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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2021
OR
For the transition period from to
Commission file number 001-38596
REPLIMUNE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
82-2082553
(I.R.S. Employer
Identification No.)
500 Unicorn Park Drive
rd
3 Floor
Woburn MA 01801
(Address of principal executive offices)
(Zip Code)
(781) 222-9600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.001 per share
Trading Symbol(s)
REPL
Name of each exchange on which registered
The Nasdaq Stock Market LLC (Nasdaq Global
Select Market)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $500.2 million, based on the closing price of
the registrant’s Common Stock on September 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter.
There were 46,608,958 shares of Common Stock outstanding as of May 17, 2021.
The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended March 31, 2021.
Portions of such definitive proxy statement are incorporated by reference into Part III of this Annual Report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
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REPLIMUNE GROUP, INC.
ANNUAL REPORT ON FORM 10-K
For the Year Ended March 31, 2021
Table of Contents
PART I
Item 1.
Item 1A.
Business
Risk factors
Item 1B.
Unresolved staff comments
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Properties
Legal proceedings
Mine safety disclosures
Market for registrant’s common equity, related stockholder matters and issuer
purchases of equity securities
Selected financial data
Management’s discussion and analysis of financial condition and results of
operations
Item 7A.
Quantitative and qualitative disclosures about market risk
Item 8.
Item 9.
Financial statements and supplementary data
Changes in and disagreements with accountants on accounting and financial
disclosures
Item 9A.
Controls and procedures
PART III
Item 10.
Directors, executive officers and corporate governance
Item 11.
Item 12.
Executive compensation
Security ownership of certain beneficial owners and management and related
stockholder matters
Item 13.
Certain relationships and related transactions, and director independence
Item 14.
Principal accountant fees and services
PART IV
Item 15.
Exhibits and financial statement schedules
Item 16.
10-K summary
SIGNATURES
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Special note regarding forward-looking statements
This Annual Report on Form 10-K contains forward-looking statements concerning our business,
operations and financial performance and condition, as well as our plans, objectives and expectations for
our business operations and financial performance and condition. Any statements contained herein that are
not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can
identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,”
“potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,”
“plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words.
Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or
will be important factors that could cause actual outcomes or results to differ materially from those
indicated in these statements. We believe these factors include, among other things:
•
the timing, progress, and results of preclinical studies and clinical trials for our product candidates,
including the timing of initiation and completion of studies or trials and related preparatory work and
the period during which the results of the trials will become available;
•
our ability to obtain additional funding as necessary;
•
the timing, scope or likelihood of regulatory filings and approvals, including timing of our Biologics
License Application, or BLA, and filing for, and final approval by the U.S. Food and Drug
Administration, or the FDA, of, RP1 or any of our other product candidates;
•
the timing, scope, or likelihood of foreign regulatory filings and approvals;
•
•
•
our ability to develop our product candidates for use in combination with other checkpoint blockade
therapies, including anti-PD-1;
our ability to develop and advance any future product candidates into, and successfully complete,
clinical trials;
our expectations regarding the size of the patient populations for RP1 and our other product
candidates if approved for commercial use;
•
the costs of operating our in-house manufacturing facility;
•
our estimates regarding expenses and capital requirements;
•
the implementation of our business model and our strategic plans for our business, RP1 and our other
product candidates;
•
the rate and degree of market acceptance and clinical utility of RP1 and our other product candidates;
•
•
•
the potential benefits of and our ability to establish or maintain future collaborations or strategic
relationships;
our ability to retain the continued service of our key professionals and to identify, hire and retain
additional qualified professionals;
our intellectual property position, including the scope of protection we are able to establish and
maintain for intellectual property rights covering RP1 and our other product candidates, claims
others may make regarding rights in our intellectual property, and any potential infringement,
misappropriation or other violation of any third-party intellectual property rights;
•
our competitive position, and developments and projections relating to our competitors and our
industry;
•
negative developments in the field of immuno-oncology;
•
the impact of laws and regulations;
•
the impact of the COVID-19 coronavirus, or COVID-19, as a global pandemic and related public
health issues;
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•
our expectations regarding the time during which we will be an emerging growth company under the
Jumpstart Our Business Startups Act of 2012; and
•
the other risks and uncertainties described under “Risk factors.”
The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of
the date on which the statements are made. These factors should not be construed as exhaustive and should
be read in conjunction with the other cautionary statements that are included in this Annual Report on Form
10-K. Moreover, we operate in a competitive and rapidly changing environment. New risks and
uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that
could have an impact on the forward-looking statements contained in this Annual Report on Form 10-K. We
undertake no obligation to publicly update or review any forward-looking statement, whether as a result of
new information, future developments or otherwise, except to the extent required by applicable law. You
should not rely on forward-looking statements as predictions of future events. We may not actually achieve
the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place
undue reliance on our forward-looking statements.
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Item 1.
Business
Overview
PART I
We are a clinical-stage biotechnology company committed to applying our leading expertise in the field
of oncolytic immunotherapy to transform the lives of cancer patients. We use our proprietary Immulytic
platform to design and develop product candidates that are intended to maximally activate the immune
system against cancer.
Oncolytic immunotherapy is an emerging drug class, which we intend to establish as the second
cornerstone of immune-based cancer treatments, alongside checkpoint blockade. Oncolytic immunotherapy
exploits the ability of certain viruses to selectively replicate in and directly kill tumors, as well as induce a
potent, patient-specific, anti-tumor immune response. Our product candidates incorporate multiple
mechanisms of action into a practical “off-the-shelf” approach that is intended to maximize the immune
response against a patient’s cancer and to offer significant advantages over personalized vaccine
approaches. We believe that the bundling of multiple approaches for the treatment of cancer into single
therapies will simplify the development path of our product candidates, while also improving patient
outcomes at a lower cost to the healthcare system than the use of multiple different drugs.
The foundation of our Immulytic platform consists of a proprietary, engineered strain of herpes simplex
virus 1, or HSV-1, that has been “armed” with a fusogenic glycoprotein intended to substantially increase
anti-tumor activity. Our Immulytic platform enables us to incorporate various genes into HSV-1 that are
intended to further augment the inherent properties of HSV-1 in order to both directly destroy tumor cells
and induce an anti-tumor immune response. We currently have three product candidates in our development
pipeline: RP1, our lead product candidate, RP2 and RP3.
We are conducting a number of clinical trials of RP1, both as a monotherapy and in combination with
anti-PD-1 therapy, with a focus on immune-responsive tumors. We are actively enrolling patients in a
randomized, controlled Phase 2 clinical trial of RP1 with cutaneous squamous cell carcinoma, or CSCC,
RP1’s lead indication, or CERPASS or the CERPASS trial, in agreement with our partner Regeneron
Pharmaceuticals, Inc., or Regeneron. CERPASS is a registration-directed clinical trial evaluating RP1 in
combination with cemiplimab, an anti-PD-1 therapy developed by Regeneron, versus cemiplimab alone.
CERPASS is currently being amended, in agreement with Regeneron, to include two independent primary
endpoints, complete response (CR) rate and overall response rate (ORR), rather than only ORR, and to
reduce the sample size from 240 to 180 patients. Regeneron has granted to us a non-exclusive royalty-free
license to cemiplimab for use in this trial, is funding one-half of the clinical trial costs, and is supplying
cemiplimab at no cost. If the CERPASS trial generates compelling clinical data demonstrating the benefits
of the combined treatment, we believe the data could support a filing with regulatory authorities seeking
marketing approval. We expect the primary data read-out from this Phase 2 CERPASS trial in 2022.
We continue our collaboration with Bristol-Myers Squibb Company, or BMS, under which it has
granted us a non-exclusive, royalty-free license to, and is supplying at no cost, its anti-PD-1 therapy,
nivolumab, for use in combination with RP1 in a multi-cohort Phase 1/2 clinical trial, or IGNYTE or the
IGNYTE trial. This trial includes a registration directed Phase 2 expansion cohort enrolling 125 patients
with anti-PD-1 failed cutaneous melanoma who are being treated with RP1 in combination with nivolumab.
We initiated this cohort after completing enrollment in a prior Phase 2 cohort in the same clinical trial of
approximately 30 patients with melanoma, which demonstrated the safety and clinical activity of the
combination of RP1 and nivolumab in patients with melanoma who failed prior anti-PD-1 when given alone
or in combination with CTLA-4 blockade. In March 2021 we held a Type B meeting with the FDA to
discuss the design of this cohort in the IGNYTE trial. In this meeting, the FDA expressed that while a
randomized controlled clinical trial would always be preferred for registration purpose, that in this patient
population with no clear standard of care, if the clinical data is sufficiently compelling then the data could
be considered for submission by the FDA under the accelerated approval pathway. The FDA also indicated
that a randomized confirmatory trial would also be needed as is required under the accelerated approval
pathway. The design of the confirmatory trial is intended to be discussed with the FDA prior to a BLA
submission. In connection with a presentation at the Society for Immunotherapy of Cancer, or SITC, in
October 2020 we announced updated clinical
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data from our multi-cohort Phase 1/2 clinical trial evaluating RP1 in combination with nivolumab in
patients with melanoma and non-melanoma skin cancers. As reported, RP1 in combination with nivolumab
has continued to be well tolerated, and we believe demonstrates continued promising anti-tumor activity in
patients with skin cancers, including in patients with anti-PD-1 failed melanoma, and in patients with
CSCC. We expect that the primary data read-out from the registration directed Phase 2 melanoma cohort
will be in 2022.
We continue to enroll patients in other IGNYTE Phase 2 cohorts under our collaboration with BMS in
which we are evaluating RP1 in combination with nivolumab. Currently, enrollment is ongoing in a 45
patient cohort with non-melanoma skin cancer (including the recent addition of 15 patients who have failed
prior anti-PD-1 therapy), a 15 patient cohort with microsatellite instability high, or (MSI-H)/dMMR,
tumors, and a 30 patient cohort with anti-PD(L)-1 failed non-small cell lung cancer, or NSCLC. We recently
began dosing a patient in the NSCLC cohort. Due in part to COVID-19 related disruptions, we now expect
the original 30 patient non-melanoma skin cancer cohort to be fully accrued by mid-2021. We continue to
accumulate data in the MSI-H/dMMR cohort and expect to decide whether to pursue MSI-H/dMMR tumors
into registration-directed development by the end of 2021.
We have also opened for enrollment a Phase 1b clinical trial of single agent RP1 in solid organ
transplant recipients with CSCC, or ARTACUS or the ARTACUS trial, which we believe to be potentially
registrational (in its own right or, subject to discussion with regulatory authorities, following enrollment of
additional patients). We are currently enrolling patients in the ARTACUS trial to assess the safety and
efficacy of RP1 in liver and kidney transplant recipients with recurrent CSCC and are currently targeting
about 30 patients for this trial. Enrollment in this clinical trial has been impacted by COVID-19, as the
patient population is severely immune-compromised and considered very high risk. Nevertheless, we have
begun dosing patients and expect to present initial data from this clinical trial in the second half of the year.
We are also developing additional product candidates, RP2 and RP3, that have been further engineered
to enhance anti-tumor immune responses and are intended to address additional tumor types, including
traditionally less immune responsive tumor types. In addition to the expression of GALV-GP R(-) and
human GM-CSF as in RP1, RP2 has been engineered to express an antibody-like molecule intended to block
the activity of CTLA-4, a protein that inhibits the full activation of an immune response, including to
tumors. RP3, on the other hand, does not include the expression of GM-CSF but has been engineered with
the intent to further stimulate an anti-tumor immune response through activation of immune co-stimulatory
pathways through expression of the ligands for CD40 and 4-1BBL, as well as anti-CTLA-4 and GALV-GP
R(-).
We initiated a Phase 1 clinical trial of RP2 alone and in combination with nivolumab in the second half
of 2019. This clinical trial is also being conducted as part of our collaboration with BMS, under which BMS
has granted us a non-exclusive, royalty-free license to, and will supply at no cost, nivolumab, for use in
combination with RP2. We and BMS agreed to increase the number of patients in the combination part of
this clinical trial from 12 to 30 patients. In October 2020, we presented positive data from the single agent
RP2 portion of this clinical trial that showed deep and durable responses, including demonstration of tumor
response in uninjected lesions and in patients with difficult to treat advanced cancers. This data supports the
hypothesis that anti-CTLA-4 delivered intra-tumorally through oncolytic virus replication, with
accompanying antigen release and presentation, can provide potent anti-tumor effects. Following the
monotherapy phase of this clinical trial with RP2, enrollment in the expansion phase using RP2 in
combination with nivolumab is currently underway and we expect to present initial data in mid-2021.
We have obtained clearance from the Medicines and Healthcare Products Regulatory Agency in the
United Kingdom to enter clinical development with RP3 and in December 2020 we initiated dosing in this
clinical trial. This Phase 1 clinical trial is designed to evaluate RP3 alone and combined with anti-PD-1
therapy in advanced solid tumor patients. Initial data from this trial is expected to be presented in the second
half of 2021.
RP1, RP2 and RP3 are administered by direct injection into solid tumors, guided either visually or by
ultrasound, computerized tomography, or CT, or other imaging methods. We believe that direct injection
maximizes virus-mediated tumor cell death, provides the most efficient delivery of virus-encoded immune
activating proteins into the tumor with the goal of activating systemic immunity, and limits the systemic
toxicities that could be associated with intravenous administration. Activation of systemic immunity
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through local administration is intended to lead to the induction of anti-tumor immune responses leading to
clinical response of tumors that have not themselves been injected.
Our approach — Oncolytic immunotherapy
Our product candidates are designed to induce a robust immune response against a patient’s cancer and
turn immunologically “cold” tumors “hot.” To achieve this objective, we use oncolytic immunotherapies
that combine multiple mechanisms of action in a single product candidate. We believe our product
candidates will initiate or enhance an immune response in patients with no or minimal pre-existing cancer
immunity, including to tumor neo-antigens, and thereby increase the effectiveness of immune checkpoint
blockade therapies.
Our product candidates are intended to act at several key points in the pathways involved in the
initiation of an immune response. Following direct injection into tumors, our viruses replicate in cancer
cells and then lyse, or break them open, releasing tumor antigens, including neo-antigens specific to the
patient, which could otherwise be hidden from the immune system. This process of necrotic cell death
releases intra-cellular markers of “danger,” the danger associated molecular patterns, or DAMPs, while the
virus produces pathogen associated markers of danger, or PAMPs. These trigger various pathways of the
innate immune system, including the STING pathway and pathways mediated through toll-like receptors, or
TLRs, each resulting in the production of interferon. Innate immune activation would be expected to itself
provide anti-tumor effects, as interferon activates natural killer cells which can destroy tumor cells. Innate
immune activation would also be expected to help trigger adaptive anti-cancer immunity, in which antigen
presenting cells, or APCs, are attracted to the injected tumor. APCs internalize cancer antigens, including
neo-antigens, and traffic back to the draining lymph nodes where they present the antigens to T cells.
Primed with the antigens, these T cells then proliferate and disperse systemically to seek and destroy cancer
cells with the same antigen profile throughout the body, resulting in the potential destruction of distant
tumor deposits.
To further augment these intended effects, our product candidates are intended to genetically encode
and express multiple potent, cell-killing and immune-stimulating proteins in the tumor — in other words,
our product candidates are “armed” with these therapeutic genes.
We believe that our ability to incorporate multiple mechanisms of action into a practical “off-the-shelf”
approach to initiating or enhancing an anti-tumor immune response, including to neo-antigens, will offer
significant advantages over the various approaches to immune activation that are currently in development,
including personalized vaccine treatments. Tumor neo-antigens are uniquely present in tumors, rather than
normal tissue, because they result from the genetic changes that occur as cancer develops. Unlike the
antigens present in normal tissue, the immune system identifies neo-antigens as foreign. As a result, the
immune system is able to mount an immune response to tumor neo-antigens in the same way that it would to
the antigens contained in disease-causing micro-organisms, which the immune system also identifies as
foreign. Researchers believe immune responses to tumor neo-antigens are particularly important in the
immune system’s ability to combat cancer, and as a consequence various “personalized vaccine” approaches
to generating immune responses to tumor neo-antigens are in development. These approaches are generally
both expensive and time consuming because a vaccine cannot be designed and manufactured until a tumor
biopsy is taken and analyzed in the laboratory to identify the mutated tumor antigens that will be targeted by
the treatment. We also believe that our “off-the-shelf” approach may offer significant advantages over other
approaches to anti-cancer immune activation that only target a single pathway of the immune system, as is
the case with most of the other immuno-oncology therapies currently under development. Importantly, our
product candidates are intended to maximally activate an immune response against cancer, which we believe
is the missing element needed to allow anti-PD-1 or anti-PD-L1 therapy to treat more patients and tumor
types, unlike some other therapies that are intended to act by blocking additional defense mechanisms
against an anti-tumor immune response once it has been initiated.
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Our Immulytic platform and product candidates
Our current product candidate pipeline is summarized in the table below:
The foundation of our oncolytic immunotherapy product candidates, which we call our Immulytic
platform, consists of a proprietary strain of HSV-1 that we have engineered to replicate selectively in tumors
and to express a fusogenic glycoprotein, a protein that triggers the fusion of the membranes between cells.
HSV-1 is both highly cell lytic and inflammatory, and also has a large carrying capacity, which makes it
possible to incorporate multiple genes encoding therapeutic proteins. We believe our combination of HSV-1
with the expression of the fusogenic glycoprotein increases the natural ability of HSV-1 to kill tumor cells
and to induce an anti-tumor immune response. The fusogenic functionality of our product candidates is
intended not only to increase the number of tumor cells that are killed, but also to cause highly
immunogenic death of tumor cells. We believe that these factors will increase the potency of the systemic
anti-tumor immune response that is generated by our product candidates. With the intention of further
amplifying the anti-tumor response, we have also engineered product candidates that express a range of
additional potent, immune activating genes encoding therapeutic proteins in tumors.
Our lead product candidate, RP1, serves as the base from which our additional product candidates, RP2
and RP3, are being developed to express additional therapeutic proteins. We believe that our sequential
development approach of further enhancing our product candidates with additional therapeutic proteins
reduces clinical risk, as we are able to study the safety profile of each therapeutic protein prior to moving to
the next product candidate with an additional therapeutic protein that is intended to provide more potent
anti-tumor immune effects.
Lead product candidate: RP1
Our lead product candidate, RP1, is a selectively replicating version of HSV-1 that expresses GALV-GP
R(-) and human GM-CSF. RP1 has the following properties:
•
we have deleted the ICP34.5-encoding gene, which enables tumor-selective virus replication;
•
we have deleted the ICP47-encoding gene, which is intended to prevent the inhibition of the antigen
presentation pathway otherwise caused by ICP47 binding to the transporter associated with antigen
presentation. ICP47 deletion is also intended to result in the increased and earlier expression of the
HSV-1 US11 gene by placing the HSV-1 US11 gene under the control of ICP47 promoter which we
believe will increase virus replication in tumors without reducing tumor-selectivity; and
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•
we have inserted the sequences for GALV-GP R(-) and human GM-CSF, resulting in the expression
of these therapeutic proteins with the intention of increasing both the direct tumor cell killing and the
potency of the anti-tumor immune response that is induced.
We have developed RP1 as a monotherapy and for use in combination with immune checkpoint
blockade therapy, particularly therapies targeting PD-1 or PD-L1. We believe that the robust release of
tumor antigens and the highly immunogenic tumor cell death intended to be caused by RP1 will further
increase the previously observed synergy between oncolytic viruses and immune checkpoint blockade
therapy.
Clinical Trials in RP1
We are currently conducting the CERPASS trial, which is a randomized, controlled Phase 2 clinical
trial testing RP1 in combination with cemiplimab versus cemiplimab alone in patients with CSCC. The
CERPASS trial is being conducted under a collaboration agreement with Regeneron, pursuant to which
Regeneron has granted us a non-exclusive, royalty-free license to cemiplimab for use in the clinical trial and
is funding one-half of the clinical trial costs and supplying cemiplimab at no cost. The CERPASS trial is
also currently being amended, in agreement with Regeneron, to include two independent primary endpoints,
complete response (CR) rate and overall response rate (ORR), rather than only ORR, and to reduce the
sample size from 240 to 180 patients. In addition to our clinical trial sites in Australia and the United States,
we have opened or are in the process of opening clinical trial sites in five European countries and Canada. If
compelling clinical data are generated demonstrating the benefits of the combination treatment in this
clinical trial, we believe the data from the CERPASS Phase 2 trial could support a filing with regulatory
authorities for marketing approval. We expect the primary data readout from the CERPASS trial in 2022.
