.11
March 30, 2020
10.1+
2018 Equity Incentive Plan and Forms of Stock
Option Grant Notice and Option Agreement.
S-8
333-227935
10.2
October 22, 2018
10.2+
2018 Equity Incentive Plan (as amended).
10-Q
001-38697
10.1
November 10, 2021
10.3#+
Form of RSU Grant Notice and Award Agreement
for 2018 Equity Incentive Plan.
10.4+
2018 Employee Stock Purchase Plan.
S-8
333-227935
10.3
October 22, 2018
10.5+
2022 Inducement Plan and Forms of Stock Option
Grant Notice and Option Agreement.
S-8
333-262185
99.3
January 14, 2022
10.6#+
Form of RSU Grant Notice and Award Agreement
for 2022 Inducement Plan.
10.7#
Non-Employee Director Compensation Policy, as
amended.
10.8+
Form of Indemnification Agreement by and
between PhaseBio Pharmaceuticals, Inc. and each
of its directors and executive officers.
S-1/A
333-227474
10.5
October 5, 2018
10.9#+
Severance Benefit Plan and Form of Participation
Agreement, as amended.
10.10+
Amended and Restated 2002 Stock Plan and Form
of Option Agreement and Exercise Notice
thereunder, as amended to date.
S-1
333-227474
10.1
September 21, 2018
10.11+
Offer Letter, dated as of November 19, 2012, by and
between PhaseBio Pharmaceuticals, Inc. and
Jonathan P. Mow, as amended to date.
S-1
333-227474
10.7
September 21, 2018
10.12+
Offer Letter, dated as of March 13, 2016, by and
between PhaseBio Pharmaceuticals, Inc. and John
Sharp.
S-1
333-227474
10.8
September 21, 2018
101
Incorporated by Reference
Exhibit
Number
Exhibit Title
Form
File No.
Exhibit
Filing Date
10.13+
Offer Letter, dated as of March 30, 2016, by and
between PhaseBio Pharmaceuticals, Inc. and John
Lee, M.D., Ph.D.
S-1
333-227474
10.9
September 21, 2018
10.14†
License Agreement, dated as of October 18, 2006
and as amended to date, by and between Phase
Bioscience, Inc. (predecessor to PhaseBio
Pharmaceuticals, Inc.) and Duke University.
S-1
333-227474
10.10
September 21, 2018
10.15††
Eighth Amendment to License Agreement, dated as
of March 5, 2019, by and between PhaseBio
Pharmaceuticals, Inc. and Duke University.
8-K
001-38697
10.1
April 9, 2019
10.16†
License Agreement, dated as of November 21, 2017,
by and between PhaseBio Pharmaceuticals, Inc. and
MedImmune Limited.
S-1
333-227474
10.11
September 21, 2018
10.17
Amendment to License Agreement, dated January 9,
2020, by and between PhaseBio Pharmaceuticals,
Inc. and MedImmune Limited.
10-K
001-38697
10.13
March 30, 2020
10.18††
Acknowledgement of Grant of a Sublicense in
Accordance with the License Agreement between
Medimmune Limited and PhaseBio
Pharmaceuticals, Inc. and Related Options.
10-Q
001-38697
10.2
August 21, 2021
10.19
Loan and Security Agreement, dated as of October
18, 2017 and as amended to date, by and between
PhaseBio Pharmaceuticals, Inc. and Silicon Valley
Bank.
S-1
333-227474
10.12
September 21, 2018
10.20
Loan and Security Agreement, dated as of March
25, 2019, by and among PhaseBio Pharmaceuticals,
Inc. and Silicon Valley Bank and WestRiver
Innovation Lending Fund VIII, L.P.
10-K
001-38697
10.13
March 26, 2019
10.21
Consent and First Amendment to Loan and Security
Agreement, dated as of March 19, 2020, by and
among PhaseBio Pharmaceuticals, Inc. and Silicon
Valley Bank and WestRiver Innovation Lending
Fund VIII, L.P.
10-K
001-38697
10.16
March 30, 2020
10.22
Subordination Agreement, dated as of March 19,
2020, by and among Silicon Valley Bank, WestRiver
Innovation Lending Fund VIII, L.P. and SFJ
Pharmaceuticals X, Ltd.
10-K
001-38697
10.17
March 30, 2020
102
Incorporated by Reference
Exhibit
Number
Exhibit Title
Form
File No.
Exhibit
Filing Date
10.23††
Intellectual Property Security Agreement, dated as
of March 19, 2020, by and among PhaseBio
Pharmaceuticals, Inc. and Silicon Valley Bank and
WestRiver Innovation Lending Fund VIII, L.P.
10-K
001-38697
10.18
March 30, 2020
10.24††
Master Services Agreement, dated as of November
14, 2018, by and between PhaseBio
Pharmaceuticals, Inc. and BioVectra Inc.
10-K
001-38697
10.14
March 26, 2019
10.25#
Amendment No. 1, dated November 18, 2021, to
Master Services Agreement by and between
PhaseBio Pharmaceuticals, Inc. and BioVectra Inc.
10.26††
Supply Agreement, dated as of March 10, 2021, by
and between PhaseBio Pharmaceuticals, Inc. and
BioVectra Inc.
10-Q
001-38697
10.2
May 13, 2021
10.27
Lease Agreement, dated as of January 15, 2010 and
as amended to date, by and between PhaseBio
Pharmaceuticals, Inc. and Liberty Property Limited
Partnership.
S-1
333-227474
10.13
September 21, 2018
10.28††
Co-Development Agreement, dated January 9,
2020, by and between PhaseBio Pharmaceuticals,
Inc. and SFJ Pharmaceuticals X, Ltd.
10-K
001-38697
10.21
March 30, 2020
10.29††
Form of Program Transfer Agreement by and
between PhaseBio Pharmaceuticals Inc. and SFJ
Pharmaceuticals X. Ltd.
10-K
001-38697
10.22
March 30, 2020
10.30††
Asset Purchase Agreement, dated January 13, 2020,
by and between PhaseBio Pharmaceuticals, Inc.,
Viamet Pharmaceuticals Holdings, LLC and
Selenity Therapeutics (Bermuda), Ltd.
10-K
001-38697
10.23
March 30, 2020
10.31††
License Agreement, dated as of June 16, 2021, by
and between PhaseBio Pharmaceuticals, Inc. and
Alfasigma, S.p.A.
10-Q
001-38697
10.1
August 12, 2021
23.1#
Consent of KPMG LLP
24.1#
Power of Attorney (included on signature page)
31.1#
Certification of Chief Executive Officer and
President (Principal Executive Officer), pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2#
Certification of Chief Financial Officer (Principal
Financial Officer), pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
103
Incorporated by Reference
Exhibit
Number
Exhibit Title
Form
File No.
Exhibit
Filing Date
32.1#*
Certification of Chief Executive Officer (Principal
Executive Officer), pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2#*
Certification of Chief Financial Officer (Principal
Financial Officer), pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
101.INS#
XBRL Instance Document.
101.SCH#
XBRL Taxonomy Extension Schema Document.
101.CAL#
XBRL Taxonomy Extension Calculation Linkbase
Document.
101.DEF#
XBRL Taxonomy Extension Definition Linkbase
Document.
101.LAB#
XBRL Taxonomy Extension Label Linkbase
Document.
101.PRE#
XBRL Taxonomy Extension Presentation Linkbase
Document.
104
Cover Page Interactive Data (formatted as Inline
XBRL and contained in Exhibit 101)
# Filed herewith.
+ Indicates management contract or compensatory plan.
† Confidential treatment has been granted for certain portions of this exhibit (indicated by asterisks). Such information has been omitted and was filed
separately with the Securities and Exchange Commission.
†† Certain portions of this exhibit (indicated by asterisks) have been omitted because they are not material and are the type that PhaseBio
Pharmaceuticals, Inc. treats as private or confidential.
* These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant,
whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 16. Form 10-K Summary
Not applicable.
104
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PHASEBIO PHARMACEUTICALS INC.
March 24, 2022
By:
/s/ John P. Sharp
John P. Sharp
Chief Financial Officer
(On behalf of the registrant and in his capacity as
Principal Financial Officer and Principal Accounting Officer)
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jonathan P. Mow
and John P. Sharp, jointly and severally, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him
or her and in his or her name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K of PhaseBio Pharmaceuticals, Inc., and
any or all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises hereby ratifying and confirming all that said attorneys-in-fact and agents, or his, her or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Jonathan P. Mow
Chief Executive Officer and Director
(Principal Executive Officer)
March 24, 2022
Jonathan P. Mow
/s/ John P. Sharp
Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
March 24, 2022
John P. Sharp
/s/ Clay B. Thorp
Chairman of the Board of Directors
March 24, 2022
Clay B. Thorp
/s/ Edmund P. Harrigan, M.D.
Director
March 24, 2022
Edmund P. Harrigan, M.D.
/s/ Nancy J. Hutson, Ph.D.
Director
March 24, 2022
Nancy J. Hutson, Ph.D.
/s/ William D. Humphries
Director
March 24, 2022
William D. Humphries
/s/ Caroline M. Loewy
Director
March 24, 2022
Caroline M. Loewy
/s/ Alex C. Sapir
Director
March 24, 2022
Alex C. Sapir
/s/ Richard A. van den Broek
Director
March 24, 2022
Richard A. van den Broek
105
Exhibit 10.3
PhaseBio Pharmaceuticals, Inc.
RSU Award Grant Notice
(2018 Equity Incentive Plan)
PhaseBio Pharmaceuticals, Inc. (the “Company”), pursuant to its 2018 Equity Incentive Plan (the “Plan”) has awarded to you (the “Participant”) the
number of restricted stock units specified, and on the terms set forth, below (the “RSU Award”). Your RSU Award is subject to all of the terms and
conditions set forth herein and in the Plan and the Award Agreement (the “Agreement”), both of which are attached hereto and incorporated herein in their
entirety. Capitalized terms not explicitly defined herein but defined in the Plan or the Agreement shall have the meanings set forth in the Plan or the
Agreement.