We are further conducting the IGNYTE trial, which is a multi-cohort Phase 1/2 clinical trial of RP1 in
collaboration with BMS. Pursuant to our collaboration, BMS has granted us a non-exclusive, royalty-free
license to, and is supplying at no cost, nivolumab, for use in combination with RP1 in the IGNYTE trial. We
have completed enrollment of the Phase 1 part of the IGNYTE trial, in which we enrolled 36 patients with
advanced heavily pre-treated cancers who failed available therapies. Based on the data, which we believe
showed a favorable safety profile for both RP1 alone and in combination with nivolumab, the RP1 dosing
regimen moved forward into Phase 2 development with an initial dose of up to 10mL of 1x10 pfu/ml
7
followed by subsequent doses of up to 10mL of 1x10 pfu/ml. In the combination portion of the Phase 1 part
of the IGNYTE trial, anti-tumor activity was demonstrated in multiple patients with a variety of solid tumor
types, particularly in CSCC and melanoma. Of particular note, substantial tumor reduction was observed in
a number of patients after just the first dose of RP1, but before the introduction of nivolumab two weeks
later and responses were seen in injected and uninjected tumors. Biomarker data further confirmed the
mechanism of action of RP1 alone and in combination with nivolumab, suggesting that RP1 provides broad
anti-tumor immune activation. Increases in CD8 T Cells and PD-L1 were seen in serial tumor biopsies
across tumor types, suggesting that the kinetics of virus detection is indicative of robust virus replication in
tumors occurs.
6
The Phase 2 part of this clinical trial was originally designed to assess the safety and efficacy of RP1 in
combination with nivolumab in four 30 patient cohorts. Those currently include cohorts of patients with
melanoma, non-melanoma skin cancers, non-small cell lung cancer and MSI-H/dMMR tumors. We have
completed enrollment in the Phase 2 part of the IGNYTE trial in the cohort of 30 patients with melanoma.
As a result of what we believe to be encouraging clinical data in this patient group with RP1 combined with
nivolumab, we are enrolling a cohort of 125 patients with anti-PD-1 failed melanoma. In March 2021 we
held a Type B meeting with the FDA to discuss the design of this cohort in the IGNYTE trial. In this
meeting, the FDA expressed that while a randomized controlled clinical trial would always be preferred for
registration purpose, that in this patient population with no clear standard of care, if the clinical data is
sufficiently compelling then the data could be considered for submission by the FDA under the accelerated
approval pathway. The FDA also indicated that a randomized confirmatory trial would also be needed as is
required under the accelerated approval pathway. The design of the confirmatory trial is intended to be
discussed with the FDA prior to a BLA submission. We are continuing to enroll cohorts of approximately 30
patients with non-melanoma skin cancers and MSI-H/dMMR tumors, although enrollment has slowed due in
part to the COVID-19 pandemic. We recently began dosing a patient in the non-small cell lung cancer
cohort. We expect that the primary data read-out from the IGNYTE Phase 2 melanoma cohort will be in
2022.
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As reported in connection with SITC in October 2020, we had enrolled 36 melanoma and 20 non-
7
melanoma skin cancer patients in the IGNYTE Phase 2 trial, 18 of whom were evaluable for efficacy. In
order to be evaluable for efficacy in this clinical trial, a patient must have had at least one follow up scan or
disease progression before the first follow up scan. Patients received up to eight doses of RP1 (up to 10 mL
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per visit once every two weeks, with a first dose of 10 PFU/mL followed by 10 PFU/mL) and nivolumab
(240mg once every two weeks for four months followed by 480mg once every four weeks for up to
two years) from the second RP1 dose. Of the 36 melanoma patients, 16 cutaneous melanoma patients had
previously received anti-PD-1 (eight of whom had also previously received anti-CTLA-4), eight cutaneous
melanoma patients were naïve to anti-PD-1 therapy, six patients had mucosal melanoma, and six patients
had uveal melanoma. At the data cut-off date, five patients with cutaneous melanoma who had received
prior anti-PD-1 therapy had responses (four partial responses and one complete response), four of whom
also received prior anti-CTLA-4 therapy. An additional patient was classified as a surgical complete
response and one patient remained on study with stable disease, having neither progressed nor met the
formal definition for response. Further, four patients (two complete responses and two partial responses)
with anti-PD-1 naïve cutaneous melanoma and two patients with mucosal melanoma (one of whom had
prior anti-PD-1 therapy and achieved a complete response) had achieved responses. Of the 18 non-
melanoma skin cancer patients evaluable for efficacy, 11 patients had CSCC, three had basal cell carcinoma,
one had Merkel cell carcinoma, and three had angiosarcoma. At the data cut-off date, two patients with
angiosarcoma had achieved response and eight patients with CSCC had achieved response, with five CSCC
patients having achieved a complete response. An additional CSCC patient had stable disease at the time of
the patient’s first scan with treatment continuing. Also as reported in connection with SITC in
October 2020, across all cohorts all responses were ongoing out to approximately 20 months from the start
of treatment with the exception of one CSCC patient and one anti-PD-1 refractory melanoma patient.
Follow-up data for one responding angiosarcoma patient who stopped nivolumab therapy due to nivolumab
side effects had currently not been obtained, and continuing response status was unknown. Adverse events
remained consistent with those observed during the IGNYTE Phase 1 trial, with RP1 side effects generally
of Grade 1 or 2 constitutional-type symptoms with less frequent Grade 3 side effects and no exacerbation of
the side effects expected for nivolumab alone. Tumor biopsies in patients had continued routinely to show
immune activation, including robust recruitment of CD8+ T cells, reversal of T cell exclusion, and increased
PD-L1 expression.
We believe this data, while in a small number of patients, differentiates the combination data of RP1
and anti-PD-1 therapy versus what would be expected for anti-PD-1 therapy alone and for which complete
responses are relatively infrequent.
We have also opened the ARTACUS trial for enrollment. The ARTACUS trial is a Phase 1b clinical
trial of single agent RP1 in solid organ transplant recipients with CSCC, which we believe to be potentially
registrational (in its own right or, subject to discussion with regulatory authorities, following enrollment of
additional patients). We are currently enrolling patients in the ARTACUS trial to assess the safety and
efficacy of RP1 in liver and kidney transplant recipients with recurrent CSCC and are currently targeting
about 30 patients for this trial. Enrollment in this clinical trial has been impacted by COVID-19, as the
patient population is severely immune-compromised and considered very high risk. Nevertheless, we have
begun dosing patients in the ARTACUS trial and expect to present initial data from this clinical trial in the
second half of the year.
Pipeline product candidate: RP2
We have designed our RP2 product candidate to express an anti-CTLA-4 antibody-like protein intended
to block the inhibition of the immune response otherwise caused by CTLA-4. We believe that RP2 may
offer advantages compared with current CTLA-4 approaches, including ipilimumab. By expressing anti-
CTLA-4 only locally in the tumor and draining lymph nodes, we believe that activity will be retained, but
that toxicity will be reduced. We intend that our RP2 product candidate will be used in combination with
anti-PD-1 therapy, which we believe will result in both synergy with the oncolytic virus and the expression
of anti-CTLA-4 in the tumor.
The Phase 1 clinical trial of RP2 is also being conducted as a collaboration with BMS, under which
BMS has granted us a non-exclusive, royalty-free license to, and will supply at no cost, nivolumab, for use
in combination with RP2. During October 2020 we announced initial single-agent RP2 data from our
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Phase 1 clinical trial of RP2 alone in patients with solid tumors. In this Phase 1 clinical trial, we are
assessing initial tolerability of RP2 in solid tumors and determining the recommended Phase 2 dose of RP2
to be administered alone and then evaluating in combination with nivolumab. We believe these initial
Phase 1 clinical data support the safety and efficacy of single-agent RP2, including demonstrating responses
in injected and uninjected tumors in patients with difficult to treat, heavily pre-treated and immune
insensitive advanced cancers. In addition, we believe these data support our hypothesis that anti-CTLA-4
expressed from RP2 and combined with oncolytic virus replication, with accompanying antigen release and
presentation, can induce potent anti-tumor immune responses.
5
In the dose-escalation portion of this clinical trial, patients were treated with single-agent RP2 using a
3+3 dose escalation at two dose levels of up to 10 mL of RP2 once every two weeks, up to five times. The
first dose level was 10 PFU/mL for the initial dose followed by four doses of 10 PFU/mL, and the second
dose level was 10 PFU/mL for the initial dose followed by four doses of 10 PFU/mL. Lesions were
directly injected or by using imaging guidance for deep seated, visceral lesions and tumor biopsies were
obtained for biomarker analysis. Viral shedding and anti-HSV-1 antibody titers were also monitored. As the
first six patients were all HSV seropositive per the protocol, an additional three HSV seronegative patients
were enrolled as per the protocol.
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6
As reported in October 2020, in connection with SITC, nine patients had been enrolled in the dose-
escalation portion of this clinical trial and received single agent RP2. Of the nine patients treated with single
agent RP2, three had ongoing responses at between 8 to 11 months from the start of treatment (one complete
response and two partial responses) and a further patient remained on study with the response status
continuing to be monitored. The objective responses were observed in patients with uveal melanoma,
mucoepidermoid carcinoma of the parotid, and esophageal cancer. A further patient with micro satellite
stable (immune intensive) colorectal cancer remained on study and the response status continued to be
monitored. The other five patients enrolled into the clinical trial were no longer being followed due to
progressive disease. Adverse events were primarily Grade 1 or 2, including febrile and other constitutional
symptoms, local inflammation, and erythema, with rarer Grade 3 side effects being observed. There were no
dose-limiting toxicities requiring dose level expansion. The recommended Phase 2 dose was selected as up
to 10 mL of 10 PFU/mL followed once every two weeks by multiple doses of 10 PFU/mL.
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We are currently enrolling in a combination cohort with nivolumab of up to 30 patients to be dosed up
to eight times at the Phase 2 dose level of RP2 in combination with nivolumab from the second RP2 dose
(240mg once every two weeks for four months from the second RP2 dose, followed by 480mg once every
four weeks for 20 months). As reported in October 2020, ten patients had been enrolled with no dose
limiting toxicities, with none having yet been evaluated for efficacy. Initial data for this combination cohort
is intended to be presented mid-2021.
Pipeline product candidate: RP3
We have designed our RP3 product candidate to express immune-activating proteins that stimulate
T cells, in addition to anti-CTLA-4 and GALV-GP R(-). These immune activating proteins are the ligands
for two immune co-stimulatory pathways responsible for T cell proliferation and/or activation, the CD40L
and 4-1BBL pathways. We have obtained clearance from the Medicines and Healthcare Products Regulatory
Agency in the United Kingdom to enter clinical development with RP3 and in December 2020 we initiated
dosing in this clinical trial. This Phase 1 clinical trial is designed to evaluate RP3 alone and combined with
anti-PD-1 therapy in advanced solid tumor patients. Initial data from this trial is expected to be presented in
the second half of 2021.
Intellectual property
We believe our rights under issued patents, if obtained, and patent applications will provide a
competitive advantage. Our success depends in part on our ability to obtain and maintain proprietary
protection for our product candidates, technology and know-how, to operate without infringing the
proprietary rights of others and to prevent others from infringing upon our proprietary rights. Our policy is
to seek to protect our proprietary position by, among other methods, filing United States and foreign patent
applications related to our proprietary technology, inventions and improvements that are important to the
development of our
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business. We also rely on trade secrets, know-how and continuing technological innovation to develop and
maintain our proprietary position.
For the core technology in our Immulytic platform and each of our product candidates, we have filed
six patent applications under the Patent Cooperation Treaty, or PCT. All six of these PCT applications have
entered the national phase and are pending in a range of countries. Examination has started in connection
with some of the national phase applications. Four US patents have been granted by the applicable
authorities in the US. Three European patents have been granted by the applicable authorities in the
European Union and two patents have been granted by the applicable authorities in Hong Kong and a notice
of allowance has been issued on one Israeli patent application. The granted US patents include US patent
numbers 10,570,377; 10,612,005; 10,626,377; and 10,947,513 and include description and claims directed
to oncolytic virus compositions of matter, pharmaceutical compositions encompassing an oncolytic virus
and methods of use in treating cancer with oncolytic virus compositions. We continue to vigorously pursue
advancement of our patent applications through examination in the respective patent offices in which they
are pending throughout the world.
The term of individual patents depends upon the legal term of the patents in the countries in which they
are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a
non-provisional patent application. In the United States, the patent term of a patent that covers an FDA-
approved drug may also be eligible for patent term extension, which permits patent term restoration of a
portion of the patent term lost during the U.S. clinical development and FDA regulatory review process. The
Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration of the patent.
The length of the patent term extension is related to the length of time the drug is under clinical
development in the United States and the length of time the drug is under regulatory review. Patent term
extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product
approval and only one patent applicable to an approved drug may be extended. Similar provisions are
available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved
drug. In the future, if and when our products receive FDA approval, and if and when patents grant, we
expect to apply for patent term extensions on patents covering those products. We plan to seek patent term
extensions to any of our issued patents in any jurisdiction where these are available, however there is no
guarantee that the applicable authorities, including the FDA in the United States, will agree with our
assessment of whether such extensions should be granted, and if granted, the length of such extensions.
We may rely, in some circumstances, on trade secrets to protect our technology. We seek to protect our
proprietary technology and processes, in part, by confidentiality agreements with our employees,
consultants, scientific advisors and other contractors, as well as physical security of our premises and our
information technology systems.
Competition
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies,
intense competition and a strong emphasis on proprietary rights. We compete in the highly competitive
markets that address cancer and face significant competition from many sources, including pharmaceutical,
biopharmaceutical and biotechnology companies, as well as universities and private and public research
institutions. Many of our competitors have significantly greater financial, manufacturing, marketing and
drug development resources than we do. Large biopharmaceutical companies in particular have extensive
experience in clinical testing and in obtaining regulatory approvals for drugs and biologicals. These
companies also have significantly greater research capabilities than we do. Smaller or early-stage companies
may also prove to be significant competitors, particularly through collaborative arrangements with large and
established companies or universities and research institutions.
Our competitors fall primarily into the following groups of treatment:
•
traditional cancer therapies, including chemotherapy, surgery, radiation and targeted therapies;
•
approved immunotherapy antibodies and immunotherapy antibodies in clinical trials;
•
oncolytic immunotherapies, including T-Vec and other oncolytic immunotherapies in clinical trials;
•
therapies aimed at activating innate immunity such as those targeting STING and TLRs;
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cancer vaccines including personalized vaccines and those targeting tumor neo-antigens; and
•
cell-based therapies, such as CAR-T, T cell receptor-based, and NK cell therapies.
Our commercial opportunity will be reduced or eliminated if our competitors develop and
commercialize products that are safer, more effective, have fewer side effects, are easier to administer or are
less expensive alone or in combination with other therapies than any products that we may develop alone or
in combination with other therapies, especially if these get to market sooner than our products. These third
parties also compete with us in recruiting and retaining qualified scientific and management personnel,
establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies
and technology licenses complementary to our programs or advantageous to our business.
Our oncolytic product candidates, if and when marketed, will compete with a number of drugs that are
currently marketed or in development that also target cancer but that utilize a different mechanism of action.
To compete effectively with these agents, our product candidates will need to demonstrate advantages that
lead to improved clinical efficacy and safety compared with these competitors. At the same time, however,
we believe that our oncolytic product candidates, if and when ultimately marketed, would likely be used
principally in combination with checkpoint blockade therapies in addition to existing cancer therapies,
including surgery, chemotherapy, radiation therapy and other biological therapies such as antibodies
targeting particular surface receptors. We therefore believe that our product candidates, if and when
marketed, would largely complement rather than compete directly with these existing treatment options.
We do, however, expect to face direct and increasing competition from a number of companies that are
also seeking to develop cancer therapies based on oncolytic viruses and other ways to prime the immune
system, including neo-antigen vaccination. We believe that our ability to successfully compete will depend,
among other things, on our ability to:
•
expeditiously advance the development of our product candidates;
•
design, enroll patients in and successfully complete appropriate clinical trials in a timely fashion;
•
•
•
gain regulatory approval for our product candidates in their first indications as well as further
indications;
establish collaborations and partnerships for the development and marketing of our product
candidates;
commercialize our product candidates successfully, including convincing physicians, insurers and
third-party payors of the safety and efficacy of our product candidates over currently approved
therapies;
•
secure and protect intellectual property rights based on our innovations; and
•
manufacture or otherwise obtain and sell commercial quantities of future products to the market.
Manufacturing and suppliers
We have established an operations leadership team with extensive experience in manufacturing
biologics based on viruses, including oncolytic products and gene therapy products, and in the construction,
validation, approval and operation of facilities designed to manufacture biologics. Our team has already
developed a robust and reproducible manufacturing process for our product candidates. We are also
developing our product candidates for maximum practicality of use compared with some other oncolytic
immunotherapies; in particular, our product candidates do not require refrigeration at –70 Celsius at
clinical sites.
0
To date, our third-party contract manufacturer in Europe has been responsible for sourcing raw
materials for use in the manufacture, in accordance with cGMP, of our product candidates for use in our
planned early clinical trials. We currently use fetal bovine sera, a commonly used growth supplement, in the
initial growth of the mammalian cells used in the production of our viral product candidates and a
recombinant human protein to increase the stability of our drug formulation. We are in the process of
developing our raw material supply chain for our product candidates as part of the process of establishing
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our own manufacturing facility and intend to enter into commercial supply, collaboration or similar
agreements prior to conducting advanced clinical trials.
Our approximately 63,000 square foot manufacturing facility in Framingham, Massachusetts is now
fully operational. We plan to operate this in-house manufacturing facility in order to secure supplies for
pivotal studies and commercial launch. The facility has been designed to allow us to produce enough
material to cover full global commercialization of all our current product candidates. The facility is intended
to give us control over key aspects of the supply chain for our products and product candidates.
By establishing our own manufacturing facility, we aim to minimize or eliminate our reliance on
contract manufacturing organizations, which typically have limited capacity at commercial scale and
quality. We believe that having control over the whole manufacturing process will allow us to reduce cycle
times and cost of goods for commercial production and to shorten overall timelines for new product
candidates in our development pipeline, as well as help us to develop drug formulations or presentations to
simplify distribution and/or administration of future oncolytic immunotherapies. We also believe that having
a dedicated manufacturing facility will allow us to optimize commercial-scale processes and to develop a
suitable workforce capable of supporting market launch.
Sales and marketing
None of our product candidates have been approved for sale. If and when our product candidates
receive marketing approval, we intend to commercialize them on our own in the United States and
potentially with pharmaceutical or biotechnology partners in other geographies. We currently have no sales,
marketing or commercialization capabilities and have no experience as a company doing such activities.
However, on April 20, 2020, we announced the strengthening of our executive team with the appointment of
Sushil Patel, Ph.D. as our Chief Commercial Officer effective May 3, 2021 and we intend to further build
the necessary capabilities and infrastructure over time following the advancement of our product candidates.
Clinical data, the size of the opportunity and the size of the commercial infrastructure required will
influence our commercialization plans and decision making.
Collaborations
BMS
In 2018, we entered into a Clinical Trial Collaboration and Supply Agreement with Bristol-Myers
Squibb Company, or BMS. Pursuant to the agreement, BMS is providing to us, at no cost, nivolumab, its
anti-PD-1 therapy, for use in combination with RP1 in our ongoing IGNYTE Phase 1/2 trial. Under the
agreement, we will sponsor, fund and conduct the clinical trial in accordance with an agreed-upon protocol.
BMS granted us a non-exclusive, non-transferrable, royalty-free license (with a right to sublicense) under its
intellectual property to use nivolumab in the IGNYTE trial and has agreed to supply nivolumab, at no cost
to us, for use in the clinical trial. Both parties will own the study data produced in the clinical trial, other
than study data related solely to nivolumab, which will belong solely to BMS, or study data related solely to
RP1, which will belong solely to us. In January 2020, this agreement was expanded to cover an additional
cohort of 125 patients with anti-PD-1 failed melanoma.
Unless earlier terminated, the agreement will remain in effect until (i) the completion of the clinical
trial, (ii) all related clinical trial data have been delivered to both parties and (iii) the completion of any
statistical analyses and bioanalyses contemplated by the clinical trial protocol or any analysis otherwise
agreed upon by the parties. The agreement may be terminated by either party (i) in the event of an uncured
material breach by the other party, (ii) in the event the other party is insolvent or in bankruptcy proceedings
or (iii) for safety reasons. Upon termination, the licenses granted to us to use nivolumab in the clinical trial
will terminate. The agreement contains representations, warranties, undertakings and indemnities customary
for a transaction of this nature.
In 2019, we entered into a separate agreement with BMS on terms similar to the terms set forth in the
agreement described above, pursuant to which BMS will provide, at no cost to us, nivolumab for use in our
Phase 1 clinical trial of RP2 in combination with nivolumab.
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Regeneron
In 2018, we entered into a Master Clinical Trial Collaboration and Supply Agreement with Regeneron
Pharmaceuticals, Inc., or Regeneron. Pursuant to the agreement we agreed to undertake one or more clinical
trials with Regeneron for the administration of our product candidates in combination with cemiplimab, an
anti-PD-1 therapy developed by Regeneron, across multiple solid tumor types, the first of which is our
ongoing CERPASS Phase 2 trial testing RP1 in combination with cemiplimab versus cemiplimab alone in
patients with CSCC. Each CERPASS trial will be conducted pursuant to an agreed study plan which, among
other things, will identify the name of the sponsor and which party will manage the particular study, and
include the protocol, the budget and a schedule of clinical obligations. The first study plan related to the
CERPASS Phase 2 trial in CSCC has been agreed.
Pursuant to the terms of the agreement, each party granted the other party a non-exclusive license of
their respective intellectual property and agreed to contribute the necessary resources needed to fulfill their
respective obligations, in each case, under the terms of agreed study plans. Development costs of a
particular clinical trial will be split equally. The agreement contains representations, warranties,
undertakings and indemnities customary for a transaction of this nature. The agreement also contains certain
time-based covenants that restrict us from entering into a third-party arrangement with respect to the use of
our product candidates in combination with an anti-PD-1 therapy and that restrict Regeneron from entering
into a third-party arrangement with respect to the use of cemiplimab in combination with an HSV-1 virus, in
each case, for the treatment of a tumor type that is the subject of a clinical trial to which the covenants
apply. Unless otherwise mutually agreed in a future study plan, these covenants are only applicable to our
ongoing Phase 2 clinical trial in CSCC, and expire upon the one-year anniversary of the commencement of
the applicable study plan.
The agreement may be terminated by either party if (i) there is no active study plan for which a final
study report has not been completed and the parties have not entered into a study plan for an additional
clinical trial within a period of time after the delivery of the most recent final study report or (ii) in the
event of a material breach.
Regulatory matters
Government authorities in the United States, at the federal, state, and local level, and in other countries,
extensively regulate, among other things, the research, development, testing, approval, manufacture,
packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, import, and
export of biopharmaceutical products such as those we are developing. In addition, manufacturers of
biopharmaceutical products participating in Medicaid and Medicare are required to comply with mandatory
price reporting, discount, and rebate requirements. The processes for obtaining regulatory approvals in the
United States and in foreign countries, along with compliance with applicable statutes and regulations,
require the expenditure of substantial time and financial resources. The FDA and governmental authorities
in other countries have issued a growing body of guidance documents on various regulatory matters,
including those specific to cell and gene therapy development. Moreover, in light of the COVID-19
pandemic, the FDA and governmental authorities in other countries have also issued a number of guidance
documents to assist companies navigating COVID-19, product development, and manufacturing during the
pandemic.
FDA and EU regulation
In the United States, the FDA regulates biologics under the Federal Food, Drug, and Cosmetic Act, or
FDCA, the Public Health Services Act, or PHSA, and their implementing regulations. The process required
by the FDA before product candidates may be marketed in the United States generally involves the
following:
•
•
completion of preclinical laboratory tests, animal studies, and formulation studies in compliance with
GLP regulations;
submission to the FDA of an IND, which must become effective before human clinical trials may
begin at United States clinical trial sites;
•
approval by an IRB for each clinical site, or centrally, before each trial may be initiated;
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•
•
adequate and well-controlled human clinical trials to establish the safety, purity, and potency of the
proposed product candidate for its intended use, performed in accordance with GCPs;
development of manufacturing processes to ensure the product candidate’s identity, strength, quality,
purity, and potency;
•
submission to the FDA of a BLA;
•
satisfactory completion of an FDA advisory committee review, if applicable;
•
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the
products are produced to assess compliance with current cGMPs, and to assure that the facilities,
methods, and controls are adequate to preserve the therapeutics’ identity, strength, quality, purity,
and potency as well as satisfactory completion of an FDA inspection of selected clinical sites and
selected clinical investigators to determine GCP compliance; and
•
FDA review and approval of the BLA to permit commercial marketing for particular indications for
use.
The process in the European Union and other countries with developed regulatory regimes is broadly
comparable.
Preclinical studies and IND submission
The testing and approval process of product candidates requires substantial time, effort, and financial
resources. Satisfaction of the FDA’s and other countries’ regulatory authorities’ pre-market approval
requirements typically takes many years and the actual time required may vary substantially based upon the
type, complexity, and novelty of the product or disease. Preclinical studies include laboratory evaluation of
chemistry, pharmacology, toxicity, and product formulation, as well as animal studies to assess potential
safety and efficacy. Such studies must generally be conducted in accordance with the FDA’s GLPs. Prior to
commencing the first clinical trial at a United States or other country’s investigational site with a product
candidate, an IND sponsor must submit the results of the preclinical tests and preclinical literature, together
with manufacturing information, analytical data, any available clinical data or literature, and proposed
clinical study protocols among other things, to the FDA as part of an IND (or equivalent in other countries).
An IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the
30-day time period, notifies the applicant of safety concerns or questions related to one or more proposed
clinical trials and places the trial on a clinical hold. In such a case, the IND sponsor and the FDA must
resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed by
the FDA at any time before or during trials due to safety concerns or non-compliance. As a result,
submission of an IND may not result in FDA authorization to commence a clinical trial. A separate
submission to an existing IND must also be made for each successive clinical trial conducted during product
development.
Clinical trials
Clinical trials involve the administration of the investigational product to human subjects under the
supervision of qualified investigators in accordance with federal regulations and GCP requirements, which
include the requirements that all research subjects provide their informed consent in writing for their
participation in any clinical trial, as well as review and approval of the study by an IRB. Investigators must
also provide certain information to the clinical trial sponsors to allow the sponsors to make certain financial
disclosures to the FDA. Clinical trials are conducted under protocols detailing, among other things, the
objectives of the trial, the trial procedures, the parameters to be used in monitoring safety, the effectiveness
criteria to be evaluated, and a statistical analysis plan. A protocol for each clinical trial, and any subsequent
protocol amendments, must be submitted to the FDA as part of the IND. In addition, an IRB at each study
site participating in the clinical trial or a central IRB must review and approve the plan for any clinical trial,
informed consent forms, and communications to study subjects before a study commences at that site. An
IRB considers, among other things, whether the risks to individuals participating in the trials are minimized
and are reasonable in relation to anticipated benefits, and whether the planned human subject protections are
adequate. The IRB must continue to oversee the clinical trial while it is being conducted. Once
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an IND is in effect, each new clinical protocol and any amendments to the protocol must be added to the
IND for FDA review, and to the IRB for approval. If a product candidate is being investigated for multiple
intended indications, separate INDs may also be required. Progress reports detailing the results of the
clinical trials must also be submitted at least annually to the FDA and the IRB and more frequently if
serious adverse events or other significant safety information is found.
The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time, or
impose other sanctions, if it believes that the clinical trial either is not being conducted in accordance with
FDA requirements or presents an unacceptable risk to the clinical trial patients. An IRB may also require the
clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s
requirements or if the trial poses an unexpected serious harm to subjects. The FDA or an IRB may also
impose conditions on the conduct of a clinical trial. Clinical trial sponsors may also choose to discontinue
clinical trials as a result of risks to subjects, a lack of favorable results, or changing business priorities.
Information about certain clinical trials, including a description of the study and study results, must be
submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination
on their clinicaltrials.gov website. Manufacturers or distributors of investigational products for the
diagnosis, monitoring, or treatment of one or more serious diseases or conditions must also have a publicly
available policy on evaluating and responding to requests for expanded access requests.
Additionally, some clinical trials are overseen by an independent group of qualified experts organized
by the clinical trial sponsor that regularly reviews accumulated data and advises the study sponsor regarding
the continuing safety of the trial. This group may also review interim data to assess the continuing validity
and scientific merit of the clinical trial. This group receives special access to unblinded data during the
clinical trial and may advise the sponsor to halt the clinical trial if it determined there is an unacceptable
safety risk for subjects or on other grounds, such as no demonstration of efficacy.
Moreover, certain studies involving recombinant and synthetic nucleic acid molecules are subject to
review by Institutional Biosafety Committees, or IBCs, under the National Institutes of Health Guidelines
for Research Involving Recombinant or Synthetic Nucleic Acid Molecules.
The manufacture of investigational biologics for the conduct of human clinical trials is subject to
current cGMP requirements. Investigational biologics and active ingredients imported into the United States
are also subject to regulation by the FDA. Further, the export of investigational products outside of the
United States is subject to regulatory requirements of the receiving country as well as United States export
requirements under the FDCA.
In general, for purposes of BLA approval, human clinical trials are typically conducted in three
sequential phases, which may overlap or be combined.
•
•
•
Phase 1 — Trials are initially conducted in healthy human volunteers or subjects with the target
disease or condition and test the product candidate for safety, dosage tolerance, structure-activity
relationships, mechanism of action, absorption, metabolism, distribution, and excretion. If possible,
Phase 1 trials may also be used to gain an initial indication of product effectiveness.
Phase 2 — Controlled trials are conducted in limited subject populations with a specified disease or
condition to evaluate the effectiveness of the product candidate for a particular indication or
indications, identify optimal dosages, dosage tolerance and schedule, possible adverse effects and
safety risks, and expanded evidence of safety.
Phase 3 — These adequate and well controlled clinical trials are undertaken in expanded subject
populations, generally at geographically dispersed clinical trial sites, to generate enough data to
provide statistically significant evidence of clinical efficacy and safety of the product for approval, to
establish the overall risk benefit profile of the product, and to provide adequate information for the
labeling of the product. Typically, two Phase 3 trials are required by the FDA for product approval.
Under some limited circumstances, however, approval may be based upon a single adequate and
well-controlled clinical trial plus confirmatory evidence or a single large multicenter trial without
confirmatory evidence.
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Additional kinds of data may also help to support a BLA, such as patient experience data and real-
world evidence. Real world evidence may also be used to assist in clinical trial design. For appropriate
indications sought through supplemental BLAs, data summaries may provide marketing application support.
For genetically targeted products and variant protein targeted products intended to address an unmet medical
need in one or more patient subgroups with a serious or life threatening rare disease or condition, the FDA
may allow a sponsor to rely upon data and information previously developed by the sponsor or for which the
sponsor has a right of reference, that was submitted previously to support an approved application for a
product that incorporates or utilizes the same or similar genetically targeted technology or a product that is
the same or utilizes the same variant protein targeted drug as the product that is the subject of the
application.
Further, under certain circumstances, manufacturers and sponsors of investigational biopharmaceutical
product candidates can provide access to the product candidates to certain qualifying patients outside of
clinical trials. For instance, under the FDA’s expanded access program, with FDA approval and subject to
certain requirements, sponsors may provide access to product candidates to patients with serious or
immediately life threatening diseases or conditions for which there is no comparable or satisfactory
alternative therapy, provided that the potential patient benefit justifies the risks, the risks are not
unreasonable in the context of the disease or condition to be treated, and the provision of the product
candidate for the requested use will not interfere with clinical investigations. The specific expanded access
criteria and requirements depend on the number of expanded access patients. Sponsors and investigators of
expanded access programs must still comply with the FDA’s clinical trial guidelines and are subject to
protection regulations. Federal and state laws in the United States, referred to as right to try laws, also
establish a separate mechanism through which certain patients with life threatening diseases or conditions,
who have exhausted all approved treatment options and are unable to participate in a clinical trial, may
request access to investigational product candidates that have completed a Phase 1 clinical trial. While
certain criteria must be met for a patient to be eligible for access to product candidates under right to try
laws, these laws do not require the FDA to approve the use of the product candidate and do not require
compliance with the majority of the FDA’s clinical trial regulations.
The FDA may also require, or companies may conduct, additional clinical trials for the same indication
after a product is approved. These so-called Phase 4 trials may be made a condition to be satisfied after
approval. The results of Phase 4 trials can confirm or refute the effectiveness of a product candidate and can
provide important safety information.
Concurrent with clinical trials, companies usually complete additional animal studies and must also
develop additional information about the chemistry and physical characteristics of the product candidate as
well as finalize a process for manufacturing the product in commercial quantities in accordance with current
cGMP requirements. The manufacturing process must be capable of consistently producing quality batches
of the product candidate and, among other things, manufacturers must develop methods for testing the
identity, strength, quality, potency, and purity of the final product. Additionally, appropriate packaging must
be selected and tested, and stability studies must be conducted to demonstrate that the product candidate
does not undergo unacceptable deterioration over its shelf life.
In relation to the clinical trial in the United Kingdom and in so far as trials will be conducted in other
countries with a view to obtaining a marketing authorization from the European Medicines Agency, there
are broadly equivalent GLP, GCP, cGMP and ethical approval requirements and European Union regulatory
rules that are implemented nationally. However, enforcement of such rules is conducted by the regulatory
authority in which the trial is carried out, which is the MHRA in the United Kingdom. With the full
departure of the United Kingdom from the European Union in January 2021, different clinical trial approval
and conduct requirements may apply. Specifically, the United Kingdom will not be subject to the
forthcoming European Union Clinical Trial Regulation.
Combination Products
Biologic products may be regulated as combination products if they are intended for use in conjunction
with medical devices, such as a delivery device. In such cases, the use of the two products together (i.e., the
biological product and the device) must be shown to be safe and effective for the proposed intended use,
and, the labeling of the two products must reflect their combined use. In some cases, the device component
may
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require a separate premarket submission; for example, when the device component is intended for use with
multiple therapeutics. Sponsors of clinical studies using investigational devices are required to comply with
FDA’s investigational device exemption regulations. Once approved or cleared, the sponsor of the device
component submission (or the combination product submission, if both components are covered by one
premarket submission) would need to comply with FDA’s post-market device requirements, including
establishment registration, device listing, device labeling, unique device identifier, quality system
regulations, medical device reporting, and reporting of corrections and removals. In the European Union
there are specific quality requirements for drug-device combinations.
BLA submission, review by the FDA, and marketing approval
Assuming successful completion of the required clinical and preclinical testing, the results of product
development, including chemistry, manufacture, and controls, non-clinical studies, and clinical trial results,
including negative or ambiguous results as well as positive findings, are all submitted to the FDA, along
with the proposed labeling, as part of a BLA requesting approval to market the product for one or more
indications. In most cases, the submission of a BLA is subject to a substantial application user fee. These
user fees must be paid at the time of the first submission of the application, even if the application is being
submitted on a rolling basis. Fee waivers or reductions are available in certain circumstances. One basis for
a waiver of the application user fee is if the applicant employs fewer than 500 employees, including
employees of affiliates, the applicant does not have an approved marketing application for a product that has
been introduced or delivered for introduction into interstate commerce, and the applicant, including its
affiliates, is submitting its first marketing application.
In addition, under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA for a
new active ingredient, indication, dosage form, dosage regimen, or route of administration, must contain
data that are adequate to assess the safety and effectiveness of the product for the claimed indications in all
relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation
for which the product is safe and effective. Also, under the FDA Reauthorization Act of 2017, beginning in
2020, for applications for product candidates intended for the treatment of adult cancer which are directed at
molecular targets that the FDA determines to be substantially relevant to the growth or progression of
pediatric cancer, in place of the PREA investigations, sponsors must submit, with the application, reports
from molecularly targeted pediatric cancer investigations designed to yield clinically meaningful pediatric
study data, using appropriate formulations, to inform potential pediatric labeling. The FDA may, on its own
initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until
after approval of the product for use in adults, or full or partial waivers from the pediatric data
requirements.
The FDA also may require submission of a REMS to ensure that the benefits of the biologic outweigh
the risks. The REMS plan could include medication guides, physician communication plans, and elements to
assure safe use, such as restricted distribution methods, patient registries, or other risk minimization tools.
An assessment of the REMS must also be conducted at set intervals. Following product approval, a REMS
may also be required by the FDA if new safety information is discovered and the FDA determines that a
REMS is necessary to ensure that the benefits of the biologic outweigh the risks.
Once the FDA receives an application, it has 60 days to review the BLA to determine if it is
substantially complete to permit a substantive review before it accepts the application for filing. The FDA
may request additional information rather than accept a BLA for filing. In this event, the application must
be resubmitted with the additional information. The resubmitted application is also subject to review before
the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth
substantive review.
Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, or
PDUFA, the FDA has set the review goal of completing its review of 90% of all applications within
ten months from the 60-day filing date for its initial review of a BLA. This review goal is referred to as the
PDUFA date. The PDUFA date is only a goal, thus, the FDA does not always meet its PDUFA dates. The
review process and the PDUFA date may also be extended if the FDA requests or the sponsor otherwise
provides substantial additional information or clarification regarding the submission.
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The FDA may also refer certain applications to an advisory committee. Before approving a biologic for
which no active ingredient, including any ester or salt of active ingredients, has previously been approved
by the FDA, the FDA must either refer that biologic to an external advisory committee or provide in an
action letter, a summary of the reasons why the FDA did not refer the product candidate to an advisory
committee. An advisory committee is typically a panel that includes clinicians and other experts, which
review, evaluate, and make a recommendation as to whether the application should be approved and under
what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers
such recommendations carefully when making decisions.
The FDA reviews applications to determine, among other things, whether a product is safe, pure and
potent and whether the manufacturing methods and controls are adequate to assure and preserve the
product’s identity, strength, quality, potency, and purity. Before approving a BLA, the FDA typically will
inspect the facility or facilities where the product is manufactured, referred to as a Pre-Approval Inspection.
The FDA will not approve an application unless it determines that the manufacturing processes and
facilities, including contract manufacturers and subcontractors, are in compliance with current cGMP
requirements and adequate to assure consistent production of the product within required specifications.
Additionally, before approving a BLA the FDA will inspect one or more clinical trial sites to assure
compliance with GCPs.
After evaluating the BLA and all related information, including the advisory committee
recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites,
the FDA may issue an approval letter, or, in some cases, a Complete Response Letter, or CRL. A CRL
indicates that the review cycle of the application is complete and the application is not ready for approval,
and describes all of the specific deficiencies that the FDA identified in the BLA. A CRL generally contains
a statement of specific conditions that must be met in order to secure final approval of the BLA and may
require additional clinical or preclinical testing in order for the FDA to reconsider the application. The
deficiencies identified may be minor, for example, requiring labeling changes, or major, for example,
requiring additional clinical trials. If a CRL is issued, the applicant may either: resubmit the BLA,
addressing all of the deficiencies identified in the letter; withdraw the application; or request an opportunity
for a hearing. The FDA has the goal of reviewing 90% of application resubmissions in either two or
six months of the resubmission date, depending on the kind of resubmission. Even with submission of this
additional information, the FDA ultimately may decide that the application does not satisfy the regulatory
criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA may
issue an approval letter. An approval letter authorizes commercial marketing of the product with specific
prescribing information for specific indications.
Even if the FDA approves a product, it may limit the approved indications or populations for use of the
product, require that contraindications, warnings, or precautions be included in the product labeling,
including a boxed warning, require that post-approval studies, including Phase 4 clinical trials, be conducted
to further assess a product’s safety and efficacy after approval, require testing and surveillance programs to
monitor the product after commercialization, or impose other conditions, including distribution restrictions
or other risk management mechanisms under a REMS which can materially affect the potential market and
profitability of the product. The FDA may also not approve label statements that are necessary for
successful commercialization and marketing.
After approval, some types of changes to the approved product, such as adding new indications,
manufacturing changes, and additional labeling claims, are subject to further testing requirements and FDA
review and approval. The FDA may also withdraw the product approval if compliance with the pre- and
post-marketing regulatory standards are not maintained or if problems occur after the product reaches the
marketplace. Further, should new safety information arise, additional testing, product labeling, or FDA
notification may be required.
While there is no direct equivalent to the separate route for biologics, broadly equivalent requirements
and controls similarly apply to the submission of pediatric testing and marketing authorization applications
to the European Medicines Agency in the European Union and, post-approval, to the holding of such
marketing authorizations, including conditionality.
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Biosimilars and exclusivity
The BPCIA creates an abbreviated approval pathway for biological products shown to be highly similar
to or interchangeable with an FDA-licensed reference biological product. Biosimilarity sufficient to
reference a prior FDA-approved product requires a high similarity to the reference product notwithstanding
minor differences in clinically inactive components, and no clinically meaningful differences between the
biological product and the reference product in terms of safety, purity, and potency. Biosimilarity must be
shown through analytical studies, animal studies, and at least one clinical trial, absent a waiver by the FDA.
There must be no difference between the reference product and a biosimilar in mechanism of action,
conditions of use, route of administration, dosage form, and strength. A biosimilar product may be deemed
interchangeable with a prior approved product if it meets the higher hurdle of demonstrating that it can be
expected to produce the same clinical results as the reference product and, for products administered
multiple times, the biosimilar and the reference biologic may be switched after one has been previously
administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the
reference biologic. The FDA has issued a number of guidance documents outlining its approach to review
and approval of biosimilars, including guidance documents on the demonstration of interchangeability and
the licensure of biosimilar and interchangeable products for fewer than all of the reference product’s
licensed conditions of use.
A reference biologic is granted 12 years of exclusivity from the time of first licensure of the reference
product, and no application for a biosimilar can be submitted for four years from the date of licensure of the
reference product. However, certain changes and supplements to an approved BLA, and subsequent
applications filed by the same sponsor, manufacturer, licensor, predecessor in interest, or other related entity
do not qualify for the twelve-year exclusivity period. The PHSA also includes provisions to protect
reference products that have patent protection. The biosimilar product sponsor and reference product
sponsor may exchange certain patent and product information for the purpose of determining whether there
should be a legal patent challenge. Based on the outcome of negotiations surrounding the exchanged
information, the reference product sponsor may bring a patent infringement suit and injunction proceedings
against the biosimilar product sponsor. The biosimilar applicant may also be able to bring an action for
declaratory judgment concerning the patent.