Participant:
Date of Grant:
Vesting Commencement Date:
Number of Restricted Stock Units:
Vesting Schedule:
One-third of the RSU Award shall vest on each of the first three anniversaries of the Vesting
Commencement Date. Notwithstanding the foregoing, vesting shall terminate upon Participant’s
termination of Continuous Service.
Issuance Schedule:
One share of Common Stock will be issued for each restricted stock unit which vests at the time set
forth in Section 5 of the Agreement.
Participant Acknowledgements: By your signature below or by electronic acceptance or authentication in a form authorized by the Company, you
understand and agree that:
•
The RSU Award is governed by this RSU Award Grant Notice (the “Grant Notice”), and the provisions of the Plan and the Agreement,
all of which are made a part of this document. Unless otherwise provided in the Plan, this Grant Notice and the Agreement (together, the
“RSU Award Agreement”) may not be modified, amended or revised except in a writing signed by you and a duly authorized officer of
the Company.
•
You have read and are familiar with the provisions of the Plan, the RSU Award Agreement and the Prospectus. In the event of any
conflict between the provisions in the RSU Award Agreement, or the Prospectus and the terms of the Plan, the terms of the Plan shall
control.
•
The RSU Award Agreement sets forth the entire understanding between you and the Company regarding the acquisition of Common
Stock and supersedes all prior oral and written agreements, promises and/or representations on that subject with the exception of (i) other
equity awards previously granted to you, and (ii) any written employment agreement, offer letter, severance agreement, written severance
plan or policy, or other written agreement between the Company and you in each case that specifies the terms that should govern this
RSU Award.
PhaseBio Pharmaceuticals, Inc.
By:
Signature
Title:
Date:
Participant:
By:
Signature
Date:
Attachments: RSU Award Agreement, 2018 Equity Incentive Plan
Attachment I
Award Agreement
1.
263446770 v3
PhaseBio Pharmaceuticals, Inc.
2018 Equity Incentive Plan
Award Agreement (RSU Award)
As reflected by your Restricted Stock Unit Grant Notice (“Grant Notice”), PhaseBio Pharmaceuticals, Inc. (the
“Company”) has granted you a RSU Award under its 2018 Equity Incentive Plan (the “Plan”) for the number of restricted stock
units indicated in your Grant Notice (the “RSU Award”). The terms of your RSU Award as specified in this Award Agreement for
your RSU Award (the “Agreement”) and the Grant Notice constitute your “RSU Award Agreement”. Defined terms not explicitly
defined in this Agreement but defined in the Grant Notice or the Plan shall have the same definitions as in the Grant Notice or
Plan, as applicable.
The general terms applicable to your RSU Award are as follows:
1.
Governing Plan Document. Your RSU Award is subject to all the provisions of the Plan. Your RSU Award is further
subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted
pursuant to the Plan. In the event of any conflict between the RSU Award Agreement and the provisions of the Plan, the
provisions of the Plan shall control.
2.
Grant of the RSU Award. This RSU Award represents your right to be issued on a future date the number of
shares of the Company’s Common Stock that is equal to the number of restricted stock units indicated in the Grant Notice as
modified to reflect any Capitalization Adjustment and subject to your satisfaction of the vesting conditions set forth therein (the
“Restricted Stock Units”). Any additional Restricted Stock Units that become subject to the RSU Award pursuant to
Capitalization Adjustments as set forth in the Plan and the provisions of Section 3 below, if any, shall be subject, in a manner
determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as
applicable to the other Restricted Stock Units covered by your RSU Award.
3.
Dividends. You shall receive no benefit or adjustment to your RSU Award with respect to any cash dividend,
stock dividend or other distribution that does not result from a Capitalization Adjustment as provided in the Plan; provided,
however, that this sentence shall not apply with respect to any shares of Common Stock that are delivered to you in connection
with your RSU Award after such shares have been delivered to you.
4.
Withholding Obligations. As further provided in the Plan, you hereby authorize withholding from payroll and
any other amounts payable to you, and otherwise agree to make adequate provision for, any sums required to satisfy the federal,
state, local and foreign tax withholding obligations, if any, which arise in connection with your RSU Award (the “Withholding
Obligation”) in accordance with the withholding procedures established by the Company. Unless the Withholding Obligation is
satisfied, the Company shall have no obligation to deliver to you any Common Stock in respect of the RSU Award. In the event
the Withholding Obligation of the Company arises prior to the delivery to you of Common Stock or it is determined after the
delivery of Common Stock to you that the amount of the Withholding Obligation was greater than the amount withheld by the
Company, you agree to indemnify and hold the Company harmless from any failure by the Company to withhold the proper
amount.
2.
5.
Date of Issuance.
(a)
The issuance of shares in respect of the Restricted Stock Units is intended to comply with Treasury
Regulations Section 1.409A-1(b)(4) and will be construed and administered in such a manner. Subject to the satisfaction of the
Withholding Obligation, if any, in the event one or more Restricted Stock Units vests, the Company shall issue to you one (1)
share of Common Stock for each Restricted Stock Unit that vests on the applicable vesting date(s) (subject to any adjustment
under Section 3 above, and subject to any different provisions in the Grant Notice). Each issuance date determined by this
paragraph is referred to as an “Original Issuance Date.”
(b)
If the Original Issuance Date falls on a date that is not a business day, delivery shall instead occur on the
next following business day.
In addition, if:
(i)
the Original Issuance Date does not occur (1) during an “open window period” applicable to you,
as determined by the Company in accordance with the Company’s then-effective policy on trading in Company securities, or (2)
on a date when you are otherwise permitted to sell shares of Common Stock on an established stock exchange or stock market
(including but not limited to under a previously established written trading plan that meets the requirements of Rule 10b5-1 under
the Exchange Act and was entered into in compliance with the Company’s policies (a “10b5-1 Arrangement”)), and
(ii)
either (1) a Withholding Obligation does not apply, or (2) the Company decides, prior to the
Original Issuance Date, (A) not to satisfy the Withholding Obligation by withholding shares of Common Stock from the shares
otherwise due, on the Original Issuance Date, to you under this Award, and (B) not to permit you to enter into a “same day sale”
commitment with a broker-dealer (including but not limited to a commitment under a 10b5-1 Arrangement) and (C) not to permit
you to pay your Withholding Obligation in cash,
(iii)
then the shares that would otherwise be issued to you on the Original Issuance Date will not be
delivered on such Original Issuance Date and will instead be delivered on the first business day when you are not prohibited from
selling shares of the Company’s Common Stock in the open public market, but in no event later than December 31 of the
calendar year in which the Original Issuance Date occurs (that is, the last day of your taxable year in which the Original Issuance
Date occurs), or, if and only if permitted in a manner that complies with Treasury Regulations Section 1.409A-1(b)(4), no later
than the date that is the 15th day of the third calendar month of the applicable year following the year in which the shares of
Common Stock under this Award are no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury
Regulations Section 1.409A-1(d).
(c)
In addition and notwithstanding the foregoing, no shares of Common Stock issuable to you under this
Section 5 as a result of the vesting of one or more Restricted Stock Units will be delivered to you until any filings that may be
required pursuant to the Hart-Scott-Rodino (“HSR”) Act in connection with the issuance of such shares have been filed and any
required waiting period under the HSR Act has expired or been terminated (any such filings and/or waiting period required
pursuant to HSR, the “HSR Requirements”). If the HSR Requirements apply to the issuance of any shares of Common Stock
issuable to you under this Section 5 upon vesting of one or more Restricted Stock Units, such shares of Common Stock will not
be issued on the Original Issuance Date and will instead be issued on the first business day on or following the date when all such
HSR Requirements are satisfied and when you are permitted to sell shares of Common Stock on an established stock exchange or
stock market, as determined by the Company in accordance with the Company’s then-effective policy on trading
3.
in Company securities. Notwithstanding the foregoing, the issuance date for any shares of Common Stock delayed under this
Section 5(c) shall in no event be later than December 31 of the calendar year in which the Original Issuance Date occurs (that is,
the last day of your taxable year in which the Original Issuance Date occurs), unless a later issuance date is permitted without
incurring adverse tax consequences under Section 409A of the Code or other Applicable Law.
6.
Transferability. Except as otherwise provided in the Plan, your RSU Award is not transferable, except by will or
by the applicable laws of descent and distribution.
7.
Corporate Transaction. Your RSU Award is subject to the terms of any agreement governing a Corporate
Transaction involving the Company, including, without limitation, a provision for the appointment of a stockholder representative
that is authorized to act on your behalf with respect to any escrow, indemnities and any contingent consideration.
8.
No Liability For Taxes. As a condition to accepting the RSU Award, you hereby (a) agree to not make any claim
against the Company, or any of its Officers, Directors, Employees or Affiliates related to tax liabilities arising from the RSU
Award or other Company compensation and (b) acknowledge that you were advised to consult with your own personal tax,
financial and other legal advisors regarding the tax consequences of the RSU Award and have either done so or knowingly and
voluntarily declined to do so.
9.
Severability. If any part of this Agreement or the Plan is declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared to
be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid will, if
possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent
possible while remaining lawful and valid.
10.
Other Documents. You hereby acknowledge receipt of or the right to receive a document providing the
information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Prospectus. In addition, you
acknowledge and agree to be subject to the Company’s Trading Policy, which such Trading Policy has been or will be made
available to you.
11.
Questions. If you have questions regarding these or any other terms and conditions applicable to your RSU
Award, including a summary of the applicable federal income tax consequences please see the Prospectus.
4.
Attachment II
2018 Equity Incentive Plan
5.
Exhibit 10.6
PhaseBio Pharmaceuticals, Inc.