In the European Union there is a period of 10 years (or 11 years for significant new indications) of data
exclusivity so that those seeking to market biosimilars cannot apply on an abridged basis for a marketing
authorization for eight years from when the product was first marketed in the European Union and cannot
place it on the market for 10 or 11 years from such first marketing.
If approved, biologics may also be eligible for periods of United States patent term restoration. If
granted, patent term restoration extends the patent life of a single unexpired patent, that has not previously
been extended, for a maximum of five years. The total patent life with the extension also cannot exceed
fourteen years from the product’s approval date. Subject to the prior limitations, the period of the extension
is calculated by adding half of the time from the effective date of an IND to the initial submission of a
marketing application, and all of the time between the submission of the marketing application and its
approval. This period may also be reduced by any time that the applicant did not act with due diligence.
In the European Union, a supplementary protection certificate, or SPC, can similarly extend a patent
term for a maximum of five years. A six-month additional extension, however, is available if the SPC
relates to a medicinal product for which data has been submitted according to a Pediatric Investigation Plan.
In an effort to increase competition in the biologic product marketplace, Congress, the executive
branch, and FDA have taken certain legislative and regulatory steps. By way of example, in 2020 the FDA
finalized a draft guidance to facilitate biologic product importation. Moreover, the 2020 Further
Consolidated Appropriations Act included provisions requiring that sponsors of approved biologic products,
including those subject to REMS, provide samples of the approved products to persons developing
biosimilar products within specified timeframes, in sufficient quantities, and on commercially reasonable
market-based terms. Failure to do so can subject the approved product sponsor to civil actions, penalties,
and responsibility for attorney’s fees and costs of the civil action.
Post-approval requirements
Any products manufactured or distributed pursuant to FDA approvals are subject to pervasive and
continuing regulation by the FDA, including, among other things, requirements related to manufacturing,
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recordkeeping, and reporting, including adverse experience reporting, deviation reporting, shortage
reporting, risk management plans, supply chain security, and periodic reporting, product distribution,
advertising, marketing, promotion, certain electronic records and signatures, and post-approval obligations
imposed as a condition of approval, such as Phase 4 clinical trials, REMS, and surveillance to assess safety
and effectiveness after commercialization.
After approval, most changes to the approved product, such as adding new indications or other labeling
claims are subject to prior FDA review and approval. There also are continuing annual program user fee
requirements for approved products. In addition, manufacturers and other entities involved in the
manufacture and distribution of approved therapeutics are required to register their establishments with the
FDA and certain state agencies, list their products, and are subject to periodic announced and unannounced
inspections by the FDA and these state agencies for compliance with current cGMP and other requirements,
which impose certain procedural and documentation requirements upon us and third-party manufacturers.
Recently, the information that must be submitted to FDA regarding manufactured products was expanded
through the Coronavirus Aid, Relief, and Economic Security, or CARES, Act to include the volume of drugs
produced during the prior year. Manufacturers must continue to expend time, money, and effort in the areas
of production and quality-control to maintain compliance with current cGMPs. Regulatory authorities may
withdraw product approvals, require label modifications or request product recalls, among other actions, if a
company fails to comply with regulatory standards, if it encounters problems following initial marketing, or
if previously unrecognized problems are subsequently discovered.
Changes to the manufacturing process are strictly regulated and often require prior FDA approval or
notification before being implemented. FDA regulations also require investigation and correction of any
deviations from current cGMP and specifications and impose reporting and documentation requirements
upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly,
manufacturers must continue to expend time, money, and effort in the area of production and quality control
to maintain current cGMP compliance.
The FDA also strictly regulates marketing, labeling, advertising, and promotion of products that are
placed on the market. A company can make only those claims relating to safety and efficacy, purity, and
potency that are approved by the FDA. Physicians, in their independent professional medical judgment, may
prescribe legally available products for unapproved indications that are not described in the product’s
labeling and that differ from those tested and approved by the FDA. Biopharmaceutical companies,
however, are required to promote their products only for the approved indications 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, and a company that is found to have improperly promoted off-
label uses may be subject to significant liability, including, but not limited to, criminal and civil penalties
under the FDCA and False Claims Act, exclusion from participation in federal healthcare programs,
mandatory compliance programs under corporate integrity agreements, suspension and debarment from
government contracts, and refusal of orders under existing government contracts.
Moreover, the Drug Quality and Security Act imposes obligations on manufacturers of
biopharmaceutical products related to product tracking and tracing. Among the requirements of this
legislation, manufacturers are required to provide certain information regarding the products to individuals
and entities to which product ownership is transferred, are required to label products with a product
identifier, and are required to keep certain records regarding the product. The transfer of information to
subsequent product owners by manufacturers is also required to be done electronically. Manufacturers must
also verify that purchasers of the manufacturers’ products are appropriately licensed. Further, under this
legislation, manufactures have product investigation, quarantine, disposition, and notification
responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products that would
result in serious adverse health consequences or death to humans, as well as products that are the subject of
fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably
likely to result in serious health consequences or death. Similar requirements additionally are and will be
imposed through this legislation on other companies within the biopharmaceutical product supply chain,
such as distributors and dispensers.
Adverse event reporting and submission of periodic reports, including annual reports and deviation
reports, are required following FDA approval of a BLA. Later discovery of previously unknown problems
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with a product, including adverse events of unanticipated severity or frequency, or with manufacturing
processes, or failure to comply with regulatory requirements, may result in significant regulatory actions.
Such actions may include refusal to approve pending applications, license suspension or revocation,
imposition of a clinical hold or termination of clinical trials, warning letters, untitled letters, cyber letters,
modification of promotional materials or labeling, provision of corrective information, imposition of post-
market requirements including the need for additional testing, imposition of distribution or other restrictions
under a REMS, product recalls, product seizures or detentions, refusal to allow imports or exports, total or
partial suspension of production or distribution, FDA debarment, injunctions, fines, consent decrees,
corporate integrity agreements, suspension and debarment from government contracts, refusal of orders
under existing government contracts, exclusion from participation in federal and state healthcare programs,
restitution, disgorgement, or civil or criminal penalties, including fines and imprisonment, and result in
adverse publicity, among other adverse consequences.
Broadly equivalent requirements, controls and sanctions similarly apply to supply, QA, manufacture,
labelling, advertising, pharmacovigilance and tracing of medicinal products as imposed by European Union
laws and enforced by European Union national regulatory authorities.
Additional controls for biologics
To help reduce the increased risk of the introduction of adventitious agents, the PHSA emphasizes the
importance of manufacturing controls for products whose attributes cannot be precisely defined. The PHSA
also provides authority to the FDA to immediately suspend licenses in situations where there exists a danger
to public health, to prepare or procure products in the event of shortages and critical public health needs,
and to authorize the creation and enforcement of regulations to prevent the introduction or spread of
communicable diseases in the United States and between states.
After a BLA is approved, the product may also be subject to official lot release as a condition of
approval. As part of the manufacturing process, the manufacturer is required to perform certain tests on each
lot of the product before it is released for distribution. If the product is subject to official release by the
FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol
showing the results of all of the manufacturer’s tests performed on the lot. The FDA may also perform
certain confirmatory tests on lots of some products before releasing the lots for distribution by the
manufacturer.
In addition, the FDA conducts laboratory research related to the regulatory standards on the safety,
purity, potency, and effectiveness of biological products. There are also a number of additional standards
that apply to oncolytic virus products. The FDA has issued various applicable guidance documents on
factors that the agency considers during product development including, but not limited to, preclinical
assessments; chemistry manufacturing and controls; and long-term patient and clinical study subject follow
up and regulatory reporting. In the European Union, while there is no direct equivalent to the separate route
for biologics, the EMA issues scientific guidelines on biological medicinal products and the standard
Common Technical Document structure is modified for biologicals, plasma-derived products.
Fraud and abuse, data privacy and security, and transparency laws and regulations
Our business activities, including but not limited to, research, sales, promotion, distribution, medical
education, and other activities following product approval will be subject to regulation by numerous federal
and state regulatory and law enforcement authorities in the United States in addition to the FDA, including
potentially the Department of Justice, the Department of Health and Human Services and its various
divisions, including the CMS and the Health Resources and Services Administration, the Department of
Veterans Affairs, the Department of Defense, and state and local governments. Our business activities must
comply with numerous healthcare laws, including but not limited to, anti-kickback and false claims laws
and regulations as well as data privacy and security laws and regulations, which are described below, as
well as state and federal consumer protection and unfair competition laws.
The federal Anti-Kickback Statute, which regulates, among other things, marketing practices,
educational programs, pricing policies, and relationships with healthcare providers or other entities,
prohibits, among other things, any person or entity, from knowingly and willfully offering, paying,
soliciting,
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or receiving any 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, or
the referral to another for the furnishing or arranging for the furnishing of any item or service reimbursable
under Medicare, Medicaid, or other federal healthcare programs, in whole or in part. The term
“remuneration” has been interpreted broadly to include anything of value. The Anti-Kickback Statute has
been interpreted to apply to arrangements between biopharmaceutical manufacturers on one hand and
prescribers, purchasers, formulary managers, and beneficiaries on the other, as well as free trial and starter
prescriptions provided through pharmacies. There are certain statutory exceptions and regulatory safe
harbors protecting some common activities from prosecution. HHS recently promulgated a regulation that is
effective in two phases. First, the regulation excludes from the definition of “remuneration” limited
categories of (a) PBM rebates or other reductions in price to a plan sponsor under Medicare Part D or a
Medicaid Managed Care Organization plan reflected in point-of sale reductions in price and (b) PBM
service fees. Second, effective January 1, 2023, the regulation expressly provides that rebates to plan
sponsors under Medicare Part D either directly to the plan sponsor under Medicare Part D, or indirectly
through a pharmacy benefit manager will not be protected under the anti-kickback discount safe harbor. The
exceptions and safe harbors are drawn narrowly, and 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. Failure to meet all of the requirements of a particular applicable
statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-
Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on
a cumulative review of all of the facts and circumstances. Several courts have interpreted the statute’s intent
requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals
of federal healthcare covered business, including purchases of products paid by federal healthcare programs,
the statute has been violated. The ACA modified the intent requirement under the Anti-Kickback Statute to
a stricter standard, such that a person or entity no longer needs to have actual knowledge of the statute or
specific intent to violate it in order to have committed a violation. In addition, the ACA also provided that a
violation of the federal Anti-Kickback Statute is grounds for the government or a whistleblower to assert
that a claim for payment of items or services resulting from such violation constitutes a false or fraudulent
claim for purposes of the federal civil False Claims Act.
The federal civil False Claims Act prohibits, among other things, any person or entity from knowingly
presenting, or causing to be presented, a false or fraudulent claim for payment to, or approval by, the federal
government, 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, or avoiding, decreasing, or concealing an obligation to
pay money to the federal government. A claim includes “any request or demand” for money or property
presented to the U.S. government. The civil False Claims Act has been used to assert liability on the basis of
kickbacks and other improper referrals, improperly reported government pricing metrics such as Best Price
or Average Manufacturer Price, improper use of Medicare provider or supplier numbers when detailing a
provider of services, improper promotion of off-label uses not expressly approved by the FDA in a product’s
label, and allegations as to misrepresentations with respect to products, contract requirements and services
rendered. In addition, private payers have filed follow-on lawsuits alleging fraudulent misrepresentation,
although establishing liability and damages in these cases is more difficult than under the civil False Claims
Act. Intent to deceive is not required to establish liability under the civil False Claims Act. Civil False
Claims Act actions may be brought by the government or may be brought by private individuals on behalf
of the government, called “qui tam” actions. If the government decides to intervene in a qui tam action and
prevails in the lawsuit, the individual will share in the proceeds from any fines or settlement funds. If the
government declines to intervene, the individual may pursue the case alone. The civil False Claims Act
provides for treble damages and a civil penalty for each false claim, such as an invoice or pharmacy claim
for reimbursement, which can aggregate into millions of dollars. For these reasons, since 2004, civil False
Claims Act lawsuits against biopharmaceutical companies have increased significantly in volume and
breadth, leading to several substantial civil and criminal settlements, as much as $3.0 billion, regarding
certain sales practices and promoting off label uses. Civil False Claims Act liability may further be imposed
for known Medicare or Medicaid overpayments, for example, overpayments caused by understated rebate
amounts, that are not refunded within 60 days of discovering the overpayment, even if the overpayment was
not caused by a false or fraudulent act. In addition, conviction or civil judgment for violating the civil False
Claims Act may result in exclusion from federal health care programs, suspension and debarment from
government contracts, and refusal of orders under existing government contracts.
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The government may further prosecute conduct constituting a false claim under the criminal False
Claims Act. The criminal False Claims Act prohibits the making or presenting of a claim to the government
knowing such claim to be false, fictitious, or fraudulent and, unlike the civil False Claims Act, requires
proof of intent to submit a false claim.
The civil monetary penalties statute is another potential statute under which biopharmaceutical
companies may be subject to enforcement. Among other things, the civil monetary penalties statute imposes
fines against any person who is determined to have knowingly presented, or caused to be presented, claims
to a federal healthcare program that the person knows, or should know, is for an item or service that was not
provided as claimed or is false or fraudulent.
Payment or reimbursement of prescription therapeutics by Medicaid or Medicare requires
manufacturers to submit certified pricing information to CMS. The Medicaid Drug Rebate statute requires
manufacturers to calculate and report price points, which are used to determine Medicaid rebate payments
shared between the states and the federal government and Medicaid payment rates for certain therapeutics.
The Medicaid Drug Rebate statute also imposes inflation penalties, and recent legislative proposals have
called for removal of caps limiting the magnitude of these penalties and the implementation of new inflation
penalties applicable to the Medicare program. In addition to the Medicaid statutory rebate, states are
authorized to negotiate supplemental rebates on pharmaceuticals included in their formularies. For
therapeutics paid under Medicare Part B, manufacturers must also calculate and report their Average Sales
Price, which is used to determine the Medicare Part B payment rate. For products approved under a BLA
(including biosimilars), or an NDA, the Veterans Health Care Act, or VHCA, requires manufacturers to
calculate and report to the Department Veterans Affairs, or VA, a different price called the Non-Federal
Average Manufacturer Price, which is used to determine the maximum price that can be charged to certain
federal agencies, referred to as the Federal Ceiling Price, or FCP. Like the Medicaid rebate amount, the FCP
includes an inflation penalty. A Department of Defense regulation requires manufacturers to provide this
discount on therapeutics dispensed by retail pharmacies when paid by the TRICARE Program. All of these
price reporting requirements create risk of submitting false information to the government, and potential
FCA liability.
The VHCA also requires manufacturers of covered therapeutics participating in the Medicaid program
to enter into Federal Supply Schedule contracts with the VA through which their covered therapeutics must
be sold to certain federal agencies at FCP. This necessitates compliance with applicable federal procurement
laws and regulations, including submission of commercial sales and pricing information and certification of
compliance with the Trade Agreements Act, and subjects us to contractual remedies as well as
administrative, civil, and criminal sanctions. In addition, the VHCA requires manufacturers participating in
Medicaid to agree to provide different mandatory discounts to certain Public Health Service grantees and
other safety net hospitals and clinics under the 340B program based on the manufacturer’s reported
Medicaid pricing information. The 340B program has its own regulatory authority to impose sanctions for
non-compliance and adjudicate overcharge claims against manufacturers by the purchasing entities.
The federal Health Insurance Portability and Accountability Act of 1996, as amended, or HIPAA, also
created federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or
attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses,
representations or promises, any of the money or property owned by, or under the custody or control of, a
healthcare benefit program, regardless of whether the payor is public or private, in connection with the
delivery or payment for health care benefits, knowingly and willfully embezzling or stealing from a health
care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly
and willfully falsifying, concealing, or covering up by any trick or device a material fact or making any
materially false statements in connection with the delivery of, or payment for, healthcare benefits, items, or
services relating to healthcare matters. Additionally, the ACA amended the intent requirement of certain of
these criminal statutes under HIPAA so that a person or entity no longer needs to have actual knowledge of
the statute, or the specific intent to violate it, to have committed a violation.
Under the federal Physician Payments Sunshine Act and its implementing regulations, manufacturers of
biologics for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance
Program (with certain exceptions) must make annual reports to CMS regarding payments and other transfers
of value made to or at the request of covered recipients, such as, but not limited to, physicians, physician
assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists and
teaching
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hospitals, as well as ownership and investment interests held by physicians and their immediate family.
Certain payments for clinical trials are included within the ambit of this law. CMS makes the reported
information publicly available.
Further, we may be subject to data privacy and security regulation by both the federal government and
the states in which we conduct our business. HIPAA, as amended by the HITECH Act, and its respective
implementing regulations imposes requirements on covered entities relating to the privacy, security, and
transmission of certain individually identifiable health information known as protected health information.
Among other things, the HITECH Act, through its implementing regulations, makes HIPAA’s security
standards and certain privacy standards directly applicable to business associates, defined as a person or
organization, other than a member of a covered entity’s workforce, that creates, receives, maintains, or
transmits protected health information on behalf of a covered entity for a function or activity regulated by
HIPAA. The HITECH Act also strengthened the civil and criminal penalties that may be imposed against
covered entities, business associates, and individuals, and gave state attorneys general new authority to file
civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek
attorney’s fees and costs associated with pursuing federal civil actions. In addition, other federal and state
laws, such as the California Consumer Privacy Act, may govern the privacy and security of health and other
information in certain circumstances, many of which differ from each other in significant ways and may not
be preempted by HIPAA, thus complicating compliance efforts.
Many states have also adopted laws similar to each of the above federal laws, which may be broader in
scope and apply to items or services reimbursed by any third-party payor, including commercial insurers.
Certain state laws also regulate manufacturers’ use of prescriber-identifiable data. Certain states also require
implementation of commercial compliance programs and compliance with the pharmaceutical industry’s
voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal
government, or otherwise restrict payments or the provision of other items of value that may be made to
healthcare providers and other potential referral sources; impose restrictions on marketing practices; or
require manufacturers to track and report information related to payments, gifts, and other items of value to
physicians and other healthcare providers. Recently, states have enacted or are considering legislation
intended to make drug prices more transparent and deter significant price increases. These laws may affect
our future sales, marketing, and other promotional activities by imposing administrative and compliance
burdens.
If our operations are found to be in violation of any of the laws or regulations described above or any
other laws that apply to us, we may be subject penalties or other enforcement actions, including criminal
and significant civil monetary penalties, damages, fines, disgorgement, imprisonment, exclusion from
participation in government healthcare programs, corporate integrity agreements, suspension and debarment
from government contracts, and refusal of orders under existing government contracts, reputational harm,
diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which
could adversely affect our ability to operate our business and our results of 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. In the European
Union, the data privacy laws are generally perceived to be stricter than those which apply in the United
States and include specific requirements for the transfer of personal data outside the European Union to the
United States to ensure that European Union standards of data privacy will be applied to such data.
Coverage and reimbursement generally
The commercial success of our product candidates and our ability to commercialize any approved
product candidates successfully will depend in part on the extent to which governmental payor programs at
the federal and state levels, including Medicare and Medicaid, private health insurers, and other third-party
payors, provide coverage for and establish adequate reimbursement levels for our product candidates.
Government authorities, private health insurers, and other organizations generally decide which therapeutics
they will pay for and establish reimbursement levels for healthcare. Medicare is a federally funded program
managed by CMS through local fiscal intermediaries and carriers that administer coverage and
reimbursement
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for certain healthcare items and services furnished to the elderly and disabled. Medicaid is an insurance
program for certain categories of patients whose income and assets fall below state defined levels and who
are otherwise uninsured that is both federally and state funded and managed by each state. The federal
government sets general guidelines for Medicaid and each state creates specific regulations that govern its
individual program, including supplemental rebate programs that restrict coverage to therapeutics on the
state Preferred Drug List. Similarly, government laws and regulations establish the parameters for coverage
of prescription therapeutics by health plans participating in state exchanges and Tricare, the health care
program for military personnel, retirees, and related beneficiaries. Some states have also created pharmacy
assistance programs for individuals who do not qualify for federal programs. In the United States, private
health insurers and other third-party payors often provide reimbursement for products and services based on
the level at which the government provides reimbursement through the Medicare or Medicaid programs for
such products and services.
In the United States, the European Union, and other potentially significant markets for our product
candidates, government authorities and third-party payors are increasingly attempting to limit or regulate
the price of medical products and services, particularly for new and innovative products and therapies,
which often has resulted in average selling prices lower than they would otherwise be and sometimes at or
below the provider’s acquisition cost. In the United States, it is also common for government and private
health plans to use coverage determinations to leverage rebates from manufacturers in order to reduce the
plans’ net costs. These restrictions and limitations influence the purchase of healthcare services and
products and lower the realization on manufacturers’ sales of prescription therapeutics. Third-party payors
are developing increasingly sophisticated methods of controlling healthcare costs. Third-party payors may
limit coverage to specific therapeutic products on an approved list, or formulary, which might not include
all of the FDA-approved products for a particular indication or might impose high copayment amounts to
influence patient choice. Third-party payors also control costs by requiring prior authorization or imposing
other dispensing restrictions before covering certain products and by broadening therapeutic classes to
increase competition. Third-party payors are increasingly challenging the price and examining the medical
necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy.
Absent clinical differentiators, third-party payors may treat products as therapeutically equivalent and base
formulary decisions on net cost. To lower the prescription cost, manufacturers frequently rebate a portion of
the prescription price to the third-party payors. Recently, purchasers and third-party payors have begun to
focus on value of new therapeutics and sought agreements in which price is based on achievement of
performance metrics.
Federal programs also impose price controls through mandatory ceiling prices on purchases by federal
agencies and federally funded hospitals and clinics and mandatory rebates on retail pharmacy prescriptions
paid by Medicaid and Tricare. These restrictions and limitations influence the purchase of healthcare
services and products. Legislative proposals to reform healthcare or reduce costs under government
programs may result in lower reimbursement for our product candidates or exclusion of our product
candidates from coverage. In addition, government programs like Medicaid include substantial penalties for
increasing commercial prices over the rate of inflation. All of these conditions can affect realization and
return on investment.
Private payors often rely on the lead of the governmental payors in rendering coverage and
reimbursement determinations. Therefore, achieving favorable CMS coverage and reimbursement is usually
a significant gating issue for successful introduction of a new product. In addition, many government
programs as a condition of participation mandate fixed discounts or rebates from manufacturers regardless
of formulary position or utilization, and then rely on competition in the market to attain further price
reductions, which can greatly reduce realization on the sale.
Further, the increased emphasis on managed healthcare in the United States and on country and
regional pricing and reimbursement controls in the European Union will put additional pressure on product
pricing, reimbursement, and utilization, which may adversely affect our future product sales and results of
operations. These pressures can arise from rules and practices of managed care groups, competition within
therapeutic classes, judicial decisions and governmental laws and regulations related to Medicare, Medicaid,
and healthcare reform, biopharmaceutical coverage and reimbursement policies, and pricing in general.
Patients who are prescribed treatments for their conditions and providers performing the prescribed
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services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Sales
of our product candidates will therefore depend substantially, both domestically and abroad, on the extent to
which the costs of our products will be paid by health maintenance, managed care, pharmacy benefit and
similar healthcare management organizations, or reimbursed by government health administration
authorities, such as Medicare and Medicaid, private health insurers, and other third-party payors.
As a result of the above, we may need to conduct expensive pharmacoeconomic and/or health
technology assessment studies in order to demonstrate the medical necessity and cost-effectiveness of our
products, in addition to the costs required to obtain the FDA and EMA approvals. Our product candidates
may not be considered medically necessary or cost-effective, or the rebate percentages required to secure
coverage may not yield an adequate margin over cost.
Moreover, a payor’s decision to provide coverage for a product does not imply that an adequate
reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us
to maintain price levels sufficient to realize an appropriate return on our investment in therapeutic
development. Legislative or regulatory proposals to reform healthcare or reduce costs under government
insurance programs may result in lower reimbursement for our products and product candidates or exclusion
of our products and product candidates from coverage. The cost containment measures that healthcare
payors and providers are instituting and any healthcare reform could significantly reduce our revenues from
the sale of any approved product candidates. We cannot provide any assurances that we will be able to
obtain and maintain third-party coverage or adequate reimbursement for our product candidates in whole or
in part.
The absence in Europe of any substantive harmonization of pricing and reimbursement regimes,
including health technology assessment, means that separate negotiations will need to take place with the
relevant authorities in each member state and may include a variety of risk share agreements with payors.
Healthcare reform measures
The United States and some foreign jurisdictions are considering or have enacted a number of
legislative and regulatory proposals designed to change the healthcare system in ways that could affect our
ability to sell our products profitably. 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 expanding access. In the United States, the biopharmaceutical
industry has been a particular focus of these efforts and has been significantly affected by major legislative
initiatives.
For example, on November 27, 2020, CMS issued an interim final rule implementing a Most Favored
Nation payment model under which reimbursement for certain Medicare Part B drugs and biologicals will
be based on a price that reflects the lowest per capita Gross Domestic Product-adjusted (GDP-adjusted)
price of any non-U.S. member country of the Organization for Economic Co-operation and Development
(OECD) with a GDP per capita that is at least sixty percent of the U.S. GDP per capita. Any reduction in
reimbursement from Medicare and other government programs may result in a similar reduction in
payments from private payors.
Moreover, the ACA broadened access to health insurance, attempts to reduce or constrain the growth of
healthcare spending, enhanced remedies against fraud and abuse, added new transparency requirements for
healthcare and health insurance industries, imposed new taxes and fees on the health care industry, and
imposed additional health policy reforms. The law expanded the eligibility criteria and mandatory eligibility
categories for Medicaid programs, thereby potentially increasing both the volume of sales and
manufacturers’ Medicaid rebate liability. The law also expanded the 340B discount program that mandates
discounts to certain hospitals, community centers, and other qualifying providers, by expanding the
categories of entities eligible to purchase under the program. In addition, the ACA authorized civil
monetary penalties for violating 340B pricing requirements, and regulations implementing this authority
became effective on January 1, 2019. The ACA revised the definition of “average manufacturer price”, or
AMP, for reporting purposes, which generally increased the amount of Medicaid rebates to states and
created a separate AMP for certain categories of administered therapeutics provided in non-retail outpatient
settings. The law additionally extended manufacturer’s Medicaid rebate liability to covered therapeutics
dispensed to patients enrolled in Medicaid managed care organizations and increased the statutory minimum
rebates a
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manufacturer must pay under the Medicaid Drug Rebate program. The revisions to the AMP definition and
Medicaid rebate formula can have the further effect of increasing the required 340B discounts. Further, the
ACA required manufacturers of covered therapeutics to pay mandatory Medicare Part D coverage gap
rebates, and the Bipartisan Budget Act of 2018, increased the required percentage to 70% of the pharmacy
charge to Medicare Part D patients while they are in the coverage gap. Finally, the ACA imposes a
significant annual fee on companies that manufacture or import branded prescription therapeutic products.
Substantial new provisions affecting compliance have also been enacted through the ACA and otherwise,
including the reporting of therapeutic sample distribution, which may require us to modify our business
practices with healthcare practitioners. Although the ACA was recently amended to repeal the individual
insurance mandate, and efforts to repeal and replace portions of the law may continue, it is likely that
pressure on biopharmaceutical pricing, especially under the Medicare program, will continue, and may also
increase our regulatory burdens and operating costs. Moreover, in the coming years, additional changes
could be made to governmental healthcare programs that could significantly impact the success of our
product candidates.
The cost of biopharmaceuticals continues to generate substantial governmental and third-party payor
interest. We expect that the biopharmaceutical industry will experience pricing pressures due to the trend
toward managed healthcare, the increasing influence of managed care organizations and additional
legislative proposals. Our results of operations could be adversely affected by current and future healthcare
reforms.
Some third-party payors also require pre-approval of coverage for new or innovative devices or
therapies before they will reimburse healthcare providers that use such therapies. While we cannot predict
whether any proposed cost-containment measures will be adopted or otherwise implemented in the future,
the announcement or adoption of these proposals could have a material adverse effect on our ability to
obtain adequate prices for our product candidates.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. The
Budget Control Act of 2011, as amended, created the Joint Select Committee on Deficit Reduction to
recommend proposals in spending reductions to Congress. The Joint Select Committee on Deficit Reduction
did not achieve its targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021,
triggering the legislation’s automatic reductions to several government programs. These reductions include
aggregate reductions to Medicare payments to providers of up to 2% per fiscal year. The Bipartisan Budget
Act of 2018 retained the federal budget “sequestration” Medicare payment reductions of 2%, at present that
reduction has been extended through 2030. The American Taxpayer Relief Act of 2012 further reduced
Medicare payments to several categories of healthcare providers and increased the statute of limitations
period for the government to recover overpayments to providers from three to five years. These and other
healthcare reform initiatives may result in additional reductions in Medicare and other healthcare funding,
which could have a material adverse effect on our financial operations. We expect that additional state and
federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that
federal and state governments will pay for healthcare products and services, which could further limit the
prices we are able to charge, or the amounts of reimbursement available, for our product candidates once
they are approved. The Bipartisan Budget Act also extended Manufacturer responsibility for prescription
costs in the Medicare Part D coverage gap to biosimilars, which had previously been exempt.
The Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. 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 or representatives of international organizations 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 or obtaining an improper advantage. The FCPA also obligates companies whose
securities are listed in the United States to comply with books and records an accounting control 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. Activities that violate the FCPA, even if they occur wholly
outside the United States, can result in criminal and civil fines, imprisonment, disgorgement, oversight by
compliance monitors, and suspension and debarment from government contracts, and refusal of orders under
existing government contracts.
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Other foreign anti-corruption regimes are arguably of wider application. For instance, the U.K. Bribery
Act 2010 applies to dealings with any decision maker whether in the private or public sector in a position of
trust.
Background on certain of our target indications
Set forth below is a description of certain of the target indications we currently intend to pursue with
our product candidates.
Cutaneous squamous cell carcinoma
CSCC is the second most common form of skin cancer and is estimated to be responsible for at least
7,000 deaths each year in the United States. It currently accounts for approximately 20% of all skin cancers
in the U.S., with the number of newly diagnosed cases expected to rise annually. When CSCC invades
deeper layers of the skin or adjacent tissues, it is categorized as locally advanced. Once it spreads to other
distant parts of the body, it is considered metastatic. Cemiplimab is the only approved therapy in the United
States and Brazil, and conditionally approved therapy in the European Union and Canada, for the treatment
of locally advanced or metastatic CSCC.
Melanoma
Melanoma is a form of skin cancer characterized by the uncontrolled growth of pigment-producing
cells (melanocytes) located in the skin. Metastatic melanoma is the deadliest form of the disease and occurs
when cancer spreads beyond the surface of the skin to other organs. The incidence of melanoma has been
increasing steadily for the last 30 years. In the United States, 91,270 new diagnoses of melanoma and more
than 9,320 related deaths were estimated to have occurred in 2018. Globally, the World Health Organization
estimates that by 2035, melanoma incidence will reach 424,102, with 94,308 related deaths. Melanoma is
mostly curable when treated in its very early stages; however, survival rates are roughly halved if regional
lymph nodes are involved.
Human capital
As of March 31, 2021, we employed 152 employees, all of which are full-time employees. Of the 152
employees, 129 are in research and development and 23 are in general and administrative functions. We
have never had a work stoppage, and none of our employees is represented by a labor organization or under
any collective bargaining arrangements. We consider our employee relations to be good.
We focus on identifying, attracting, retaining and developing highly talented and motivated employees.
Our equity and cash incentive plans are aligned to attract, retain and reward our employees through the
granting of stock-based and cash-based compensation awards. We believe motivating our employees to
perform at their highest level and take pride in achieving company goals increases stockholder value.
The well-being, health and safety of our employees are integral to the success of our business. In an
effort to protect the health and safety of our employees, early in the COVID-19 outbreak we proactively
implemented social distancing policies at our facilities, encouraged and enabled remote working
arrangements and restricted employee travel. In addition, we provided a safety training for all employees
and we established a task force focused on creating and keeping employees well informed about our latest
plans and guidance around COVID-19.
Corporate information
We are a Delaware corporation organized in July 2017. Our principal executive offices are located at
500 Unicorn Park Drive, 3 Floor, Woburn, MA 01801, and our telephone number is (781) 222-9600. Our
website is www.replimune.com. Information that is contained on, or that can be accessed through, our
website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider
information on our website to be part of this Annual Report on Form 10-K.
rd
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Available information
We make available free of charge on the investor relations portion of our website our Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements for our
annual meetings of stockholders, and amendments to those reports, as soon as reasonably practicable after
we file such material with, or furnish it to, the Securities and Exchange Commission, or SEC. These filings
are available for download free of charge on the investor relations portion of our website located at
https://ir.replimune.com. The SEC also maintains a website that contains reports, proxy and information
statements and other information about issuers, like us, that file electronically with the SEC. The address of
that website is https://www.sec.gov.
Item 1A.
Risk factors
Investing in our common stock involves a high degree of risk. You should carefully consider the risks
and uncertainties described below, together with all of the other information in this Annual Report on Form
10-K, including our audited consolidated financial statements and related notes and “Management’s
discussion and analysis of results of operations and financial condition.” If any of the following risks are
realized, our business, financial condition, operating results and prospects could be materially and
adversely affected. In that event, the price of our common stock could decline, and you could lose part or all
of your investment. The risks and uncertainties described below are not the only ones we face. Additional
risks and uncertainties not presently known to us or that we currently believe to be immaterial may also
adversely affect our business.
Summary of Risk Factors
Material risks that may affect our business, operating results and financial condition include, but are
not necessarily limited to, those relating to:
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the timing, progress, and results of our preclinical studies and clinical trials for our product
candidates, and the timing, scope or likelihood of regulatory filings and approvals for any of our
other product candidates;
our ability to develop and advance any future product candidates based on our novel Immulytic
platform and successfully complete clinical trials;
our ability to develop our product candidates for use in combination with other checkpoint blockade
therapies, including anti-PD-1;
our ability to successfully commercialize any product candidate for which we receive regulatory
approval and our expectations regarding the size of the patient populations or the market acceptance
of our product candidates if approved for commercial use;
our ability to compete with other biopharmaceutical, biotechnology companies and other third parties
and risks associated with such third parties developing or commercializing products more quickly or
marketing them more successfully than us;
negative developments in the field of immuno-oncology including clinical or commercial
developments that may be attributed to our product candidates;
our history of losses, the likelihood that we will continue to incur substantial and increasing net
losses in the future, and the likelihood that we will require additional financing to achieve our goals;
our intellectual property position, including the scope of protection we are able to establish and
maintain for intellectual property rights covering RP1 and our other product candidates, claims
others may make regarding rights in our intellectual property, and any potential infringement,
misappropriation or other violation of any third-party intellectual property rights;
the costs of operating our in-house manufacturing facility and our reliance on third-party
collaborators and clinical trial service providers;
our compliance with domestic and foreign laws, rules and regulations and the consequences in the
event that we fail to comply with such laws, rules and regulations;
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our ability to retain the continued service of our key professionals and to identify, hire and retain
additional qualified professionals;
our competitive position, and developments and projections relating to our competitors and our
industry;
the impact of the COVID-19 coronavirus, or COVID-19, as a global pandemic and related public
health issues; and
Risks related to product development
Our product candidates are in the early stages of development, are not approved for commercial sale and might
never receive regulatory approval or become commercially viable. We have never generated any revenue from
product sales and may never be profitable.
All of our product candidates are in research or early development. We have not generated any
revenues from the sale of products and do not expect to do so for at least the next several years. Our lead
product candidate, RP1, and any other product candidates will require extensive preclinical and/or clinical
testing and regulatory approval prior to commercial use. Our research and development efforts may not be
successful. Even if our clinical development efforts result in positive data, our product candidates may not
receive regulatory approval or be successfully introduced and marketed at prices that would permit us to
operate profitably.
An underlying problem with our Immulytic platform would adversely affect our business and may require us to
discontinue development of product candidates based on the same or similar therapeutic approaches.
Since all of the product candidates in our current pipeline are based on our Immulytic platform, if any
of our product candidates fail in development as a result of any underlying problem with our Immulytic
platform, then we may be required to discontinue development of all product candidates that are based on
our therapeutic approach. If we were required to discontinue development of our product candidates that are
based on our therapeutics approach, or if any of them were to fail to receive regulatory approval or achieve
sufficient market acceptance, we could be prevented from or significantly delayed in achieving profitability.
We can provide no assurance that we would be successful at developing other product candidates based on
an alternative therapeutic approach.
We will not be able to commercialize our product candidates if our preclinical studies do not produce successful
results and/or our clinical trials do not demonstrate the safety and efficacy of our product candidates.
Our product candidates are susceptible to the risks of failure inherent at any stage of product
development, including the occurrence of unexpected or unacceptable adverse events or the failure to
demonstrate efficacy in clinical trials. Clinical development is expensive and can take many years to
complete, and its outcome is inherently uncertain.
The results of preclinical studies, preliminary study results, and early clinical trials of our product
candidates may not be predictive of the results of later stage clinical trials. Our product candidates may not
perform as we expect, may ultimately have a different or no impact on tumors, may have a different
mechanism of action than we expect in humans, and may not ultimately prove to be safe and effective.
Preliminary and final results from preclinical studies and early stage trials, and trials in compounds that
we believe are similar to ours, may not be representative of results that are found in larger, controlled,
blinded, and longer-term studies. Product candidates may fail at any stage of preclinical or clinical
development. Product candidates may fail to show the desired safety and efficacy traits even if they have
progressed through preclinical studies or initial clinical trials. Preclinical studies and clinical trials may also
reveal unfavorable product candidate characteristics, including safety concerns. A number of companies in
the biopharmaceutical industry have suffered significant setbacks in clinical trials, notwithstanding
promising results in earlier preclinical studies or clinical trials or promising mechanisms of action. In some
instances, there can be significant variability in safety or efficacy results between different clinical trials of
the same product candidate due to numerous factors, including changes in trial procedures set forth in
protocols, differences in the size
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and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of
dropout among clinical trial participants. Moreover, should there be an issue with the design of a clinical
trial, our results may be impacted. We may not discover such a flaw until the clinical trial is at an advanced
stage.
We may also 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:
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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 be lost to follow-up at a higher rate than we anticipate, or may
elect to participate in alternative clinical trials sponsored by our competitors with product candidates
that treat the same indications as our product candidates;
regulators or institutional review boards, or IRBs, may not authorize us or our investigators to
commence a clinical trial, conduct a clinical trial at a prospective trial site, or amend trial protocols,
or may require that we modify or amend our clinical trial protocols;
we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial
contracts or clinical trial protocols with prospective trial sites and/or contract research organizations,
or CROs;
clinical trials of our product candidates may produce negative or inconclusive results, or our studies
may fail to reach the necessary level of statistical significance, and we may decide, or regulators may
require us, to conduct additional clinical trials or abandon product development programs;
our third-party contractors may fail to comply with regulatory requirements or the clinical trial
protocol, or meet their contractual obligations to us in a timely manner, or at all, or we may be
required to engage in additional clinical trial site monitoring;
we, regulators, or IRBs may require that we or our investigators suspend or terminate clinical
research for various reasons, including noncompliance with regulatory requirements or a finding that
the participants are being exposed to unacceptable health risks, undesirable side effects, or other
unexpected characteristics of the product candidate, or due to findings of undesirable effects caused
by a chemically or mechanistically similar therapeutic or therapeutic candidate;
changes could be adopted in marketing approval policies during the development period, rendering
our data insufficient to obtain marketing approval;
statutes or regulations could be amended or new ones could be adopted, especially in light of the new
Administration in the United States;
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changes could be adopted in the regulatory review process for submitted product applications;
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the cost of clinical trials of our product candidates may be greater than we anticipate or we may have
insufficient funds for a clinical trial or to pay the substantial user fees required by the FDA upon the
filing of a Biologics License Application, or BLA, or equivalent authorizations from comparable
foreign regulatory authorities;
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 or we may not be able to obtain them on
favorable terms due to reasons, such as international trade policies;
we may decide, or regulators may require us, to conduct or gather, as applicable, additional clinical
trials, analyses, reports, data, or preclinical trials, or we may abandon product development
programs;
we may fail to reach an agreement with regulators or IRBs regarding the scope, design, or
implementation of our clinical trials, and the FDA or comparable foreign regulatory authorities may
require changes to our study designs that make further study impractical or not financially prudent;
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regulators may ultimately disagree with the design or our conduct of our preclinical studies or
clinical trials, finding that they do not support product candidate approval;
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we may have delays in adding new investigators or clinical trial sites, or we may experience a
withdrawal of clinical trial sites;
patients that enroll in our studies may misrepresent their eligibility or may otherwise not comply
with the clinical trial protocol, resulting in the need to drop the patients from the study or clinical
trial, increase the needed enrollment size for the clinical trial or extend its duration;
•
there may be regulatory questions or disagreements regarding interpretations of data and results;
•
the FDA or comparable foreign regulatory authorities may disagree with our study design, including
endpoints, or our interpretation of data from preclinical studies and clinical trials or find that a
product candidate’s benefits do not outweigh its safety risks;
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the FDA or comparable foreign regulatory authorities may not accept data from studies with clinical
trial sites in foreign countries;
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the FDA or comparable foreign regulatory authorities may disagree with our intended indications;
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the FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fault
with the manufacturing processes or our manufacturing facilities for clinical and future commercial
supplies;
the data collected from clinical trials, including our registration directed or registration intended
trials, of our product candidates may not be sufficient to the satisfaction of the FDA or comparable
foreign regulatory authorities to support the submission of a BLA or other comparable submission in
foreign jurisdictions or to obtain regulatory approval in the United States or elsewhere;
the FDA or comparable foreign regulatory authorities may take longer than we anticipate to make a
decision on our product candidates;
we may not be able to demonstrate that a product candidate provides an advantage over current
standards of care or current or future competitive therapies in development; and
we, the third parties on which we rely, and the FDA may have delays in the conduct of our respective
operations as a result of the effects of the COVID-19 pandemic, which could result in delays or
prevent our ability to receive marketing approval or commercialize our product candidates.