RSU Award Grant Notice
(2022 Inducement Plan)
PhaseBio Pharmaceuticals, Inc. (the “Company”), pursuant to its 2022 Inducement Plan (the “Plan”) has awarded to you (the “Participant”) the number of
restricted stock units specified, and on the terms set forth, below (the “RSU Award”). Your RSU Award is subject to all of the terms and conditions set forth
herein and in the Plan and the Award Agreement (the “Agreement”), both of which are attached hereto and incorporated herein in their entirety. Capitalized
terms not explicitly defined herein but defined in the Plan or the Agreement shall have the meanings set forth in the Plan or the Agreement.
Participant:
Date of Grant:
Vesting Commencement Date:
Number of Restricted Stock Units:
Vesting Schedule:
One-third of the RSU Award shall vest on each of the first three anniversaries of the Vesting
Commencement Date. Notwithstanding the foregoing, vesting shall terminate upon Participant’s
termination of Continuous Service.
Issuance Schedule:
One share of Common Stock will be issued for each restricted stock unit which vests at the time set
forth in Section 5 of the Agreement.
Participant Acknowledgements: By your signature below or by electronic acceptance or authentication in a form authorized by the Company, you
understand and agree that:
•
The RSU Award is governed by this RSU Award Grant Notice (the “Grant Notice”), and the provisions of the Plan and the Agreement,
all of which are made a part of this document. Unless otherwise provided in the Plan, this Grant Notice and the Agreement (together, the
“RSU Award Agreement”) may not be modified, amended or revised except in a writing signed by you and a duly authorized officer of
the Company.
•
You have read and are familiar with the provisions of the Plan, the RSU Award Agreement and the Prospectus. In the event of any
conflict between the provisions in the RSU Award Agreement, or the Prospectus and the terms of the Plan, the terms of the Plan shall
control.
•
The RSU Award Agreement sets forth the entire understanding between you and the Company regarding the acquisition of Common
Stock and supersedes all prior oral and written agreements, promises and/or representations on that subject with the exception of (i) other
equity awards previously granted to you, and (ii) any written employment agreement, offer letter, severance agreement, written severance
plan or policy, or other written agreement between the Company and you in each case that specifies the terms that should govern this
RSU Award.
PhaseBio Pharmaceuticals, Inc.
By:
Signature
Title:
Date:
Participant:
By:
Signature
Date:
Attachments: RSU Award Agreement, 2022 Inducement Plan
Attachment I
Award Agreement
1.
263446858 v2
PhaseBio Pharmaceuticals, Inc.
2022 Inducement Plan
Award Agreement (RSU Award)
As reflected by your Restricted Stock Unit Grant Notice (“Grant Notice”), PhaseBio Pharmaceuticals, Inc. (the
“Company”) has granted you a RSU Award under its 2022 Inducement Plan (the “Plan”) for the number of restricted stock units
indicated in your Grant Notice (the “RSU Award”). The terms of your RSU Award as specified in this Award Agreement for your
RSU Award (the “Agreement”) and the Grant Notice constitute your “RSU Award Agreement”. Defined terms not explicitly
defined in this Agreement but defined in the Grant Notice or the Plan shall have the same definitions as in the Grant Notice or
Plan, as applicable.
The general terms applicable to your RSU Award are as follows:
1.
Governing Plan Document. Your RSU Award is subject to all the provisions of the Plan. Your RSU Award is further
subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted
pursuant to the Plan. In the event of any conflict between the RSU Award Agreement and the provisions of the Plan, the
provisions of the Plan shall control.
2.
Grant of the RSU Award. This RSU Award represents your right to be issued on a future date the number of
shares of the Company’s Common Stock that is equal to the number of restricted stock units indicated in the Grant Notice as
modified to reflect any Capitalization Adjustment and subject to your satisfaction of the vesting conditions set forth therein (the
“Restricted Stock Units”). Any additional Restricted Stock Units that become subject to the RSU Award pursuant to
Capitalization Adjustments as set forth in the Plan and the provisions of Section 3 below, if any, shall be subject, in a manner
determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as
applicable to the other Restricted Stock Units covered by your RSU Award.
3.
Dividends. You shall receive no benefit or adjustment to your RSU Award with respect to any cash dividend,
stock dividend or other distribution that does not result from a Capitalization Adjustment as provided in the Plan; provided,
however, that this sentence shall not apply with respect to any shares of Common Stock that are delivered to you in connection
with your RSU Award after such shares have been delivered to you.
4.
Withholding Obligations. As further provided in the Plan, you hereby authorize withholding from payroll and
any other amounts payable to you, and otherwise agree to make adequate provision for, any sums required to satisfy the federal,
state, local and foreign tax withholding obligations, if any, which arise in connection with your RSU Award (the “Withholding
Obligation”) in accordance with the withholding procedures established by the Company. Unless the Withholding Obligation is
satisfied, the Company shall have no obligation to deliver to you any Common Stock in respect of the RSU Award. In the event
the Withholding Obligation of the Company arises prior to the delivery to you of Common Stock or it is determined after the
delivery of Common Stock to you that the amount of the Withholding Obligation was greater than the amount withheld by the
Company, you agree to indemnify and hold the Company harmless from any failure by the Company to withhold the proper
amount.
2.
5.
Date of Issuance.
(a)
The issuance of shares in respect of the Restricted Stock Units is intended to comply with Treasury
Regulations Section 1.409A-1(b)(4) and will be construed and administered in such a manner. Subject to the satisfaction of the
Withholding Obligation, if any, in the event one or more Restricted Stock Units vests, the Company shall issue to you one (1)
share of Common Stock for each Restricted Stock Unit that vests on the applicable vesting date(s) (subject to any adjustment
under Section 3 above, and subject to any different provisions in the Grant Notice). Each issuance date determined by this
paragraph is referred to as an “Original Issuance Date.”
(b)
If the Original Issuance Date falls on a date that is not a business day, delivery shall instead occur on the
next following business day.
In addition, if:
(i)
the Original Issuance Date does not occur (1) during an “open window period” applicable to you,
as determined by the Company in accordance with the Company’s then-effective policy on trading in Company securities, or (2)
on a date when you are otherwise permitted to sell shares of Common Stock on an established stock exchange or stock market
(including but not limited to under a previously established written trading plan that meets the requirements of Rule 10b5-1 under
the Exchange Act and was entered into in compliance with the Company’s policies (a “10b5-1 Arrangement”)), and
(ii)
either (1) a Withholding Obligation does not apply, or (2) the Company decides, prior to the
Original Issuance Date, (A) not to satisfy the Withholding Obligation by withholding shares of Common Stock from the shares
otherwise due, on the Original Issuance Date, to you under this Award, and (B) not to permit you to enter into a “same day sale”
commitment with a broker-dealer (including but not limited to a commitment under a 10b5-1 Arrangement) and (C) not to permit
you to pay your Withholding Obligation in cash,
(iii)
then the shares that would otherwise be issued to you on the Original Issuance Date will not be
delivered on such Original Issuance Date and will instead be delivered on the first business day when you are not prohibited from
selling shares of the Company’s Common Stock in the open public market, but in no event later than December 31 of the
calendar year in which the Original Issuance Date occurs (that is, the last day of your taxable year in which the Original Issuance
Date occurs), or, if and only if permitted in a manner that complies with Treasury Regulations Section 1.409A-1(b)(4), no later
than the date that is the 15th day of the third calendar month of the applicable year following the year in which the shares of
Common Stock under this Award are no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury
Regulations Section 1.409A-1(d).
(c)
In addition and notwithstanding the foregoing, no shares of Common Stock issuable to you under this
Section 5 as a result of the vesting of one or more Restricted Stock Units will be delivered to you until any filings that may be
required pursuant to the Hart-Scott-Rodino (“HSR”) Act in connection with the issuance of such shares have been filed and any
required waiting period under the HSR Act has expired or been terminated (any such filings and/or waiting period required
pursuant to HSR, the “HSR Requirements”). If the HSR Requirements apply to the issuance of any shares of Common Stock
issuable to you under this Section 5 upon vesting of one or more Restricted Stock Units, such shares of Common Stock will not
be issued on the Original Issuance Date and will instead be issued on the first business day on or following the date when all such
HSR Requirements are satisfied and when you are permitted to sell shares of Common Stock on an established stock exchange or
stock market, as determined by the Company in accordance with the Company’s then-effective policy on trading
3.
in Company securities. Notwithstanding the foregoing, the issuance date for any shares of Common Stock delayed under this
Section 5(c) shall in no event be later than December 31 of the calendar year in which the Original Issuance Date occurs (that is,
the last day of your taxable year in which the Original Issuance Date occurs), unless a later issuance date is permitted without
incurring adverse tax consequences under Section 409A of the Code or other Applicable Law.
6.
Transferability. Except as otherwise provided in the Plan, your RSU Award is not transferable, except by will or
by the applicable laws of descent and distribution.
7.
Corporate Transaction. Your RSU Award is subject to the terms of any agreement governing a Corporate
Transaction involving the Company, including, without limitation, a provision for the appointment of a stockholder representative
that is authorized to act on your behalf with respect to any escrow, indemnities and any contingent consideration.
8.
No Liability For Taxes. As a condition to accepting the RSU Award, you hereby (a) agree to not make any claim
against the Company, or any of its Officers, Directors, Employees or Affiliates related to tax liabilities arising from the RSU
Award or other Company compensation and (b) acknowledge that you were advised to consult with your own personal tax,
financial and other legal advisors regarding the tax consequences of the RSU Award and have either done so or knowingly and
voluntarily declined to do so.
9.
Severability. If any part of this Agreement or the Plan is declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared to
be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid will, if
possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent
possible while remaining lawful and valid.
10.
Other Documents. You hereby acknowledge receipt of or the right to receive a document providing the
information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Prospectus. In addition, you
acknowledge and agree to be subject to the Company’s Trading Policy, which such Trading Policy has been or will be made
available to you.