Our development costs will also increase if we experience delays in testing or approvals, and we may
not have sufficient funding to complete the testing and approval process for any of our product candidates.
We may be required to obtain additional funds to complete clinical trials and prepare for possible
commercialization of our product candidates. We do not know whether any preclinical tests or clinical trials
beyond what we currently have planned will be required, will begin as planned, will need to be restructured,
or will be completed on schedule, or at all. Significant delays relating to any preclinical or clinical trials
also could shorten any periods during which we may have the exclusive right to commercialize our product
candidates or allow our competitors to bring products to market before we do and impair our ability to
successfully commercialize our product candidates and may harm our business and results of operations. In
addition, many of the factors that cause, or lead to, delays in clinical trials may ultimately lead to the denial
of marketing approval of any of our product candidates. If any of these occur, our business, financial
condition, results of operations, stock price and prospects may be materially harmed.
We anticipate that our product candidates will be used in combination with third-party drugs, some of which are still
in development, and we have limited or no control over the supply, regulatory status, or regulatory approval of such
drugs.
Our product candidates may be administered in combination with checkpoint blockade drugs, a class of
drugs that are intended to stop tumor cells from “switching off” an immune system attack against
themselves. We have entered into agreements with BMS for the supply of nivolumab, its anti-PD-1 therapy,
for use in connection with our ongoing IGNYTE Phase 1/2 trials with RP1 and our clinical trial with RP2.
We have also entered into a clinical collaboration agreement with Regeneron, which includes the supply of
cemiplimab, its anti-PD-1 therapy, for clinical trials conducted thereunder. We are enrolling patients in the
CERPASS trial, our first planned clinical trial under the Regeneron agreement. We may enter into additional
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agreements for the supply of anti-PD-1 products for use in combination with and for the continued
development of one or more of our product candidates. Our ability to develop and ultimately commercialize
our product candidates used in combination with nivolumab, cemiplimab or any other checkpoint blockade
therapy will depend on our ability to access such drugs on commercially reasonable terms for the clinical
trials and their availability for use with the commercialized product, if approved. We cannot be certain that
current or potential future commercial relationships will provide us with a steady supply of such drugs on
commercially reasonable terms or at all.
Any failure to maintain or enter into new successful commercial relationships, or the expense of
purchasing checkpoint blockade therapies in the market, may delay our development timelines, increase our
costs and jeopardize our ability to develop our product candidates as commercially viable therapies. If any
of these occur, our business, financial condition, results of operations, stock price and prospects may be
materially harmed.
Moreover, the development of our product candidates for use in combination with another product or
product candidate may present challenges that are not faced for single agent product candidates. While we
have opened a clinical trial for use of RP1 as a monotherapy, we are generally developing RP1 and our other
product candidates for use in combination with anti-PD-1 or potentially anti-PDL1 therapies and may
develop RP1 or our other product candidates for use with other therapies. Although we intend our IGNYTE
anti-PD-1 failed melanoma cohort and our CERPASS trial to be registration directed, the FDA may require
us to use more complex clinical trial designs in order to evaluate the contribution of each product and
product candidate to any observed effects. It is possible that the results of these trials could show that any
positive previous trial results are attributable to the therapy with which our products were combined and not
our product candidates. Moreover, following product approval, the FDA may require that products used in
conjunction with each other be cross-labeled for combined use. To the extent that we do not have rights to
the other product, this may require us to work with a third party to satisfy such a requirement. Moreover,
developments related to the other product may impact our clinical trials for the combination as well as our
commercial prospects should we receive marketing approval. Such developments may include changes to
the other product’s safety or efficacy profile, changes to the availability of the approved product, and
changes to the standard of care.
In the event that BMS, Regeneron or any future collaborator or supplier cannot continue to supply their
products on commercially reasonable terms or at all, we would need to identify alternatives for accessing an
anti-PD-1 therapy. Additionally, should the supply of products from BMS, Regeneron or any future
collaborator or supplier be interrupted, delayed or otherwise be unavailable to us, our clinical trials may be
delayed, interrupted or halted. In the event we are unable to source a supply of an acceptable alternative
anti-PD-1 therapy, or are unable to do so on commercially reasonable terms, our business, financial
condition, results of operations, stock price and prospects may be materially harmed.
If we fail to develop additional product candidates, our commercial opportunity could be limited.
Our lead product candidate is RP1. A key part of our strategy is to pursue clinical development of RP1
and additional product candidates, including RP2 and RP3. Developing, obtaining marketing approval for,
and commercializing additional product candidates will require substantial additional funding and will be
subject to the risks of failure inherent in medical product development. We cannot assure our shareholders
that we will be able to successfully advance any of these additional product candidates through the
development process.
Even if we obtain approval from the FDA or comparable foreign regulatory authorities to market
additional product candidates for the treatment of solid tumors, we cannot assure our shareholders that any
such product candidates will be successfully commercialized, widely accepted in the marketplace, or more
effective than other commercially available alternatives. If we are unable to successfully develop and
commercialize additional product candidates, our commercial opportunity may be limited and our business,
financial condition, results of operations, stock price and prospects may be materially harmed.
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Risks related to regulatory approval
Even if our development efforts are successful, we may not obtain regulatory approval for any of our product
candidates in the United States or other jurisdictions, which would prevent us from commercializing our product
candidates. Even if we obtain regulatory approval for our product candidates, any such approval may be subject to
limitations, including with respect to the approved indications or patient populations, which could impair our ability
to successfully commercialize our product candidates.
We are not permitted to market or promote or sell any of our product candidates before we receive
regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive
such regulatory approval for any of our product candidates. Securing marketing approval requires the
submission of extensive preclinical and clinical data and supporting information to regulatory authorities for
each therapeutic indication to establish the product candidate’s safety and efficacy for that indication.
Securing marketing approval also requires the submission of information about the product manufacturing
process to, and inspection of manufacturing facilities and clinical trial sites by, the regulatory authorities. If
we do not receive approval from the FDA and comparable foreign regulatory authorities for any of our
product candidates, we will not be able to commercialize such product candidates in the United States or in
other jurisdictions. If significant delays in obtaining approval for and commercializing our product
candidates occur in any jurisdictions, our business, financial condition, results of operations, stock price and
prospects will be materially harmed. Even if our product candidates are approved, they may:
•
be subject to limitations on the indicated uses or patient populations for which they may be
marketed, distribution restrictions, or other conditions of approval;
•
contain significant safety warnings, including boxed warnings, contraindications, and precautions;
•
not be approved with label statements necessary or desirable for successful commercialization; or
•
contain requirements for costly post-market testing and surveillance, or other requirements, including
the submission of a risk evaluation and mitigation strategy, or REMS, to monitor the safety or
efficacy of the products.
We have not previously submitted a BLA to the FDA, or a similar marketing application to comparable
foreign regulatory authorities, for any product candidate, and we can provide no assurance that we will
ultimately be successful in obtaining regulatory approval for claims that are necessary or desirable for
successful marketing, or at all.
The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time
consuming and inherently unpredictable. If we are not able to obtain, or experience delays in obtaining, required
regulatory approvals, we will not be able to commercialize our product candidates as expected, and our ability to
generate revenue may be materially impaired.
The time required to obtain approval by the FDA and comparable foreign regulatory authorities is
unpredictable but typically takes many years following the commencement of clinical trials and depends
upon numerous factors, including the substantial discretion of the regulatory authorities. In addition,
approval policies, regulations, or the type and amount of clinical data necessary to gain approval may
change during the course of a product candidate’s clinical development and may vary among jurisdictions
and there may be varying interpretations of data obtained from preclinical studies or clinical trials, any of
which may cause delays or limitations in the approval or a decision not to approve an application. These
regulatory requirements may require us to amend our clinical trial protocols, conduct additional preclinical
studies or clinical trials that may require regulatory or IRB approval, or otherwise cause delays in the
approval or rejection of an application. Any delay in obtaining or failure to obtain required approvals could
materially adversely affect our ability to generate revenue from the particular product candidate, which may
materially harm our business, financial condition, results of operations, stock price and prospects.
If we experience delays in obtaining approval, if we fail to obtain approval of a product candidate or if
the label for a product candidate does not include the labeling claims necessary or desirable for the
successful commercialization of that product candidate, the commercial prospects for such product
candidate may be harmed and our ability to generate revenues from that product candidate may be
materially impaired.
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The FDA or a comparable foreign regulatory authority may determine that our product candidates have
undesirable side effects that could delay or prevent their regulatory approval or commercialization.
There can be no assurance that undesirable side effects or serious adverse events will not be caused by
or associated with RP1 or our other product candidates as they continue through or enter clinical
development. Serious adverse events or undesirable side effects caused by our product candidates could
cause us, IRBs, and other reviewing entities or regulatory authorities to interrupt, delay, or halt clinical trials
and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or
comparable foreign regulatory authorities. For example, if concerns are raised regarding the safety of a new
therapeutic as a result of undesirable side effects identified during clinical or preclinical testing, the FDA or
comparable foreign regulatory authority may order us to cease further development, decline to approve the
product candidate or issue a letter requesting additional data or information prior to making a final decision
regarding whether or not to approve the product candidate. The FDA or comparable foreign regulatory
authorities, or IRBs and other reviewing entities, may also require, or we may voluntarily develop,
strategies for managing adverse events during clinical development, which could include restrictions on our
enrollment criteria, the use of stopping criteria, adjustments to a study’s design, or the monitoring of safety
data by a data monitoring committee, among other strategies. The FDA or comparable foreign regulatory
authority requests for additional data or information could also result in substantial delays in the approval of
our product candidates.
Undesirable side effects caused by any of our product candidates could also result in denial of
regulatory approval by the FDA or comparable foreign regulatory authorities for any or all targeted
indications or the inclusion of unfavorable information in our product labeling, such as limitations on the
indicated uses for which the products may be marketed or distributed, a label with significant safety
warnings, including boxed warnings, contraindications, and precautions, a label without statements
necessary or desirable for successful commercialization, or may result in requirements for costly post-
marketing testing and surveillance, or other requirements, including REMS, to monitor the safety or efficacy
of the products, and in turn prevent us from commercializing and generating revenues from the sale of our
product candidates. Undesirable side effects may limit the potential market for any approved products or
could result in the discontinuation of the sales and marketing of the product, or withdrawal of product
approvals. Later discovered undesirable side effects may further result in the imposition of a REMS, label
revisions, post approval study requirements, or other testing and surveillance.
If any of our product candidates is associated with serious adverse events or undesirable side effects or
have properties that are unexpected, we may need to abandon development or limit development of that
product candidate to certain uses or subpopulations in which the undesirable side effects or other
characteristics are less prevalent, less severe or more acceptable from a risk/benefit perspective. The
therapeutic-related side effects could affect patient recruitment or the ability of enrolled patients to complete
the trial or result in potential product liability claims. Any of these occurrences may materially harm our
business, financial condition, results of operations, stock price and prospects.
Changes in product candidate manufacturing or formulation may result in additional costs or delay.
As product candidates are developed through preclinical studies to later stage clinical trials towards
approval and commercialization, it is common that various aspects of the development program, such as
manufacturing methods and formulation, are altered along the way in an effort to optimize processes and
results. 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 altered materials. Such
changes may also require additional testing, or notification to, or approval by the FDA or a comparable
foreign regulatory authority. This could delay completion of clinical trials, require the conduct of bridging
clinical trials or studies, require the repetition of one or more clinical trials, increase clinical trial costs,
delay approval of our product candidates and/or jeopardize our ability to commence product sales and
generate revenue.
Regulatory approval by the FDA or comparable foreign regulatory authorities is limited to those specific indications
and conditions for which approval has been granted, and we may be subject to substantial fines, criminal penalties,
injunctions, or other enforcement actions if we are determined to be promoting the use of our products for
unapproved or “off label” uses, resulting in damage to our reputation and business.
We must comply with requirements concerning advertising and promotion for any product candidates
for which we obtain marketing approval. Promotional communications with respect to therapeutics are
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subject to a variety of legal and regulatory restrictions and continuing review by the FDA, Department of
Justice, Department of Health and Human Services’ Office of Inspector General, state attorneys general,
members of Congress, and the public. When the FDA or comparable foreign regulatory authorities issue
regulatory approval for a product candidate, the regulatory approval is limited to those specific uses and
indications for which a product is approved. If we are not able to obtain FDA approval for desired uses or
indications for our product candidates, we may not market or promote them for those indications and uses,
referred to as off label uses, and our business, financial condition, results of operations, stock price and
prospects may be materially harmed. We also must sufficiently substantiate any claims that we make for our
products, including claims comparing our products to other companies’ products, and must abide by the
FDA’s strict requirements regarding the content of promotion and advertising.
While physicians may choose to prescribe products for uses that are not described in the product’s
labeling and for uses that differ from those tested in clinical trials and approved by the regulatory
authorities, we are prohibited from marketing and promoting the products for indications and uses that are
not specifically approved by the FDA. These off label uses are common across medical specialties and may
constitute an appropriate treatment for some patients in varied circumstances. Regulatory authorities in the
United States generally do not restrict or regulate the behavior of physicians in their choice of treatment
within the practice of medicine. Regulatory authorities do, however, restrict communications by
biopharmaceutical companies concerning off label use.
If we are found to have impermissibly promoted any of our product candidates, we may become subject
to significant liability and government fines. The FDA and other agencies actively enforce the laws and
regulations regarding product promotion, particularly those prohibiting the promotion of off label uses, and
a company that is found to have improperly promoted a product may be subject to significant sanctions. The
federal government has levied large civil and criminal fines against companies for alleged improper
promotion and has enjoined several companies from engaging in off label promotion. The FDA has also
requested that companies enter into consent decrees or permanent injunctions under which specified
promotional conduct is changed or curtailed.
In the United States, engaging in the impermissible promotion of our products, following approval, for
off label uses can also subject us to false claims and other litigation under federal and state statutes. These
include fraud and abuse and consumer protection laws, which can lead to civil and criminal penalties and
fines and agreements with governmental authorities that materially restrict the manner in which we promote
or distribute therapeutic products and conduct our business. These restrictions could include corporate
integrity agreements, suspension or exclusion from participation in federal and state healthcare programs,
and suspension and debarment from government contracts and refusal of orders under existing government
contracts. These False Claims Act lawsuits against manufacturers of drugs and biologics have increased
significantly in volume and breadth. In addition, False Claims Act lawsuits may expose manufacturers to
follow-on claims by private payers based on fraudulent marketing practices. This growth in litigation has
increased the risk that a biopharmaceutical company will have to defend a false claim action, pay settlement
fines or restitution, as well as criminal and civil penalties, agree to comply with burdensome reporting and
compliance obligations, and be excluded from Medicare, Medicaid, or other federal and state healthcare
programs. If we do not lawfully promote our approved products, if any, we may become subject to such
litigation and, if we do not successfully defend against such actions, those actions may have a material
adverse effect on our business, financial condition, results of operations, stock price and prospects.
In the United States, the promotion of biopharmaceutical products is subject to additional FDA
requirements and restrictions on promotional statements. If after one or more of our product candidates
obtains marketing approval the FDA determines that our promotional activities violate its regulations and
policies pertaining to product promotion, it could request that we modify our promotional materials or
subject us to regulatory or other enforcement actions, including issuance of warning letters or untitled
letters, suspension or withdrawal of an approved product from the market, requests for recalls, payment of
civil fines, disgorgement of money, imposition of operating restrictions, injunctions or criminal prosecution,
and other enforcement actions. Similarly, industry codes in foreign jurisdictions may prohibit companies
from engaging in certain promotional activities and regulatory agencies in various countries may enforce
violations of such codes with civil penalties. If we become subject to regulatory and enforcement actions
our business, financial condition, results of operations, stock price and prospects will be materially harmed.
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Even if our product candidates receive regulatory approval, we will be subject to ongoing obligations and continued
regulatory review, which may result in significant additional expense and limit how we manufacture and market
our products.
Any product candidate for which we obtain marketing approval will be subject to extensive and
ongoing requirements of and review by the FDA and comparable foreign regulatory authorities, including
requirements related to the manufacturing processes, post approval clinical data, labeling, packaging,
distribution, adverse event reporting, shortage reporting, risk management plans, supply chain security,
storage, recordkeeping, export, import, advertising, marketing, and promotional activities for such product.
These requirements further include submissions of safety and other post-marketing information, including
manufacturing deviations and reports, registration and listing requirements, the payment of annual fees,
continued compliance with current Good Manufacturing Practice, or cGMP, requirements relating to
manufacturing, quality control, quality assurance, and corresponding maintenance of records and
documents, and good clinical practices, or GCPs, for any clinical trials that we conduct post approval.
The FDA and comparable foreign regulatory authorities will continue to closely monitor the safety
profile of any product even after approval. If the FDA or comparable foreign regulatory authorities become
aware of new safety information after approval of any of our product candidates, they may withdraw
approval, issue public safety alerts, require labeling changes or establishment of a REMS or similar strategy,
impose significant restrictions on a product’s indicated uses or marketing, or impose ongoing requirements
for potentially costly post approval studies or post-market surveillance. Any such restrictions could limit
sales of the product.
We and any of our suppliers or collaborators, including our contract manufacturers, could be subject to
periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs and other
FDA regulatory requirements. Application holders must further notify the FDA, and depending on the
nature of the change, obtain FDA preapproval for product and manufacturing changes.
In addition, later discovery of previously unknown adverse events or that the product is less effective
than previously thought or other problems with our products, manufacturers or manufacturing processes, or
failure to comply with regulatory requirements both before and after approval, may yield various negative
results, including:
•
restrictions on manufacturing, distribution, or marketing of such products;
•
restrictions on the labeling, including required additional warnings, such as black boxed warnings,
contraindications, precautions, and restrictions on the approved indication or use;
•
modifications to promotional pieces;
•
issuance of corrective information;
•
requirements to conduct post-marketing studies or other clinical trials;
•
clinical holds or termination of clinical trials;
•
requirements to establish or modify a REMS or similar strategy;
•
changes to the way the product candidate is administered;
•
liability for harm caused to patients or subjects;
•
reputational harm;
•
the product becoming less competitive;
•
warning, untitled, or cyber letters;
•
suspension of marketing or withdrawal of the products from the market;
•
regulatory authority issuance of safety alerts, Dear Healthcare Provider letters, press releases, or
other communications containing warnings or other safety information about the product candidate;
•
refusal to approve pending applications or supplements to approved applications that we submit;
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•
recalls of products;
•
fines, restitution or disgorgement of profits or revenues;
•
suspension or withdrawal of marketing approvals;
•
refusal to permit the import or export of our products;
•
product seizure or detention;
•
FDA debarment, suspension and debarment from government contracts, and refusal of orders under
existing government contracts, exclusion from federal healthcare programs, consent decrees, or
corporate integrity agreements; or
•
injunctions or the imposition of civil or criminal penalties, including imprisonment.
Any of these events could prevent us from achieving or maintaining market acceptance of the particular
product candidate, if approved, or could substantially increase the costs and expenses of commercializing
such product, which in turn could delay or prevent us from generating significant revenues from its
marketing and sale. Any of these events could further have other material and adverse effects on our
operations and business and could adversely impact our business, financial condition, results of operations,
stock price and prospects.
The FDA’s policies or those of comparable foreign regulatory authorities may change and additional
government regulations may be enacted that could prevent, limit or delay regulatory approval of our product
candidates, limit the marketability of our product candidates, or impose additional regulatory obligations on
us. Changes in medical practice and standard of care may also impact the marketability of our product
candidates.
If we are slow or unable to adapt to changes in existing requirements, standards of care, or the adoption
of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any
marketing approval that we may have obtained and be subject to regulatory enforcement action.
Should any of the above actions take place, we could be prevented from or significantly delayed in
achieving profitability. Further, the cost of compliance with post approval regulations may have a negative
effect on our operations and business and could adversely impact our business, financial condition, results
of operations, stock price and prospects.
Obtaining and maintaining marketing approval for our product candidates in one jurisdiction would not mean that
we will be successful in obtaining marketing approval of that product candidate in other jurisdictions, which could
prevent us from marketing our products internationally.