11.
Questions. If you have questions regarding these or any other terms and conditions applicable to your RSU
Award, including a summary of the applicable federal income tax consequences please see the Prospectus.
4.
Attachment II
2022 Inducement Plan
5.
Exhibit 10.7
PhaseBio Pharmaceuticals, Inc.
Non-Employee Director Compensation Policy
As Amended February 24, 2022
Each member of the Board of Directors (the “Board”) who is not also serving as an employee of or consultant to PhaseBio
Pharmaceuticals, Inc. (the “Company”) or any of its subsidiaries (each such member, an “Eligible Director”) will receive the
compensation described in this Non-Employee Director Compensation Policy for his or her Board service. An Eligible Director
may decline all or any portion of his or her compensation by giving notice to the Company prior to the date cash may be paid or
equity awards are to be granted, as the case may be. This policy originally became effective upon the date of the underwriting
agreement between the Company and the underwriters managing the initial public offering of the Company’s common stock (the
“Common Stock”), pursuant to which the Common Stock was priced in such initial public offering and may be amended at any
time in the sole discretion of the Board or the Compensation Committee of the Board.
Annual Cash Compensation
The annual cash compensation amount set forth below is payable to Eligible Directors in equal quarterly installments, payable in
arrears on the last day of each fiscal quarter in which the service occurred. If an Eligible Director joins the Board or a committee
of the Board at a time other than effective as of the first day of a fiscal quarter, each annual retainer set forth below will be pro-
rated based on days served in the applicable fiscal year, with the pro-rated amount paid for the first fiscal quarter in which the
Eligible Director provides the service and regular full quarterly payments thereafter. All annual cash fees are vested upon
payment.
1. Annual Board Service Retainer:
a. All Eligible Directors: $40,000
b. Chairman of the Board Service Retainer (in addition to Eligible Director Service Retainer): $30,000
2. Annual Committee Chair Service Retainer:
a. Chairman of the Audit Committee: $15,000
b. Chairman of the Compensation Committee: $12,000
c. Chairman of the Nominating and Corporate Governance Committee: $10,000
3. Annual Committee Member Service Retainer (not applicable to Committee Chairs):
a. Member of the Audit Committee: $7,500
b. Member of the Compensation Committee: $6,000
c. Member of the Nominating and Corporate Governance Committee: $5,000
Exhibit 10.7
Equity Compensation
The equity compensation set forth below will be granted under the Company’s 2018 Equity Incentive Plan (the “Plan”). All stock
options granted under this policy will be nonstatutory stock options, with an exercise price per share equal to 100% of the Fair
Market Value (as defined in the Plan) of the underlying Common Stock on the date of grant, and a term of ten years from the date
of grant (subject to earlier termination in connection with a termination of service as provided in the Plan, provided that upon a
termination of service other than for death, disability or cause, the post-termination exercise period will be 12 months from the
date of termination).
1. Initial Grant: For each Eligible Director who is first elected or appointed to the Board, on the date of such Eligible Director’s
initial election or appointment to the Board (or, if such date is not a market trading day, the first market trading day thereafter),
the Eligible Director will be automatically, and without further action by the Board or Compensation Committee of the Board,
granted a stock option to purchase 35,000 shares of Common Stock (the “Initial Option Grant”) and restricted stock units to
receive 7,500 shares of Common Stock (the “Initial RSU Grant”).
The shares subject to each Initial Option Grant will vest in equal monthly installments over a three-year period such that the
option is fully vested on the third anniversary of the date of grant, subject to the Eligible Director’s Continuous Service (as
defined in the Plan) through each such vesting date and will vest in full upon a Change in Control (as defined in the Plan). The
shares subject to each Initial RSU Grant will vest in equal annual installments over a three-year period such that the Initial RSU
Grant is fully vested on the third anniversary of the date of grant, subject to the Eligible Director’s Continuous Service (as
defined in the Plan) through each such vesting date and will vest in full upon a Change in Control (as defined in the Plan).
2. Annual Grant: On the date of each annual stockholder meeting of the Company, each Eligible Director who continues to
serve as a non-employee member of the Board following such stockholder meeting will be automatically, and without further
action by the Board or Compensation Committee of the Board, granted a stock option to purchase 17,500 shares of Common
Stock (the “Annual Option Grant”) and restricted stock units to receive 3,750 shares of Common Stock (the “Annual RSU
Grant” and, together with the Annual Option Grant, the “Annual Grant”). Notwithstanding the foregoing, if an Eligible Director
joined the Board upon or after the date of the last preceding annual stockholder meeting of the Company, such Eligible Director’s
Annual Grant will be pro-rated based on days served since joining the Board until the annual stockholder meeting of the
Company. For the avoidance of doubt, Eligible Directors who join the Board at an annual stockholder meeting are not eligible to
receive an Annual Grant for such annual stockholder meeting.
The shares subject to the Annual Option Grant will vest upon the earlier of the (i) one-year anniversary of the date of grant and
(b) the date of Company’s next annual stockholder meeting, in any case subject to the Eligible Director’s Continuous Service (as
defined in the Plan) through such vesting date and will vest in full upon a Change in Control (as defined in the Plan). The shares
subject to the Annual RSU Grant will vest upon the earlier of the (i) one-year anniversary of the date of grant and (b) the date of
Company’s next annual stockholder meeting, in any case subject to the Eligible Director’s Continuous Service (as defined in the
Plan) through such vesting date and will vest in full upon a Change in Control (as defined in the Plan).
Exhibit 10.9
PhaseBio Pharmaceuticals, Inc.
Severance Benefit Plan
Amended and Restated as of March 23, 2022
Section 1.
Introduction.
The PhaseBio Pharmaceuticals, Inc. Severance Benefit Plan (the “Plan”) is hereby established by the Board of
Directors of PhaseBio Pharmaceuticals, Inc. (the “Company”) effective upon the IPO Date (as defined below). The purpose of
the Plan is to provide for the payment of severance benefits to eligible employees of the Company in the event that such
employees become subject to involuntary or constructive employment terminations. This Plan document also is the Summary
Plan Description for the Plan.
For purposes of the Plan, the following terms are defined as follows:
(a)
“Affiliate” means any corporation (other than the Company) in an “unbroken chain of corporations”
beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
(b)
“Base Salary” means base pay (excluding incentive pay, premium pay, commissions, overtime, bonuses
and other forms of variable compensation) as in effect prior to any reduction that would give rise to an employee’s right to a
resignation for Good Reason (if applicable).
(c)
“Cause” means, with respect to a particular employee, the meaning ascribed to such term in any written
employment agreement, offer letter or similar agreement between such employee and the Company defining such term, and, in
the absence of such agreement, means with respect to such employee, the term “Cause” as defined in the Equity Plan. The
determination whether a termination is for Cause shall be made by the Plan Administrator in its sole and exclusive judgment and
discretion.
(d)
“Change in Control” has the meaning ascribed to such term in the Equity Plan.
(e)
“Change in Control Period” means the period commencing one month prior to the Closing of a Change in
Control and ending 12 months following the Closing of a Change in Control.
(f)
“Closing” means the initial closing of the Change in Control as defined in the definitive agreement
executed in connection with the Change in Control. In the case of a series of transactions constituting a Change in Control,
“Closing” means the first closing that satisfies the threshold of the definition for a Change in Control.
(g)
“Code” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and
guidance thereunder.
(h)
“Committee” means the Board of Directors or the Compensation Committee of the Board of Directors of
the Company.
(i)
“Company” means PhaseBio Pharmaceuticals, Inc. or, following a Change in Control, the surviving entity
resulting from such event.
(j)
“Confidentiality Agreement” means the Company’s standard form of Employee Invention Assignment and
Confidentiality Agreement or any similar or successor document.
(k)
“Covered Termination” means, with respect to an employee, a termination of employment that is due to
(1) a termination by the Company without Cause (and other than as a result of the employee’s death or Disability) or (2) the
employee’s resignation for Good Reason, and in either case of (1) or (2), results in such employee’s Separation from Service.
(l)
“Disability” means any physical or mental condition which renders an employee incapable of performing
the work for which he or she was employed by the Company or similar work offered by the Company. The Disability of an
employee shall be established if (i) the employee satisfies the requirements for benefits under the Company’s long-term disability
plan or (ii) if no long-term disability plan, the employee satisfies the requirements for Social Security disability benefits.
(m)
“Eligible Employee” means an employee of the Company that meets the requirements to be eligible to
receive Plan benefits as set forth in Section 2.
(n)
“Equity Plan” means the PhaseBio Pharmaceuticals, Inc. 2018 Equity Incentive Plan, as amended from
time to time.
(o)
“Good Reason” for an employee’s resignation means the occurrence of any one or more of the following
are undertaken by the Company (or successor to the Company, if applicable) without the employee’s express written consent:
(1)
a material reduction in a such employee’s annual base salary, representing a reduction of more than
ten percent (10%) of such employee’s then current base salary; provided, that an across-the-board reduction in the salary level of
all similarly situated employees of the Company by the same percentage amount as part of a general salary level reduction shall
not constitute such a material salary reduction;
(2)
a material reduction or material adverse change in such employee’s job duties, responsibilities or
authority; provided, however, that any such reduction or change after a Change in Control (or similar corporate transaction that
does not constitute a Change in Control) shall not constitute Good Reason by virtue of the fact that such employee is performing
similar duties and responsibilities in a larger organization;
(3)
a relocation of such employee’s principal place of employment with the Company (or successor to
the Company, if applicable) to a place that increases such employee’s one-way commute by more than 50 miles as compared to
such employee’s then-current principal place of employment immediately prior to such relocation, except for required travel by
the employee on the Company’s business to an extent substantially consistent with employee’s business travel obligations prior
to the effective date of the Change in Control (or similar transaction); or
(4)
a material breach by the Company of any provision of this Plan or any other material agreement
between such employee and the Company concerning the terms and conditions of such employee’s employment or service with
the Company,
provided, however, that in any case of (1), (2), (3) or (4) above, in order for the employee’s resignation to be
deemed to have been for Good Reason, (i) the employee must first give the Company written notice of such employee’s intent to
resign for Good Reason within 60 days after the date on which the Company gives written notice to such employee of the
2
Company’s affirmative decision to take an action set forth in clause (1), (2), (3), or (4) above (or such action or condition
otherwise occurs), which notice shall describe such condition(s) employee believes constitute Good Reason; (ii) the Company
must fail to remedy such condition(s) within 30 days after receipt of such written notice (the “Cure Period”), and (iii) the
employee must resign from employment effective not later than 30 days after the expiration of such Cure Period.
(p)
“IPO Date” means the date of the underwriting agreement between the Company and the underwriter(s)
managing the initial public offering of the Company’s Common Stock, pursuant to which the Common Stock is priced for the
initial public offering.
(q)
“Participation Agreement” means an agreement between an employee and the Company in substantially
the form of Appendix A attached hereto, and which may include such other terms as the Committee deems necessary or
advisable in the administration of the Plan.
(r)
“Plan Administrator” means the Committee prior to the Closing and the Representative upon and
following the Closing, as applicable.
(s)
“Representative” means one or more members of the Committee or other persons or entities designated by
the Committee prior to or in connection with a Change in Control that will have authority to administer and interpret the Plan
upon and following the Closing as provided in Section 8(a).
(t)
“Section 409A” means Section 409A of the Code and the treasury regulations and other guidance
thereunder and any state law of similar effect.
(u)
“Separation from Service” means a “separation from service” within the meaning of Treasury Regulations
Section 1.409A-1(h), without regard to any alternative definition thereunder.
Section 2.
Eligibility for Benefits.
(a)
Eligible Employee. An employee of the Company is eligible to participate in the Plan if (i) the Plan
Administrator has designated such employee as eligible to participate in the Plan by providing such employee a Participation
Agreement; (ii) such employee has signed and returned such Participation Agreement to the Company within the time period
required therein; and (iii) such employee meets the other Plan eligibility requirements set forth in this Section 2. The
determination of whether an employee is an Eligible Employee shall be made by the Plan Administrator, in its sole discretion,
and such determination shall be binding and conclusive on all persons. Notwithstanding the foregoing, the Company’s Chief
Executive Officer may designate employees below the level of Vice President as Eligible Employees.
(b)
Release Requirement. Except as otherwise provided in an individual Participation Agreement, in order to
be eligible to receive benefits under the Plan, the employee also must execute a general waiver and release, in such a form as
provided by the Company (the “Release”), within the applicable time period set forth therein, and such Release must become
effective in accordance with its terms, which must occur in no event more than 60 days following the date of the applicable
Covered Termination.
(c)
Plan Benefits Provided In Lieu of Any Previous Benefits. This Plan shall supersede any change in
control or severance benefit plan, policy or practice previously maintained by the Company with respect to an Eligible Employee
and any change in control or severance benefits in any individually negotiated employment contract or other agreement
3
between the Company and an Eligible Employee. Notwithstanding the foregoing, the Eligible Employee’s outstanding equity
awards shall remain subject to the terms the Equity Plan or other applicable equity plan under which such awards were granted
(including the award documentation governing such awards) that may apply upon a Change in Control and/or termination of such
employee’s service and no provision of this Plan shall be construed as to limit the actions that may be taken, or to violate the
terms, thereunder.
(d)
Exceptions to Severance Benefit Entitlement. An employee who otherwise is an Eligible Employee will
not receive benefits under the Plan in the following circumstances, as determined by the Plan Administrator in its sole discretion:
(1)
The employee is terminated by the Company for any reason (including due to the employee’s death
or Disability) or voluntarily terminates employment with the Company in any manner, and in either case, such termination does
not constitute a Covered Termination. Voluntary terminations include, but are not limited to, resignation, retirement or failure to
return from a leave of absence on the scheduled date.
(2)
The employee voluntarily terminates employment with the Company in order to accept
employment with another entity that is wholly or partly owned (directly or indirectly) by the Company or an Affiliate.
(3)
The employee is offered an identical or substantially equivalent or comparable position with the
Company or an Affiliate. For purposes of the foregoing, a “substantially equivalent or comparable position” is one that provides
the employee substantially the same level of responsibility and compensation and would not give rise to the employee’s right to
a resignation for Good Reason.
(4)
The employee is offered immediate reemployment by a successor to the Company or an Affiliate or
by a purchaser of the Company’s assets, as the case may be, following a Change in Control and the terms of such reemployment
would not give rise to the employee’s right to a resignation for Good Reason. For purposes of the foregoing, “immediate
reemployment” means that the employee’s employment with the successor to the Company or an Affiliate or the purchaser of its
assets, as the case may be, results in uninterrupted employment such that the employee does not incur a lapse in pay or benefits
as a result of the change in ownership of the Company or the sale of its assets. For the avoidance of doubt, an employee who
becomes immediately reemployed as described in this Section 2(d)(4) by a successor to the Company or an Affiliate or by a
purchaser of the Company’s assets, as the case may be, following a Change in Control shall continue to be an Eligible Employee
following the date of such reemployment.
(5)
The employee is rehired by the Company or an Affiliate and recommences employment prior to the
date severance benefits under the Plan are scheduled to commence.
(e)
Termination of Severance Benefits. An Eligible Employee’s right to receive severance benefits under this
Plan shall terminate immediately if, at any time prior to or during the period for which the Eligible Employee is receiving
severance benefits under the Plan, the Eligible Employee
(1)
willfully breaches any material statutory, common law, or contractual obligation to the Company or
an Affiliate (including, without limitation, the contractual obligations set forth in the Confidentiality Agreement and any other
confidentiality, non-disclosure and developments agreement, non-competition, non-solicitation, or similar type agreement
between the Eligible Employee and the Company, as applicable).
4
(2)
fails to enter into the terms of the Confidentiality Agreement;
(3)
without the prior written approval of the Plan Administrator, engages in a Prohibited Action (as
defined below). In addition, if benefits under the Plan have already been paid to Eligible Employee and the Eligible Employee
subsequently engages in a Prohibited Action during the Prohibited Period (or it is determined that an Eligible Employee engaged
in a Prohibited Action prior to receipt of such benefits), any benefits previously paid to the Eligible Employee shall be subject to
recoupment by the Company on such terms and conditions as shall be determined by the Plan Administrator, in its sole
discretion. The “Prohibited Period” shall commence on the date of the Employee’s Covered Termination and continue for the
number of months corresponding to the Severance Period set forth in such Eligible Employee’s Participation Agreement. A
“Prohibited Action” shall occur if the Eligible Employee: (i) breaches a material provision of the Confidentiality Agreement
and/or any obligations of confidentiality, non-solicitation, non-disparagement, no conflicts or non-competition set forth in the
Eligible Employee’s employment agreement, offer letter, any other written agreement between the Eligible Employee and the
Company, or under applicable law; (ii) encourages or solicits any of the Company’s then current employees to leave the
Company’s employ for any reason or interferes in any other manner with employment relationships at the time existing between
the Company and its then current employees; or (iii) induces any of the Company’s then current clients, customers, suppliers,
vendors, distributors, licensors, licensees, or other third parties to terminate their existing business relationship with the
Company or interferes in any other manner with any existing business relationship between the Company and any then current
client, customer, supplier, vendor, distributor, licensor, licensee, or other third parties.
Section 3.
Amount of Benefits.
(a)
Benefits in Participation Agreement. Benefits under the Plan shall be provided to an Eligible Employee
as set forth in the Participation Agreement.
(b)
Additional Benefits. Notwithstanding the foregoing, the Committee may, in its sole discretion, provide
benefits to individuals who are not Eligible Employees (“Non-Eligible Employees”) chosen by the Plan Administrator, in its sole
discretion, and the provision of any such benefits to a Non-Eligible Employee shall in no way obligate the Company to provide
such benefits to any other individual, even if similarly situated. If benefits under the Plan are provided to a Non-Eligible
Employee, references in the Plan to “Eligible Employee” (and similar references) shall be deemed to refer to such Non-Eligible
Employee.
(c)
Certain Reductions. In addition to Section 2(e) above, the Company, in its sole discretion, shall have the
authority to reduce an Eligible Employee’s severance benefits, in whole or in part, by any other severance benefits, pay and
benefits provided during a period following written notice of a business closing or mass layoff, pay and benefits in lieu of such
notice, or other similar benefits payable to the Eligible Employee by the Company or an Affiliate that become payable in
connection with the Eligible Employee’s termination of employment pursuant to (i) any applicable legal requirement, including,
without limitation, the Worker Adjustment and Retraining Notification Act or any other similar state law or (ii) any Company
policy or practice providing for the Eligible Employee to remain on the payroll for a limited period of time after being given
notice of the termination of the Eligible Employee’s employment, and the Plan Administrator shall so construe and implement the
terms of the Plan. Any such reductions that the Company determines to make pursuant to this Section 3(c) shall be made such
that any severance benefit under the Plan shall be reduced solely by any similar type of benefit under such legal requirement,
agreement, policy or practice (i.e., any cash severance benefits under the Plan shall be reduced solely by any cash payments or
severance benefits under such legal requirement, agreement, policy or practice). The Company’s decision to apply such
5
reductions to the severance benefits of one Eligible Employee and the amount of such reductions shall in no way obligate the
Company to apply the same reductions in the same amounts to the severance benefits of any other Eligible Employee. In the
Company’s sole discretion, such reductions may be applied on a retroactive basis, with severance benefits previously paid being
re-characterized as payments pursuant to the Company’s statutory obligation.