Obtaining and maintaining marketing approval of our product candidates in one jurisdiction would not
guarantee that we will be able to obtain or maintain marketing approval in any other jurisdiction, while a
failure or delay in obtaining marketing approval in one jurisdiction may have a negative effect on the
marketing approval process in others. For example, even if the FDA grants marketing approval of a product
candidate, comparable foreign regulatory authorities must also approve the manufacturing, marketing and
promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and
can involve requirements and administrative review periods different from and, in some cases, greater than,
those in the United States, including additional preclinical studies or clinical trials, as clinical trials
conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many
jurisdictions outside the United States, a product candidate must be approved for reimbursement before it
can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our
products is also subject to approval. Additionally, with the full departure of the United Kingdom from the
European Union in January 2021, commonly referred to as Brexit, there is continuing regulatory
uncertainty. Since a significant proportion of the regulatory framework in the United Kingdom is derived
from European Union directives and regulations, and the degree to which the United Kingdom and
European Union regulatory regimes align or diverge could materially impact the execution of our clinical
trials or approval of our product candidates in the United Kingdom or the European Union.
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Regulatory authorities in jurisdictions outside of the United States have requirements for approval of
product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining foreign
marketing approvals and compliance with foreign regulatory requirements could result in significant delays,
difficulties and costs for us and could delay or prevent the introduction of our products in certain countries.
If we fail to comply with the regulatory requirements in international markets and/or receive applicable
marketing approvals, our target market will be reduced and our ability to realize the full market potential of
our product candidates will be harmed. If we obtain approval for any product candidate and ultimately
commercialize that product in foreign markets, we would be subject to additional risks and uncertainties,
including the burden of complying with complex and changing foreign regulatory, tax, accounting and legal
requirements and the reduced protection of intellectual property rights in some foreign countries.
Risks related to commercialization
If we are unable to successfully commercialize any product candidate for which we receive regulatory approval, or
experience significant delays in doing so, our business will be materially harmed.
If we are successful in obtaining marketing approval from applicable regulatory authorities for RP1 or
any of our other product candidates, our ability to generate revenues from our product candidates will
depend on our success in:
•
launching commercial sales of our product candidates, whether alone or in collaboration with others;
•
•
•
•
•
•
receiving an approved label with claims that are necessary or desirable for successful marketing, and
that does not contain safety or other limitations that would impede our ability to market the product
candidates;
creating market demand for our product candidates through marketing, sales and promotion
activities;
hiring, training, and deploying a sales force or contracting with third parties to commercialize
product candidates in the United States;
manufacturing product candidates in sufficient quantities and at acceptable quality and cost to meet
commercial demand at launch and thereafter;
establishing and maintaining agreements with wholesalers, distributors, and group purchasing
organizations on commercially reasonable terms;
creating partnerships with, or offering licenses to, third parties to promote and sell product
candidates in foreign markets where we receive marketing approval;
•
maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
•
achieving market acceptance of our product candidates by patients, the medical community, and
third-party payors;
•
achieving appropriate reimbursement for our product candidates;
•
effectively competing with other therapies; and
•
maintaining a continued acceptable safety profile of our product candidates following launch.
To the extent we are not able to do any of the foregoing, our business, financial condition, results of
operations, stock price and prospects will be materially harmed.
We face significant competition from other biopharmaceutical and biotechnology companies, academic institutions,
government agencies, and other research organizations, which may result in others discovering, developing or
commercializing products more quickly or marketing them more successfully than us. If their product candidates
are shown to be safer or more effective than ours, our commercial opportunity may be reduced or eliminated.
The development and commercialization of cancer immunotherapy products is characterized by rapidly
advancing technologies, intense competition and a strong emphasis on proprietary rights. We face
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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 major
biopharmaceutical companies, specialty biopharmaceutical companies, and biotechnology companies
worldwide. There are a number of large biopharmaceutical and biotechnology companies that currently
market and sell products or are pursuing the development of products for the treatment of solid tumors,
including oncolytic immunotherapy and cancer vaccine approaches. Potential competitors also include
academic institutions, government agencies, and other public and private research organizations that
conduct research, seek patent protection, and establish collaborative arrangements for research,
development, manufacturing, and commercialization.
While our product candidates are intended to be used in combination with other drugs with different
mechanisms of action, if and when marketed they will still compete with a number of drugs that are
currently marketed or in development that also target cancer. To compete effectively with these drugs, our
product candidates will need to demonstrate advantages in clinical efficacy and safety compared to these
competitors when used alone or in combination with other drugs.
Our commercial opportunities could be reduced or eliminated if our competitors develop and
commercialize products that are safer, more effective, have fewer or less severe side effects, are easier to
administer or are less expensive alone or in combination with other therapies than any products that we may
develop alone or in combination with other therapies. Our competitors also may obtain FDA or comparable
foreign regulatory authority approval for their products more rapidly than we may obtain approval for ours,
which could result in our competitors establishing a strong market position before we are able to enter the
market. In addition, our ability to compete may be affected in many cases by insurers or other third-party
payors coverage decisions.
Certain of the companies with which we are competing or 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 biopharmaceutical and biotechnology industries may result in even more
resources being concentrated among a smaller number of our competitors. Early stage companies may also
prove to be significant competitors, particularly through collaborative arrangements with large and
established companies. These third parties compete with us in recruiting and retaining qualified scientific
and management personnel and establishing clinical trial sites and patient registration for clinical trials, as
well as in developing or acquiring technologies complementary to, or necessary for, our programs. If we are
unable to successfully compete with these companies our business, financial condition, results of operations,
stock price and prospects may be materially harmed.
If we are unable to establish effective marketing, sales and distribution capabilities or enter into agreements with
third parties to market and sell our product candidates, if they are approved, the revenues that we generate may be
limited and we may never become profitable.
We currently do not have a commercial infrastructure for the marketing, sale, and distribution of our
product candidates. If and when our product candidates receive marketing approval, we intend to
commercialize our product candidates on our own in the United States and potentially with pharmaceutical
or biotechnology partners in other geographies. In order to commercialize our products, we must build our
marketing, sales, and distribution capabilities or make arrangements with third parties to perform these
services. We may not be successful in doing so. Should we decide to move forward in developing our own
marketing capabilities, we may incur expenses prior to product launch or even approval in order to recruit a
sales force and develop a marketing and sales infrastructure. If a commercial launch is delayed as a result of
FDA or comparable foreign regulatory authority requirements or other reasons, we would incur these
expenses prior to being able to realize any revenue from sales of our product candidates. Even if we are able
to effectively hire a sales force and develop a marketing and sales infrastructure, our sales force and
marketing teams may not be successful in commercializing our product candidates. This may be costly, and
our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
We may also or alternatively decide to collaborate with third-party marketing and sales organizations to
commercialize any approved product candidates in the United States, in which event, our ability to generate
product revenues may be limited. To the extent we rely on third parties to commercialize any products for
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which we obtain regulatory approval, we may receive less revenues than if we commercialized these
products ourselves, which could materially harm our prospects. In addition, we would have less control over
the sales efforts of any other third parties involved in our commercialization efforts, and could be held liable
if they failed to comply with applicable legal or regulatory requirements.
We have no prior experience in the marketing, sale, and distribution of biopharmaceutical products, and
there are significant risks involved in building and managing a commercial infrastructure. The establishment
and development of commercial capabilities, including compliance plans, to market any products we may
develop will be expensive and time consuming and could delay any product launch, and we may not be able
to successfully develop this capability. We will have to compete with other biopharmaceutical and
biotechnology companies, including oncology-focused companies, to recruit, hire, train, manage, and retain
marketing and sales personnel, which is expensive and time consuming and could delay any product launch.
Developing our sales capabilities may also divert resources and management attention away from product
development.
In the event we are unable to develop a marketing and sales infrastructure, we may not be able to
commercialize our product candidates in the United States or elsewhere, which could limit our ability to
generate product revenues and materially harm our business, financial condition, results of operations, stock
price and prospects. Factors that may inhibit our efforts to commercialize our product candidates include:
•
•
the inability to recruit, train, manage, and retain adequate numbers of effective sales and marketing
personnel;
the inability of sales personnel to obtain access to physicians or persuade adequate numbers of
physicians to prescribe our product candidates;
•
our inability to effectively oversee a geographically dispersed sales and marketing team;
•
the costs associated with training sales and marketing personnel on legal and regulatory compliance
matters and monitoring their actions;
•
an inability to secure adequate coverage and reimbursement by government and private health plans;
•
•
•
•
•
•
the clinical indications for which the products are approved and the claims that we may make for the
products;
limitations or warnings, including distribution or use restrictions, contained in the products’
approved labeling;
any distribution and use restrictions imposed by the FDA or comparable foreign regulatory
authorities or to which we agree as part of a mandatory REMS or voluntary risk management plan;
liability for sales or marketing personnel who fail to comply with the applicable legal and regulatory
requirements;
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 or engaging a contract sales organization.
Our product candidates are based on a novel approach to the treatment of cancer, which makes it difficult to predict
the time and cost of product candidate development.
We have concentrated all of our research and development efforts on product candidates based on our
Immulytic platform, and our future success depends on the successful development of this therapeutic
approach. There can be no assurance that any development problems we experience in the future will not
cause significant delays or unanticipated costs, or that such development problems can be solved. Should we
encounter development problems, including unfavorable preclinical or clinical trial results, the FDA and
foreign regulatory authorities may refuse to approve our product candidates, or may require additional
information, tests, or trials, which could significantly delay product development and significantly increase
our development costs. Moreover, even if we are able to provide the requested information or trials to the
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FDA, there would be no guarantee that the FDA would accept them or approve our product candidates. We
may also experience delays in developing a sustainable, reproducible and scalable manufacturing process, or
developing or qualifying and validating product release assays, other testing and manufacturing methods,
and our equipment and facilities in a timely manner, which may prevent us from completing our clinical
trials or commercializing our product candidates on a timely or profitable basis, if at all.
In addition, the clinical trial requirements of the FDA and comparable foreign regulatory authorities
and the criteria these regulators use to determine the safety and efficacy of a product candidate vary
substantially according to the type, complexity, novelty and intended use and market of the potential
products. The FDA and comparable foreign regulatory authorities have limited experience with the approval
of oncolytic immunotherapies. Only one oncolytic immunotherapy, T-Vec, has received FDA approval to
date. Any product candidates that are approved may be subject to extensive post approval regulatory
requirements, including requirements pertaining to manufacturing, distribution, and promotion. We may
need to devote significant time and resources to compliance with these requirements.
If our product candidates do not achieve broad market acceptance, the revenues that we generate from their sales
may be limited, and we may never become profitable.
We have never commercialized a product candidate for any indication. Even if our product candidates
are approved by the appropriate regulatory authorities for marketing and sale, they may not gain acceptance
among physicians, patients, third-party payors, and others in the medical community. If any product
candidates for which we obtain regulatory approval do not gain an adequate level of market acceptance, we
could be prevented from or significantly delayed in achieving profitability. Market acceptance of our
product candidates by the medical community, patients, and third party payors will depend on a number of
factors, some of which are beyond our control. For example, physicians are often reluctant to switch their
patients and patients may be reluctant to switch from existing therapies even when new and potentially more
effective or safer treatments enter the market.
Efforts to educate the medical community and third party payors on the benefits of our product
candidates may require significant resources and may not be successful. If any of our product candidates is
approved but does not achieve an adequate level of market acceptance, we could be prevented from or
significantly delayed in achieving profitability. The degree of market acceptance of any of our product
candidates will depend on a number of factors, including:
•
the efficacy of our product candidates in combination with marketed checkpoint blockade drugs;
•
•
•
•
•
•
•
•
the commercial success of the checkpoint blockade drugs with which our products are co-
administered;
the prevalence and severity of adverse events associated with our product candidates or those
products with which they are co-administered;
the clinical indications for which the products are approved and the approved claims that we may
make for the products;
limitations or warnings contained in the product’s FDA-approved labeling or those of comparable
foreign regulatory authorities, including potential limitations or warnings for our product candidates
that may be more restrictive than other competitive products;
changes in the standard of care for the targeted indications for our product candidates, which could
reduce the marketing impact of any claims that we could make following FDA approval or approval
by comparable foreign regulatory authorities, if obtained;
the relative convenience and ease of administration of our product candidates by direct injection into
tumors, a less common method for the administration of oncology therapies than systemic
administration, which may result in slower adoption of our therapies;
the relative convenience and ease of administration of any products with which our product
candidates are co-administered;
the cost of treatment compared with the economic and clinical benefit of alternative treatments or
therapies;
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•
the availability of adequate coverage or reimbursement by third parties, such as insurance companies
and other healthcare payors, and by government healthcare programs, including Medicare and
Medicaid;
•
the price concessions required by third-party payors to obtain coverage;
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the extent and strength of our marketing and distribution of our product candidates;
•
•
the safety, efficacy, and other potential advantages over, and availability of, alternative treatments
already used or that may later be approved;
distribution and use restrictions imposed by the FDA or comparable foreign regulatory authorities
with respect to our product candidates or to which we agree as part of a REMS or voluntary risk
management plan;
•
the timing of market introduction of our product candidates, as well as competitive products;
•
our ability to offer our product candidates for sale at competitive prices;
•
the willingness of the target patient population to try new therapies and of physicians to prescribe
these therapies;
•
the extent and strength of our third-party manufacturer and supplier support;
•
the actions of companies that market any products with which our product candidates are co-
administered;
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the approval of other new products;
•
adverse publicity about our product candidates or any products with which they are co-administered,
or favorable publicity about competitive products; and
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potential product liability claims.
The size of the potential market for our product candidates is difficult to estimate and, if any of our assumptions are
inaccurate, the actual markets for our product candidates may be smaller than our estimates.
The potential market opportunities for our product candidates are difficult to estimate and will depend
in large part on the drugs with which our product candidates are co-administered and the success of
competing therapies and therapeutic approaches. In particular, the market opportunity for oncolytic
immunotherapies is hard to estimate given that it is an emerging field with only one existing FDA-approved
oncolytic immunotherapy, T-Vec, which has yet to enjoy broad market acceptance. Our estimates of the
potential market opportunities are predicated on many assumptions, which may include industry knowledge
and publications, third-party research reports, and other surveys. Although we believe that our internal
assumptions are reasonable, these assumptions involve the exercise of significant judgment on the part of
our management, are inherently uncertain, and their reasonableness has not been assessed by an independent
source. If any of the assumptions proves to be inaccurate, the actual markets for our product candidates
could be smaller than our estimates of the potential market opportunities.
Negative developments in the field of immuno-oncology could damage public perception of our product candidates
and negatively affect our business.
The commercial success of our product candidates will depend in part on public acceptance of the use
of cancer immunotherapies. Adverse events in clinical trials of RP1 or our other product candidates or in
clinical trials of others developing similar products and the resulting publicity, as well as any other negative
developments in the field of immuno-oncology that may occur in the future, including in connection with
competitor therapies, could result in a decrease in demand for our product candidates. These events could
also result in the suspension, discontinuation, or clinical hold of or modification to our clinical trials. If
public perception is influenced by claims that the use of cancer immunotherapies is unsafe, whether related
to our therapies or those of our competitors, our product candidates may not be accepted by the general
public or the medical community and potential clinical trial subjects may be discouraged from enrolling in
our clinical trials. As a result, we may not be able to continue or may be delayed in conducting our
development programs.
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As our product candidates consist of a modified virus, adverse developments in antiviral vaccines or
clinical trials of other oncolytic immunotherapy products based on viruses may result in a disproportionately
negative effect for our product candidates as compared to other products in the field of immuno-oncology
that are not based on viruses. Future negative developments in the field of immuno-oncology or the
biopharmaceutical industry could also result in greater governmental regulation, stricter labeling
requirements and potential regulatory delays in the testing or approvals of our products. Any increased
scrutiny could delay or increase the costs of obtaining marketing approval for our product candidates.
Risks related to our financial position and need for additional capital
We are a clinical stage biopharmaceutical company with a very limited operating history. We have incurred net
losses since our inception and anticipate that we will continue to incur substantial and increasing net losses in the
foreseeable future. We may never achieve or sustain profitability.
We are a clinical stage biopharmaceutical company with a limited operating history, and we are early in
our development efforts. We have no products approved for commercial sale and have not generated any
revenue from product sales to date, and we continue to incur significant research and development and other
expenses related to our ongoing operations. Investment in biopharmaceutical product development is highly
speculative because it entails substantial upfront capital expenditures and significant risk that any potential
product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain marketing
approval and become commercially viable. We have financed our operations to date primarily through the
sale of equity securities, including the sale of our common stock and pre-funded warrants in our public
offerings. Since our inception, most of our resources have been dedicated to the preclinical and clinical
development of our Immulytic platform, RP1 and our other product candidates. The size of our future net
losses will depend, in part, on our future expenses and our ability to generate revenue, if any.
We are not profitable and have incurred losses in each period since our inception. For the years ended
March 31, 2021 and 2020, we reported a net loss of $80.9 million and $52.6 million, respectively. At
March 31, 2021, we had an accumulated deficit of $193.2 million. We expect to continue to incur significant
losses for the foreseeable future, and we expect these losses to increase as we continue our research and
development of, and seek marketing approvals for, RP1, our other product candidates and any additional
product candidates we may develop.
Even if we succeed in receiving marketing approval for and commercialize RP1 or our other product
candidates, we will continue to incur substantial research and development and other expenditures to
develop and market additional potential products. We may encounter unforeseen expenses, difficulties,
complications, delays and other unknown factors that may adversely affect our business. The size of our
future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate
revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on
our stockholders’ equity and working capital.
We have never generated any revenue from product sales, and our ability to generate revenue from product sales
and become profitable will depend significantly on our success in achieving a number of goals.
We have no products approved for commercial sale, have not generated any revenue from product
sales, and do not anticipate generating any revenue from product sales until after we have received
marketing approval for the commercial sale of a product candidate, if ever. Our ability to generate revenue
and achieve profitability depends significantly on our success in achieving a number of goals, including:
•
•
•
completing research regarding, and preclinical and clinical development of, RP1 and our other
product candidates;
obtaining marketing approvals for RP1 and our other product candidates for which we complete
clinical trials;
developing a sustainable and scalable manufacturing process for RP1 and our other product
candidates, including establishing and maintaining commercially viable supply and manufacturing
relationships with third parties;
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•
launching and commercializing RP1 and our other product candidates for which we obtain marketing
approvals, either directly or with a collaborator or distributor;
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obtaining market acceptance of RP1 and our other product candidates as viable treatment options;
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addressing any competing technological and market developments;
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identifying, assessing, acquiring and developing new product candidates;
•
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negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may
enter;
obtaining, maintaining, protecting, and expanding our portfolio of intellectual property rights,
including patents, trade secrets, and know-how; and
•
attracting, hiring, and retaining qualified personnel.
Even if our product candidates or any future product candidates that we develop are approved for
commercial sale, we anticipate incurring significant costs associated with commercializing any such product
candidate. Our expenses could increase beyond expectations if we are required by the FDA or comparable
foreign regulatory authorities to change our manufacturing processes or assays, or to perform clinical,
nonclinical, or other types of studies in addition to those that we currently anticipate.
If we are successful in obtaining regulatory approvals to market RP1 or our other product candidates,
our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain
marketing approval, the accepted price for the product, the ability to get reimbursement at any price, and
whether we own the commercial rights for that territory. If the number of our addressable patients is not as
significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, the
labels for our product candidates contain significant safety warnings, regulatory authorities impose
burdensome or restrictive distribution requirements, or the reasonably accepted patient population for
treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate
significant revenue from sales of such products, even if approved. If we are not able to generate revenue
from the sale of any approved products, we could be prevented from or significantly delayed in achieving
profitability.
We will require additional financing to achieve our goals, and a failure to obtain this necessary capital when needed
on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development or
commercialization efforts.
Our operations have consumed substantial amounts of cash since inception. At March 31, 2021, our
cash and cash equivalents and short-term investments were $476.3 million. We expect to continue to spend
substantial amounts to continue the clinical and preclinical development of RP1 and our other product
candidates. Accordingly, we will need to obtain additional funds to achieve our business objectives. If we
are able to gain marketing approval of any product candidate, we will require significant additional amounts
of cash in order to launch and commercialize such product. In addition, other unanticipated costs may arise.
Our future capital requirements depend on many factors, including:
•
•
the scope, progress, results and costs of researching and developing RP1 and our other product
candidates, and conducting preclinical studies and clinical trials;
the timing of, and the costs involved in, obtaining marketing approvals for RP1 and our other
product candidates if clinical trials are successful;
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the success of any collaborations;
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the cost of commercialization activities for any approved product, including marketing, sales and
distribution costs;
•
the cost and timing of operating our manufacturing facility;
•
the cost of manufacturing RP1 and our other product candidates for clinical trials in preparation for
marketing approval and commercialization;
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•
•
our ability to establish and maintain strategic licensing or other arrangements and the financial terms
of such agreements;
the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing
patent claims, including litigation costs and the outcome of such litigation;
•
the timing, receipt, and amount of sales of, or royalties on, our future products, if any; and
•
the emergence of competing cancer therapies and other adverse market developments.
We do not have any committed external source of funds or other support for our development efforts.