(d)
Parachute Payments. If any payment or benefit an Eligible Employee will or may receive from the
Company or otherwise (a “Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the
Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then
any such Payment shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the
Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion,
up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after
taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at
the highest applicable marginal rate), results in the Eligible Employee’s receipt, on an after-tax basis, of the greater economic
benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is
required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding
sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for the
Eligible Employee. If more than one method of reduction will result in the same economic benefit, the items so reduced will be
reduced pro rata (the “Pro Rata Reduction Method”).
Notwithstanding any provisions in this Section above to the contrary, if the Reduction Method or the Pro Rata Reduction
Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A that would not otherwise be
subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be,
shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the
modification shall preserve to the greatest extent possible, the greatest economic benefit for the Eligible Employee as determined
on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without
Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority,
Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before
Payments that are not deferred compensation within the meaning of Section 409A.
The Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this
Section. The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be
made hereunder. If the Eligible Employee receives a Payment for which the Reduced Amount was determined pursuant to clause
(x) above and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax,
Eligible Employee agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to
clause (x) above) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the
Reduced Amount was determined pursuant to clause (y) above, the Eligible Employee shall have no obligation to return any
portion of the Payment pursuant to the preceding sentence.
Section 4.
Return of Company Property.
An Eligible Employee will not be entitled to any severance benefit under the Plan unless and until the Eligible Employee
returns all Company Property. For this purpose, “Company Property” means all paper and electronic Company documents (and
all copies thereof) and other
6
Company property which the Eligible Employee had in his or her possession or control at any time, including, but not limited to,
Company files, notes, drawings, records, plans, forecasts, reports, studies, analyses, proposals, agreements, financial information,
research and development information, sales and marketing information, operational and personnel information, specifications,
code, software, databases, computer-recorded information, tangible property and equipment (including, but not limited to,
computers, facsimile machines, mobile telephones, servers), credit cards, entry cards, identification badges and keys; and any
materials of any kind which contain or embody any proprietary or confidential information of the Company (and all
reproductions thereof in whole or in part). As a condition to receiving benefits under the Plan, an Eligible Employee must not
make or retain copies, reproductions or summaries of any such Company documents, materials or property. However, an Eligible
Employee is not required to return his or her personal copies of documents evidencing the Eligible Employee’s hire, termination,
compensation, benefits and stock options and any other documentation received as a stockholder of the Company.
Section 5.
Time of Payment and Form of Benefits.
The Company reserves the right in the Participation Agreement to specify whether payments under the Plan will
be paid in a single sum, in installments, or in any other form and to determine the timing of such payments. All such payments
under the Plan will be subject to applicable withholding for federal, state, foreign, provincial and local taxes. All benefits
provided under the Plan are intended to satisfy the requirements for an exemption from application of Section 409A to the
maximum extent that an exemption is available and any ambiguities herein shall be interpreted accordingly; provided, however,
that to the extent such an exemption is not available, the benefits provided under the Plan are intended to comply with the
requirements of Section 409A to the extent necessary to avoid adverse personal tax consequences and any ambiguities herein
shall be interpreted accordingly.
It is intended that (i) each installment of any benefits payable under the Plan to an Eligible Employee be regarded
as a separate “payment” for purposes of Treasury Regulations Section 1.409A-2(b)(2)(i), (ii) all payments of any such benefits
under the Plan satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under
Treasury Regulations Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9)(iii), and (iii) any such benefits consisting of
COBRA premiums also satisfy, to the greatest extent possible, the exemption from the application of Section 409A provided
under Treasury Regulations Section 1.409A-1(b)(9)(v). However, if the Company determines that any severance benefits payable
under the Plan constitute “deferred compensation” under Section 409A and the Eligible Employee is a “specified employee” of
the Company, as such term is defined in Section 409A(a)(2)(B)(i), then, solely to the extent necessary to avoid the imposition of
the adverse personal tax consequences under Section 409A, (A) the timing of such severance benefit payments shall be delayed
until the earlier of (1) the date that is six months and one day after the Eligible Employee’s Separation from Service and (2) the
date of the Eligible Employee’s death (such applicable date, the “Delayed Initial Payment Date”), and (B) the Company shall (1)
pay the Eligible Employee a lump sum amount equal to the sum of the severance benefit payments that the Eligible Employee
would otherwise have received through the Delayed Initial Payment Date if the commencement of the payment of the severance
benefits had not been delayed pursuant to this paragraph and (2) commence paying the balance, if any, of the severance benefits
in accordance with the applicable payment schedule.
In no event shall payment of any severance benefits under the Plan be made prior to an Eligible Employee’s
Separation from Service or prior to the effective date of the Release. If the Company determines that any severance payments or
benefits provided under the Plan constitute “deferred compensation” under Section 409A, and the Eligible Employee’s Separation
from Service occurs at a time during the calendar year when the Release could become effective
7
in the calendar year following the calendar year in which the Eligible Employee’s Separation from Service occurs, then
regardless of when the Release is returned to the Company and becomes effective, the Release will not be deemed effective,
solely for purposes of the timing of payment of severance benefits under this Plan, any earlier than the latest permitted effective
date (the “Release Deadline”). If the Company determines that any severance payments or benefits provided under the Plan
constitute “deferred compensation” under Section 409A, then except to the extent that severance payments may be delayed until
the Delayed Initial Payment Date pursuant to the preceding paragraph, on the first regular payroll date following the effective
date of an Eligible Employee’s Release, the Company shall (1) pay the Eligible Employee a lump sum amount equal to the sum
of the severance benefit payments that the Eligible Employee would otherwise have received through such payroll date but for
the delay in payment related to the effectiveness of the Release and (2) commence paying the balance, if any, of the severance
benefits in accordance with the applicable payment schedule.
Section 6.
Transfer and Assignment.
The rights and obligations of an Eligible Employee under this Plan may not be transferred or assigned without the prior
written consent of the Company. This Plan shall be binding upon any entity or person who is a successor by merger, acquisition,
consolidation or otherwise to the business formerly carried on by the Company without regard to whether or not such entity or
person actively assumes the obligations hereunder and without regard to whether or not a Change in Control occurs.
Section 7.
Mitigation.
Except as otherwise specifically provided in the Plan, an Eligible Employee will not be required to mitigate damages or
the amount of any payment provided under the Plan by seeking other employment or otherwise, nor will the amount of any
payment provided for under the Plan be reduced by any compensation earned by an Eligible Employee as a result of employment
by another employer or any retirement benefits received by such Eligible Employee after the date of the Eligible Employee’s
termination of employment with the Company.
Section 8.
Clawback; Recovery.
All payments and severance benefits provided under the Plan will be subject to recoupment in accordance with any
clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or
association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and
Consumer Protection Act or other applicable law. In addition, the Plan Administrator may impose such other clawback, recovery
or recoupment provisions as the Plan Administrator determines necessary or appropriate, including but not limited to a
reacquisition right in respect of previously acquired shares of common stock of the Company or other cash or property upon the
occurrence of a termination of employment for Cause. No recovery of compensation under such a clawback policy will be an
event giving rise to a right to resign for Good Reason, constructive termination, or any similar term under any plan of or
agreement with the Company.
Section 9.
Right to Interpret and Administer Plan; Amendment and Termination.
(a)
Interpretation and Administration. Prior to the Closing, the Committee shall be the Plan Administrator
and shall have the exclusive discretion and authority to establish rules, forms, and procedures for the administration of the Plan
and to construe and interpret the Plan and to decide any and all questions of fact, interpretation, definition, computation or
administration arising in connection with the operation of the Plan, including, but not limited to,
8
the eligibility to participate in the Plan and amount of benefits paid under the Plan. The rules, interpretations, computations and
other actions of the Committee shall be binding and conclusive on all persons. Upon and after the Closing, the Plan will be
interpreted and administered in good faith by the Representative who shall be the Plan Administrator during such period. All
actions taken by the Representative in interpreting the terms of the Plan and administering the Plan upon and after the Closing
will be final and binding on all Eligible Employees. Any references in this Plan to the “Committee” or “Plan Administrator” with
respect to periods following the Closing shall mean the Representative.
(b)
Amendment. The Plan Administrator reserves the right to amend this Plan at any time; provided, however,
that any amendment of the Plan will not be effective as to a particular employee who is or may be adversely impacted by such
amendment or termination and has an effective Participation Agreement without the written consent of such employee.
(c)
Termination. Unless otherwise extended by the Committee, the Plan will automatically terminate
following satisfaction of all the Company’s obligations under the Plan.
Section 10.
No Implied Employment Contract.
The Plan shall not be deemed (i) to give any employee or other person any right to be retained in the employ of the
Company or (ii) to interfere with the right of the Company to discharge any employee or other person at any time, with or
without cause, which right is hereby reserved. This Plan does not modify the at-will employment status of any Eligible
Employee.
Section 11.
Legal Construction.
This Plan is intended to be governed by and shall be construed in accordance with the Employee Retirement
Income Security Act of 1974 (“ERISA”) and, to the extent not preempted by ERISA, the laws of the State of California.
Section 12.
Claims, Inquiries and Appeals.
(a)
Applications for Benefits and Inquiries. Any application for benefits, inquiries about the Plan or
inquiries about present or future rights under the Plan must be submitted to the Plan Administrator in writing by an applicant (or
his or her authorized representative). The Plan Administrator is:
PhaseBio Pharmaceuticals, Inc.
Compensation Committee of the Board of Directors or Representative
Attention to: Corporate Secretary
1 Great Valley Parkway, Suite 30
Malvern, Pennsylvania 19355
(b)
Denial of Claims. In the event that any application for benefits is denied in whole or in part, the Plan
Administrator must provide the applicant with written or electronic notice of the denial of the application, and of the applicant’s
right to review the denial. Any electronic notice will comply with the regulations of the U.S. Department of Labor. The notice of
denial will be set forth in a manner designed to be understood by the applicant and will include the following:
(1)
the specific reason or reasons for the denial;
(2)
references to the specific Plan provisions upon which the denial is based;
9
(3)
a description of any additional information or material that the Plan Administrator needs to
complete the review and an explanation of why such information or material is necessary; and
(4)
an explanation of the Plan’s review procedures and the time limits applicable to such procedures,
including a statement of the applicant’s right to bring a civil action under Section 502(a) of ERISA following a denial on review
of the claim, as described in Section 10(d) below.
This notice of denial will be given to the applicant within 90 days after the Plan Administrator receives the
application, unless special circumstances require an extension of time, in which case, the Plan Administrator has up to an
additional 90 days for processing the application. If an extension of time for processing is required, written notice of the
extension will be furnished to the applicant before the end of the initial 90 day period.
This notice of extension will describe the special circumstances necessitating the additional time and the date by
which the Plan Administrator is to render its decision on the application.
(c)
Request for a Review. Any person (or that person’s authorized representative) for whom an application
for benefits is denied, in whole or in part, may appeal the denial by submitting a request for a review to the Plan Administrator
within 60 days after the application is denied. A request for a review shall be in writing and shall be addressed to:
PhaseBio Pharmaceuticals, Inc.
Compensation Committee of the Board of Directors or Representative
Attention to: Corporate Secretary
1 Great Valley Parkway, Suite 30
Malvern, Pennsylvania 19355
A request for review must set forth all of the grounds on which it is based, all facts in support of the request and any other matters
that the applicant feels are pertinent. The applicant (or his or her representative) shall have the opportunity to submit (or the Plan
Administrator may require the applicant to submit) written comments, documents, records, and other information relating to his
or her claim. The applicant (or his or her representative) shall be provided, upon request and free of charge, reasonable access to,
and copies of, all documents, records and other information relevant to his or her claim. The review shall take into account all
comments, documents, records and other information submitted by the applicant (or his or her representative) relating to the
claim, without regard to whether such information was submitted or considered in the initial benefit determination.
(d)
Decision on Review. The Plan Administrator will act on each request for review within 60 days after
receipt of the request, unless special circumstances require an extension of time (not to exceed an additional 60 days), for
processing the request for a review. If an extension for review is required, written notice of the extension will be furnished to the
applicant within the initial 60 day period. This notice of extension will describe the special circumstances necessitating the
additional time and the date by which the Plan Administrator is to render its decision on the review. The Plan Administrator will
give prompt, written or electronic notice of its decision to the applicant. Any electronic notice will comply with the regulations of
the U.S. Department of Labor. In the event that the Plan Administrator confirms the denial of the application for benefits in whole
or in part, the notice will set forth, in a manner calculated to be understood by the applicant, the following:
(1)
the specific reason or reasons for the denial;
10
(2)
references to the specific Plan provisions upon which the denial is based;
(3)
a statement that the applicant is entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records and other information relevant to his or her claim; and
(4)
a statement of the applicant’s right to bring a civil action under Section 502(a) of ERISA.
(e)
Rules and Procedures. The Plan Administrator will establish rules and procedures, consistent with the
Plan and with ERISA, as necessary and appropriate in carrying out its responsibilities in reviewing benefit claims. The Plan
Administrator may require an applicant who wishes to submit additional information in connection with an appeal from the
denial of benefits to do so at the applicant’s own expense.
(f)
Exhaustion of Remedies. No legal action for benefits under the Plan may be brought until the applicant
(i) has submitted a written application for benefits in accordance with the procedures described by Section 10(a) above, (ii) has
been notified by the Plan Administrator that the application is denied, (iii) has filed a written request for a review of the
application in accordance with the appeal procedure described in Section 10(c) above, and (iv) has been notified that the Plan
Administrator has denied the appeal. Notwithstanding the foregoing, if the Plan Administrator does not respond to an Eligible
Employee’s claim or appeal within the relevant time limits specified in this Section 10, the Eligible Employee may bring legal
action for benefits under the Plan pursuant to Section 502(a) of ERISA.
Section 13.
Basis of Payments to and from Plan.
The Plan shall be unfunded, and all cash payments under the Plan shall be paid only from the general assets of the
Company.
Section 14.
Other Plan Information.
(a)
Employer and Plan Identification Numbers. The Employer Identification Number assigned to the
Company (which is the “Plan Sponsor” as that term is used in ERISA) by the Internal Revenue Service is 03-0375697 The Plan
Number assigned to the Plan by the Plan Sponsor pursuant to the instructions of the Internal Revenue Service is 504.
(b)
Ending Date for Plan’s Fiscal Year. The date of the end of the fiscal year for the purpose of maintaining
the Plan’s records is December 31.
(c)
Agent for the Service of Legal Process. The agent for the service of legal process with respect to the Plan
is:
PhaseBio Pharmaceuticals, Inc.
Attention to: Corporate Secretary
1 Great Valley Parkway, Suite 30
Malvern, Pennsylvania 19355
In addition, service of legal process may be made upon the Plan Administrator.
(d)
Plan Sponsor. The “Plan Sponsor” is:
PhaseBio Pharmaceuticals, Inc.
11
1 Great Valley Parkway, Suite 30
Malvern, Pennsylvania 19355
(610) 981-6500
(e)
Plan Administrator. The Plan Administrator is the Committee prior to the Closing and the Representative
upon and following the Closing. The Plan Administrator’s contact information is:
PhaseBio Pharmaceuticals, Inc.
Compensation Committee of the Board of Directors or Representative
1 Great Valley Parkway, Suite 30
Malvern, Pennsylvania 19355
The Plan Administrator is the named fiduciary charged with the responsibility for administering the Plan.
Section 15.
Statement of ERISA Rights.
Participants in this Plan (which is a welfare benefit plan sponsored by PhaseBio Pharmaceuticals, Inc.) are entitled
to certain rights and protections under ERISA. If you are an Eligible Employee, you are considered a participant in the Plan and,
under ERISA, you are entitled to:
(a)
Receive Information About Your Plan and Benefits
(1)
Examine, without charge, at the Plan Administrator’s office and at other specified locations, such as
worksites, all documents governing the Plan and a copy of the latest annual report (Form 5500 Series), if applicable, filed by the
Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security
Administration;
(2)
Obtain, upon written request to the Plan Administrator, copies of documents governing the
operation of the Plan and copies of the latest annual report (Form 5500 Series), if applicable, and an updated (as necessary)
Summary Plan Description. The Administrator may make a reasonable charge for the copies; and
(3)
Receive a summary of the Plan’s annual financial report, if applicable. The Plan Administrator is
required by law to furnish each Eligible Employee with a copy of this summary annual report.
(b)
Prudent Actions by Plan Fiduciaries. In addition to creating rights for Plan Eligible Employees, ERISA
imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate the
Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other Eligible Employees and
beneficiaries. No one, including your employer, your union or any other person, may fire you or otherwise discriminate against
you in any way to prevent you from obtaining a Plan benefit or exercising your rights under ERISA.
(c)
Enforce Your Rights. If your claim for a Plan benefit is denied or ignored, in whole or in part, you have a
right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial,
all within certain time schedules.
12
Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy
of Plan documents or the latest annual report from the Plan, if applicable, and do not receive them within 30 days, you may file
suit in a Federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to
$110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan
Administrator.
If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state
or Federal court.
If you are discriminated against for asserting your rights, you may seek assistance from the U.S.
Department of Labor, or you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If
you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you
to pay these costs and fees, for example, if it finds your claim is frivolous.
(d)
Assistance with Your Questions. If you have any questions about the Plan, you should contact the Plan
Administrator. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in
obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security
Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and
Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington,
D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the
publications hotline of the Employee Benefits Security Administration.
13
Appendix A
Participation Agreement
Name: ___________________
Section 1.
Eligibility.
You have been designated as eligible to participate in the PhaseBio Pharmaceuticals, Inc. Severance Benefit Plan (the
“Plan”), a copy of which is attached to this Participation Agreement (the “Participation Agreement”). Capitalized terms not
explicitly defined in this Participation Agreement but defined in the Plan shall have the same definitions as in the Plan. You will
receive the benefits set forth below if you meet all the eligibility requirements set forth in the Plan, including, without limitation,
executing the required Release within the applicable time period set forth therein and allowing such Release to become effective
in accordance with its terms. Notwithstanding the schedule for provision of benefits as set forth below, the schedule and timing of
payment of any benefits under this Participant Agreement is subject to any delay in payment that may be required under Section
5 of the Plan.
Section 2.
Change in Control Severance Benefits.
If you are terminated in a Covered Termination that occurs during the Change in Control Period, you will receive
the severance benefits set forth in this Section 2. All severance benefits described herein are subject to standard deductions and
withholdings.
(a)
Base Salary. You shall receive a cash payment in an amount equal to ______ months (the “Severance
Period”) of payment of your Base Salary. The Base Salary payment will be paid to you in a lump sum cash payment no later than
the second regular payroll date following the later of (i) the effective date of the Release or (ii) the Closing, but in any event not
later than March 15 of the year following the year in which your Separation from Service occurs.
(b)
Bonus Payment. You will be entitled to ____X the annual target cash bonus established for you, if any,
pursuant to the annual performance bonus or annual variable compensation plan established by the Board of Directors or
Committee (or any authorized committee or designee thereof) for the year in which your Covered Termination occurs. If at the
time of the Covered Termination you are eligible for the annual target cash bonus for the year in which the Covered Termination
occurs, but the target percentage (or target dollar amount, if specified as such in the applicable bonus plan) for such bonus has not
yet been established for such year, the target percentage shall be the target percentage established for you for the preceding year
(but adjusted, if necessary for your position for the year in which the Covered Termination occurs). For the avoidance of doubt,
the amount of the annual target bonus to which you are entitled under this Section 2(b) will be calculated (1) assuming all
articulated performance goals for such bonus (including, but not limited to, corporate and individual performance, if applicable),
for the year of the Covered Termination was achieved at target levels; (2) as if you had provided services for the entire year for
which the bonus relates; and (3) ignoring any reduction in your Base Salary that would give rise to your right to resignation for
Good Reason (such bonus to which you are entitled under this Section 2(b), the “Annual Target Bonus Severance Payment”).
The Annual Target Bonus Severance Payment shall be paid in a lump sum cash payment no later than the second regular payroll
date following the later of (i) the effective date of the Release or (ii) the Closing, but in any event not later than March 15 of the
year following the year in which your Separation from Service occurs.
(c)
Payment of Continued Group Health Plan Benefits. If you timely elect continued group health plan
continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) following your Covered
Termination date, the Company shall pay directly to the carrier the full amount of your COBRA premiums on behalf of you for
your continued coverage under the Company’s group health plans, including coverage for your eligible dependents, until the
earliest of (i) the end of the Severance Period following the date of your Covered Termination, (ii) the expiration of your
eligibility for the continuation coverage under COBRA, or (iii) the date when you become eligible for substantially equivalent
health insurance coverage in connection with new employment (such period from your termination date through the earliest of (i)
through (iii), the “COBRA Payment Period”). Upon the conclusion of such period of insurance premium payments made by the
Company, you will be responsible for the entire payment of premiums (or payment for the cost of coverage) required under
COBRA for the duration of your eligible COBRA coverage period, if any. For purposes of this Section, (1) references to COBRA
shall be deemed to refer also to analogous provisions of state law and (2) any applicable insurance premiums that are paid by the
Company shall not include any amounts payable by you under an Internal Revenue Code Section 125 health care reimbursement
plan, which amounts, if any, are your sole responsibility. You agree to promptly notify the Company as soon as you become
eligible for health insurance coverage in connection with new employment or self-employment.
Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that it cannot provide the
COBRA premium benefits without potentially incurring financial costs or penalties under applicable law (including, without
limitation, Section 2716 of the Public Health Service Act), then in lieu of paying COBRA premiums directly to the carrier on
your behalf, the Company will instead pay you on the last day of each remaining month of the COBRA Payment Period a fully
taxable cash payment equal to the value of your monthly COBRA premium for the first month of COBRA coverage, subject to
applicable tax withholding (such amount, the “Special Severance Payment”), such Special Severance Payment to be made
without regard to your election of COBRA coverage or payment of COBRA premiums and without regard to your continued
eligibility for COBRA coverage during the COBRA Payment Period. Such Special Severance Payment shall end upon expiration
of the COBRA Payment Period.
(d)
Equity Acceleration. The vesting and exercisability of each outstanding unvested stock option and other
stock award, as applicable, that you hold covering Company common stock (each, an “Equity Award”) shall be accelerated in full
and any reacquisition or repurchase rights held by the Company in respect of common stock issued pursuant to any Equity Award
granted to you shall lapse in full. For purposes of determining the number of shares that will vest pursuant to the foregoing
provision with respect to any performance based vesting Equity Award for which the performance period has not ended and that
has multiple vesting levels depending upon the level of performance, vesting acceleration with respect to any ongoing
performance period(s) shall occur with respect to the number of shares subject to the award as if the applicable performance
criteria had been attained at a 100% level or, if greater, based on actual performance as of your Covered Termination.
Notwithstanding anything to the contrary set forth herein, your Equity Awards shall remain subject to the terms of the Equity
Plan (or other applicable Company plan) and award documents under which such Equity Award was granted, including any
provision for earlier termination of such Equity Awards.
(e)
Extension of Post-Termination Exercise Period. All outstanding Equity Awards which carry a right to
exercise that you hold as of the date of your Covered Termination will expire on the earlier of (A) the original term of such
outstanding Equity Awards as set forth in the applicable award agreement or the equity incentive plan, subject to earlier
termination in the event of a Change in Control as set forth in the terms of the applicable equity incentive plan
A-2
and definitive agreement for such Change in Control transaction, and (B) the date which occurs on the first anniversary of your
Covered Termination.
Section 3.
Non-Change in Control Severance Benefits. If you are terminated in a Covered Termination that occurs at a
time that is not during the Change in Control Period, you will receive:
(a)
the base salary cash payment described in Section 2(a) above, but the Severance Period for purposes of
calculating such benefits shall be ______ months; and
(b)
the COBRA benefits described in Section 2(c) above, but the Severance Period for purposes of calculating
such benefits shall be ______ months.
You shall not be eligible to receive any other benefits under the Plan except as described in Section 2(a) and Section 2(c) above,
as modified by the provisions of this Section 3.
For the avoidance of doubt, in no event shall you be entitled to benefits under both Section 2 and this Section 3. If you are
eligible for severance benefits under both Section 2 and this Section 3, you shall receive the benefits set forth in Section 2 and
such benefits shall be reduced by any benefits previously provided to you under Section 3.
Section 4.
Acknowledgements.
As a condition to participation in the Plan, you hereby acknowledge each of the following:
(a)
The benefits that may be provided to you under this Participation Agreement are subject to certain
reductions and termination under Section 2 and Section 3 of the Plan.
(b)
Your eligibility for and receipt of any severance benefits to which you may become entitled as described in
Section 2 or Section 3 above is expressly contingent upon your execution of and compliance with the terms and conditions of the
Plan, the Release and the Confidentiality Agreement. Severance benefits under this Participation Agreement shall immediately
cease in the event of your violation of the provisions of Confidentiality Agreement or any other written agreement with the
Company.
(c)
As further described in Section 2(c) of the Plan, this Participation Agreement and the Plan supersede and
replace any change in control or severance benefits previously provided to you, including but not limited to the benefits under the
PhaseBio Pharmaceuticals, Inc. Change in Control Severance Benefit Plan and by executing below you expressly agree to such
treatment.
To accept the terms of this Participation Agreement and participate in the Plan, please sign and date this Agreement in the space
provided below and return it to _____________________ no later than _________, ____.
A-3
PhaseBio Pharmaceuticals, Inc.
By:
_____________________
_____________________
Eligible Employee
[Insert Name]
Date:
A-4
Exhibit 10.25
AMENDMENT NO. 1
to
MASTER SERVICES AGREEMENT
This Amendment No. 1 to the Master Services Agreement (the “Amendment”) is made as of the date of last signature below (the
“Amendment Effective Date”), by and between PhaseBio Pharmaceuticals, Inc. (hereinafter “PhaseBio”) with a place of business at 1
Great Valley Parkway, Suite 30, Malvern, PA 19355, and BioVectra Inc., having a place of business located at 11 Aviation Avenue,
Charlottetown, PE C1E 0A1, Canada (hereinafter “Contractor”).
WHEREAS, PhaseBio and Contractor (each a “Party” and collectively the “Parties”) entered into that certain Master Services
Agreement effective as of November 14, 2018 (the “Agreement”), pursuant to which Contractor provides certain manufacturing Services
to PhaseBio; and
WHEREAS, the Parties desire to amend the Agreement to include additional Products.
NOW THEREFORE, in consideration of the promises and mutual covenants contained herein, the receipt and sufficiency of which are
hereby acknowledged, the Parties agree as follows:
1.
Section 1.16 “Product”, within Section 1. Definitions in the Agreement is hereby deleted and replaced in its entirety as follows:
“1.16 “Product” may include, but not be limited to PhaseBio’s drug candidates known as PB2452 (“PB2452”), PB6440 (“PB6440”)
and PB1046 (“PB1046”) or such other drug candidates as may be otherwise determined by PhaseBio.”
2.
Part (c) in Section 14.4 in the Agreement, is hereby amended as follows:
“(c) to PhaseBio's licensor of PB2452, PB6440 and PB1046 and such licensor's affiliated entities (collectively, "Licensor") in
the event of termination of the license granted by Licensor to PhaseBio.”
3.
In the event of any inconsistency or conflict of terms between the Agreement and this Amendment, the terms of the Amendment
shall control.
4.
Except as provided herein, all other terms and conditions of the Agreement shall remain in full force and effect.
5.
This Amendment may be executed in one or more counterparts, by signatures transmitted by electronic means, each of which shall
be deemed to be an original as against any party whose signature appears thereon, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the Amendment Effective Date:
PHASEBIO PHARMACEUTICALS, INC. BIOVECTRA INC.
By: /s/ Susan Arnold By: /s/ Valana Deighan
Name: Susan Arnold Name: Valana Deighan
Title: VP, CMC & Preclinical Title: General Counsel
Date: 11/18/2021 Date: 11/18/2021
Confidential 1
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statements (Nos. 333-227935, 333-230504, 333-237462, 333-254268, and 333-262185) on
Form S-8 and in the registration statement (No. 333-235735) on Form S-3 of our report dated March 24, 2022, with respect to the financial statements of
PhaseBio Pharmaceuticals, Inc.
/s/ KPMG LLP
Philadelphia, Pennsylvania
March 24, 2022
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jonathan P. Mow, certify that:
1.
I have reviewed this Annual Report on Form 10-K of PhaseBio Pharmaceuticals, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: March 24, 2022
By:
/s/ Jonathan P. Mow
Jonathan P. Mow
Chief Executive Officer
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John Sharp, certify that:
1.
I have reviewed this Annual Report on Form 10-K of PhaseBio Pharmaceuticals, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: March 24, 2022
By:
/s/ John P. Sharp
John P. Sharp
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of PhaseBio Pharmaceuticals, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2021 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934, as amended; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: March 24, 2022
By:
/s/ Jonathan P. Mow
Jonathan P. Mow
Chief Executive Officer
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section
18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or
after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has
been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of PhaseBio Pharmaceuticals, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2021 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934, as amended; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: March 24, 2022
By:
/s/ John Sharp
John Sharp
Chief Financial Officer
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section
18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or
after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has
been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.