Until we can generate sufficient product revenue to finance our cash requirements, which we may never do,
we expect to finance our future cash needs through a combination of public or private equity offerings, debt
financings, collaborations, strategic alliances, licensing arrangements and other marketing or distribution
arrangements. Based on our research and development plans, we expect that our existing cash and cash
equivalents and short-term investments will enable us to fund our planned operating expenses and capital
expenditure requirements into the second half of 2024. We have based this estimate on assumptions that
may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. In
addition, because the design and outcome of our planned and anticipated clinical trials is highly uncertain,
we cannot reasonably estimate the actual amounts necessary to successfully complete the development and
commercialization of RP1 or our other product candidates.
Risks Related to Intellectual Property
If we are unable to obtain, maintain and protect our intellectual property rights for our technology and product
candidates, or if our intellectual property rights are inadequate, our competitive position could be harmed.
Our commercial success will depend in part on our ability to obtain and maintain patent and other
intellectual property protection in the United States and other countries with respect to our technology,
Immulytic platform, RP1 and our other product candidates. We rely on trade secret, patent, copyright and
trademark laws, and confidentiality, licensing and other agreements with employees and third parties, all of
which offer only limited protection.
The patent positions of biotechnology and pharmaceutical companies generally are highly uncertain,
involve complex legal and factual questions and have in recent years been the subject of much litigation and
subject to change with regulatory agencies and court decisions. As a result, the issuance, scope, validity,
enforceability and commercial value of our licensed patents and any patents we own in the future are highly
uncertain. The steps we have taken to protect our proprietary rights may not be adequate to preclude
misappropriation of our proprietary information, use by third parties of our products or infringement of our
intellectual property rights, both inside and outside of the United States.
Our pending applications cannot be enforced against third parties practicing the inventions claimed in
such applications unless and until a patent issues from such applications. Because the issuance of a patent is
not conclusive as to its inventorship, scope, validity or enforceability, our issued patents and issued patents
that we license from third parties or may own in the future may be challenged in the courts or patent offices
in the United States and abroad. Further, the examination process may require us to narrow the claims for
our pending patent applications, which may limit the scope of patent protection that may be obtained if
these applications issue. The scope of a patent may also be interpreted or reinterpreted after issuance. The
rights that may be granted under our future issued patents may not provide us with the proprietary
protection or competitive advantages we are seeking. Although we enter into nondisclosure and
confidentiality agreements with parties who have access to confidential or patentable aspects of our research
and development output, such as our employees, collaborators, and other third parties, any of these parties
may breach the agreements and disclose such output before a patent application is filed, thereby
jeopardizing our ability to seek patent protection. In addition, the patent prosecution process is expensive,
time consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license all
necessary or desirable patent applications at a reasonable cost or in a timely manner. If we are unable to
obtain and maintain patent protection for our technology or inventions, or for RP1 or our other product
candidates, or if the scope of the patent protection obtained is not sufficient, our competitors could develop
and
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commercialize products similar or superior to ours, and our ability to successfully commercialize RP1 or
our other product candidates and future technologies or inventions may be adversely affected.
Patent terms may be inadequate to protect our competitive position on our products for an adequate
amount of time, and our product candidates for which we intend to seek approval as biological products may
face competition sooner than anticipated. Given the amount of time required for the development, testing
and regulatory review of our product candidates, such as RP1 and our other product candidates, patents
protecting such product candidates might expire before or shortly after such product candidates are
commercialized.
Filing, prosecuting and defending patents on our technology or inventions in all countries throughout
the world would be prohibitively expensive, and our intellectual property rights in some countries or
religions outside the United States can be less protective of our products than those in the United States. In
addition, the laws and practices of some foreign countries do not protect intellectual property rights to the
same extent as federal and state laws in the United States. Changes to the patent law in the United States
and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to
protect RP1 and our other product candidates. Consequently, we may not be able to prevent third parties
from practicing our inventions in all countries outside the United States, or from selling or importing
products made using our inventions in and into the United States or other jurisdictions. Competitors may
use our technologies or inventions in jurisdictions where we have not obtained patent protection to develop
and/or manufacture their own products and may export otherwise infringing products to territories where we
have patent protection but where enforcement is not as strong as that in the United States. These products
may compete with our products and our patent claims or other intellectual property rights may not be
effective or sufficient to prevent them from so competing.
Protecting against the unauthorized use of our patented inventions, trademarks and other intellectual
property rights is expensive, time consuming, difficult and in some cases may not be possible. In some
cases, it may be difficult or impossible to detect third-party infringement or misappropriation of our
intellectual property rights, even in relation to issued patent claims, and proving any such infringement or
misappropriation may be even more difficult. If we are unable to obtain, maintain, and protect our
intellectual property our competitive advantage could be harmed, and it could result in a material adverse
effect on our business, financial condition, results of operations, stock price and prospects.
In addition to seeking patent protection, we also rely on other proprietary rights, including protection of
trade secrets, know-how and confidential and proprietary information. Although we enter into
confidentiality agreements with our employees, consultants, collaborators, suppliers, manufacturers and
other third parties who have access to our trade secrets, and our agreements with employees also provide
that any inventions conceived by the individual in the course of rendering services to us shall be our
exclusive property, we may not obtain these agreements in all circumstances, and individuals with whom we
have these agreements may not comply with their terms or may have conflicting agreements with third
parties. In addition, in the event of unauthorized use or disclosure of our trade secrets or proprietary
information, these agreements, even if obtained, may not provide meaningful protection, particularly for our
trade secrets or other confidential information. To the extent that our employees, consultants or contractors
use technology or know-how owned by third parties in their work for us, disputes may arise between us and
those third parties as to the rights in related inventions. If any of our trade secrets, know-how or confidential
or proprietary information were to be lawfully obtained, patented or independently developed by a
competitor or other third party, we would have no right to prevent them from using that technology or
information to compete with us and may be blocked from using such trade secrets, know-how or
confidential or proprietary information ourselves. The disclosure of our trade secrets or the independent
development of our trade secrets by a competitor or other third party would impair our competitive position
and may materially harm our business, financial condition, results of operations, stock price and prospects.
Third parties may in the future initiate legal proceedings alleging that we are infringing their intellectual property
rights, and we may become involved in lawsuits or other administrative procedures to protect or enforce our
intellectual property, which could be expensive, time consuming and unsuccessful and have a material adverse
effect on the success of our business.
Our commercial success depends on our ability and the ability of our current or future collaborators to
develop, manufacture, market and sell RP1 and our other product candidates, and to use our related
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proprietary technologies without infringing, misappropriating or otherwise violating the intellectual
property and proprietary rights of third parties. The biotechnology and pharmaceutical industries are
characterized by extensive litigation regarding patents and other intellectual property rights. We may
become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property
rights with respect to our current and any other future product candidates. Third parties may assert
infringement or other intellectual property claims against us based on existing patents or patents that may be
filed and/or granted in the future. At times we may attempt to initiate litigation or other administrative
procedures to invalidate or otherwise limit the scope of a third party’s intellectual property and these
attempts may not be successful. If we are found to infringe a third party’s intellectual property rights, and
we are unsuccessful in demonstrating that such intellectual property rights are invalid, unenforceable or
otherwise not infringed, we could be required to obtain a license from such third-party to continue
developing, manufacturing and commercializing RP1 and our other product candidates. Such a license may
not be available on commercially reasonable terms, or at all. Even if we were able to obtain a license, it
could be nonexclusive, thereby giving our competitors and other third parties access to the same
technologies and inventions licensed to us, and it could require us to make substantial licensing and royalty
payments. We also could be forced, including by court order, to cease developing, manufacturing, and
commercializing RP1 or our other product candidates or we could be found liable for significant monetary
damages if we are found to have willfully infringed a patent or other intellectual property right. Any of the
foregoing could have a material adverse effect on our business, financial condition, results of operations,
stock price and prospects. Any claims by third parties that we have misappropriated their know-how,
confidential or proprietary information or trade secrets could have a similar material adverse effect on our
business, financial condition, results of operations, stock price and prospects.
If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent
covering any of our technology or inventions, the defendant could counterclaim that the patent covering our
product candidate is invalid or unenforceable. If a third party 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
RP1 and our other product candidates. Such a loss of patent protection could have a material adverse impact
on our business, financial condition, results of operations, stock price and prospects.
Many of our employees, including our senior management team, were previously employed at, or
consulted for, universities or other biotechnology or pharmaceutical companies, including our competitors
or potential competitors. Although we take steps to ensure that our employees do not use, claim as theirs, or
misappropriate the intellectual property, confidential or proprietary information, know-how or trade secrets
of others in their work for us, we may be subject to claims that we or these employees have used, claimed as
theirs, misappropriated or disclosed intellectual property, including trade secrets, know-how or other
confidential or proprietary information, of any such individual’s current or former employer. Litigation may
be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying
monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such
intellectual property rights could be awarded to a third party, and we could be required to obtain a license
from such third-party to commercialize our technology or products. Such a license may not be available on
commercially reasonable terms, or at all.
In addition, we are developing certain of our product candidates in combination with nivolumab and
cemiplimab, which are covered by patents or licenses held by BMS and Regeneron, respectively, to which
we do not have a license other than for use in connection with the applicable clinical trial. We also may
develop our product candidates in combination with products developed by additional companies that are
covered by patents or licenses held by those entities to which we do not have a license. In the event that a
labeling instruction is required in product packaging recommending that combination, we could be accused
of, or held liable for, infringement of the third-party patents covering the product candidate or product
recommended for administration with RP1 or our other product candidates. In such a case, we could be
required to obtain a license from the other company or institution to use the required or desired package
labeling, which license may not be available on commercially reasonable terms, or at all.
Competitors may infringe any future licensed patents or any patent we own in the future or
misappropriate or otherwise violate our intellectual property rights. We may also be required to defend
against claims of infringement and our licensed patents and any patents we own in the future may become
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involved in priority or other intellectual property related disputes. To counter infringement or unauthorized
use, litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect
our trade secrets or to determine the validity and scope of our own intellectual property rights or the
proprietary rights of others.
These proceedings can be expensive and time consuming. Many of our current and potential
competitors have the ability to dedicate substantially greater resources to conduct intellectual property
related litigations or proceedings than we can. We may not have sufficient financial or other resources to
conduct such litigation or proceedings adequately. Accordingly, despite our efforts, we may not be able to
prevent third parties from infringing upon or misappropriating our intellectual property. An adverse result in
any litigation or other intellectual property related proceeding could put one or more of our patents at risk of
being invalidated, held unenforceable or interpreted narrowly. Furthermore, because of the substantial
amount of discovery required in connection with intellectual property litigation in the United States, there is
a risk that some of our trade secrets, know-how, or proprietary or 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 in any such proceedings. If
securities analysts or investors perceive these results to be negative, it could have a material adverse effect
on the price of shares of our common stock. Any of the foregoing may have a material adverse effect on our
business, financial condition, results of operations, stock price and prospects.
Risks related to manufacturing and our reliance on third parties
We have agreements with BMS and Regeneron, and in the future may have agreements with other companies, to
obtain the supply of anti-PD-1 therapies for the development of our product candidates. If our relationships with
BMS, Regeneron, or any future collaborator or supplier are not successful, we may be delayed in completing the
development of our product candidates.
We have entered into arrangements with BMS and Regeneron as part of our clinical development for
RP1 and RP2. BMS is providing nivolumab, its anti-PD-1 therapy, for use in our ongoing IGNYTE
Phase 1/2 trials with RP1 and our clinical trial with RP2 and Regeneron is providing cemiplimab, its anti-
PD-1 therapy, for use in our ongoing CERPASS Phase 2 trial and may potentially do so for other clinical
trials in the future. We may also enter into agreements with additional companies for the supply of anti-PD-
1 therapies for use in the development of RP1 and our other product candidates. The outcome of these
clinical trials is dependent both on the performance of our partners’ products and product candidates and
also on our partners’ ability to deliver sufficient quantities of adequately produced product. Should any of
our partners’ products or product candidates fail to produce the results that we anticipate, we may have to
re-run clinical trials for RP1 or our other product candidates or may otherwise be delayed in the
commercialization of RP1 or our other product candidates. Similarly, should any partner fail to provide us
with a product or product candidate that suits our requirements, we may have to re-run clinical trials for
RP1 or our other product candidates or may be otherwise delayed in the commercialization of RP1 or our
other product candidates.
Our collaboration agreements with any future partners may not be successful, which could adversely affect our
ability to develop and commercialize our product candidates.
We may in the future seek collaboration arrangements with other parties for the development or
commercialization of our product candidates. The success of any collaboration arrangements may depend on
the efforts and activities of our collaborators. Collaborators generally have significant discretion in
determining the efforts and resources that they will apply to these arrangements. Disagreements between
parties to a collaboration arrangement regarding clinical development and commercialization matters can
lead to delays in the development process or commercializing the applicable product candidate and, in some
cases, termination of the collaboration arrangement.
Collaborations with biopharmaceutical companies and other third parties often are terminated or
allowed to expire by the other party. Any such termination or expiration could adversely affect us
financially and could harm our business reputation.
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Any future collaborations we might enter into may pose a number of risks, including the following:
•
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;
•
collaborators could fail to make timely regulatory submissions for a product candidate;
•
•
•
•
•
collaborators may not comply with all applicable regulatory requirements or may fail to report safety
data in accordance with all applicable regulatory requirements, which could subject them or us to
regulatory enforcement actions;
collaborators could independently develop, or develop with third parties, products that compete
directly or indirectly with our products or product candidates if the collaborators believe that
competitive products are more likely to be successfully developed or can be commercialized under
terms that are more economically attractive than ours;
product candidates discovered in collaboration with us may be viewed by our collaborators as
competitive with their own product candidates or products, 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 product candidate or product;
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 intellectual property rights or may use our
proprietary information in such a way as to invite litigation that could jeopardize or invalidate our
intellectual property or proprietary information or expose us to potential litigation; and
•
collaborators may infringe the intellectual property rights of third parties, which may expose us to
litigation and potential liability.
If any collaborations we might enter into in the future do not result in the successful development and
commercialization of products or if one of our collaborators subsequently terminates its agreement with us,
we may not receive any future research funding or milestone or royalty payments under such potential
future collaboration. If we do not receive the funding we expect under the agreements, our development of
our product candidates could be delayed and we may need additional resources to develop our product
candidates and our product platform.
Additionally, if any future collaborator of ours is involved in a business combination, the collaborator
might deemphasize or terminate development or commercialization of any product candidate it licenses to
us. If one of our collaborators terminates its agreement with us, we may find it more difficult to attract new
collaborators and our reputation in the business and financial communities could be adversely affected.
We face significant competition in seeking appropriate collaborators. Our ability to reach a definitive
agreement for any collaboration will depend upon, among other things, 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.
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If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms,
or at all, we may have to curtail the development of a product candidate, reduce or delay its development
program or one or more of our other development programs, delay its potential commercialization or reduce
the scope of any sales or marketing activities, or increase our expenditures and undertake development or
commercialization activities at our own expense. If we elect to fund and undertake development or
commercialization activities on our own, we may need to obtain additional expertise and additional capital,
which may not be available to us on acceptable terms, or at all. If we fail to enter into collaborations and do
not have sufficient funds or expertise to undertake the necessary development and commercialization
activities, we may not be able to further develop our product candidates or bring them to market or continue
to develop our product platform and our business may be materially and adversely affected.
We rely, and expect to continue to rely, on third parties to conduct, supervise, and monitor our preclinical studies
and clinical trials. If those third parties do not perform satisfactorily, including failing to meet deadlines for the
completion of such trials or failing to comply with regulatory requirements, we may be unable to obtain regulatory
approval for our product candidates or any other product candidates that we may develop in the future.
We rely on third-party CROs, study sites, and others to conduct, supervise, and monitor our preclinical
studies and clinical trials for our product candidates and do not currently plan to independently conduct
preclinical studies or clinical trials of any other potential product candidates. We expect to continue to rely
on third parties, such as CROs, clinical data management organizations, medical institutions, and clinical
investigators, to conduct our preclinical studies and clinical trials. Although we have agreements governing
their activities, we have limited influence over their actual performance and control only certain aspects of
their activities. The failure of these third parties to successfully carry out their contractual duties or meet
expected deadlines could substantially harm our business because we may be delayed in completing or
unable to complete the studies required to support future approval of our product candidates, or we may not
obtain marketing approval for or commercialize our product candidates in a timely manner or at all.
Moreover, these agreements might terminate for a variety of reasons, including a failure to perform by the
third parties. If we need to enter into alternative arrangements our product development activities would be
delayed and our business, financial condition, results of operations, stock price and prospects may be
materially harmed.
Our reliance on these third parties for development activities will reduce our control over these
activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance
with the applicable protocol, legal, regulatory, and scientific standards and our reliance on third parties does
not relieve us of our regulatory responsibilities. For example, we will remain responsible for ensuring that
each of our trials is conducted in accordance with the general investigational plan and protocols for the trial.
We must also ensure that our preclinical trials are conducted in accordance with the FDA’s Good Laboratory
Practice, or GLP, regulations, as appropriate. Moreover, the FDA and comparable foreign regulatory
authorities require us to comply with standards, commonly referred to as 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. Regulatory authorities
enforce these requirements through periodic inspections of trial sponsors, clinical investigators, and trial
sites. If we or any of our third parties fail to comply with applicable GCPs or other regulatory requirements,
we or they may be subject to enforcement or other legal actions, the data generated in our trials may be
deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform
additional studies.
In addition, our clinical trials must be conducted with product candidates that were produced under
cGMP regulations. Failure to comply with these regulations may require us to repeat clinical trials, which
would delay the regulatory approval process.
If these third parties do not successfully carry out their contractual duties, meet expected deadlines or
conduct our preclinical studies or clinical trials in accordance with regulatory requirements or our stated
protocols, if they need to be replaced or if the quality or accuracy of the data they obtain is compromised
due to the failure to adhere to our protocols, regulatory requirements or for other reasons, our trials may be
repeated, extended, delayed, or terminated; we may not be able to obtain, or may be delayed in obtaining,
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marketing approvals for our product candidates; we may not be able to, or may be delayed in our efforts to,
successfully commercialize our product candidates, or we or they may be subject to regulatory enforcement
actions. As a result, our results of operations and the commercial prospects for our product candidates
would be harmed, our costs could increase and our ability to generate revenues could be delayed. To the
extent we are unable to successfully identify and manage the performance of third-party service providers in
the future, our business, financial condition, results of operations, stock price and prospects may be
materially harmed.
If any of our relationships with these third parties terminate, we may not be able to enter into
arrangements with alternative providers or to do so on commercially reasonable terms. Switching or adding
additional third parties involves additional cost and may result in delays that could compromise our ability
to meet our desired development timelines.
We also rely on other third parties to store and distribute our products for the clinical trials that we
conduct. Any performance failure on the part of our distributors could delay clinical development,
marketing approval, or commercialization of our product candidates, which could result in additional losses
and deprive us of potential product revenue.
If the manufacturers upon which we rely fail to produce our product candidates in the volumes that we require on a
timely basis, or fail to comply with stringent regulations applicable to biopharmaceutical manufacturers, we may
face delays in the development and commercialization of, or be unable to meet demand for, our product candidates
and may lose potential revenues.
We continue to rely on third-party contract manufacturers to manufacture our clinical trial product
supplies. As a result, there can be no assurance that our clinical development will not be limited,
interrupted, or of satisfactory quality or continue to be available at acceptable prices.
We currently have only one contract manufacturer for our product candidates for use in our clinical
trials. In addition, we do not have any long-term commitments from our suppliers of clinical trial material or
guaranteed prices for our product candidates or their components. There are a limited number of
manufacturers that operate under cGMP regulations and that are both capable of manufacturing and filling
our viral product for us and willing to do so. If our existing third-party manufacturers, or the third parties
that we engage in the future, should cease to work with us, we likely would experience delays in obtaining
sufficient quantities of our product candidates for us to meet commercial demand or to advance our clinical
trials while we identify and qualify replacement suppliers. Any replacement of our contract manufacturer
could require significant effort and expertise because there may be a limited number of qualified
replacements. Any delays in obtaining adequate supplies of our product candidates that meet the necessary
quality standards may delay our development or commercialization.
If our manufacturers do not perform as agreed or encounter difficulties in production costs and yields,
quality control, shortages of qualified personnel or key raw materials, compliance with strictly enforced
federal, state, and foreign regulations, or other difficulties, our ability to provide product candidates to
patients in our clinical trials could be jeopardized.
In addition, 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, they will
not be able to secure or maintain regulatory approval for their manufacturing facilities. Any such deviations
may also require remedial measures that may be costly and/or time consuming for us or a third party to
implement and that may include the temporary or permanent suspension of a clinical trial or the temporary
or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom
we contract could materially harm our business. Any delays in obtaining products or product candidates that
comply with the applicable regulatory requirements may result in delays to clinical trials, product approvals,
and commercialization.
While we are ultimately responsible for the manufacturing of our product candidates and therapeutic
substances, other than through our contractual arrangements, we have little control over our manufacturers’
compliance with these regulations and standards. If the FDA or a comparable foreign regulatory authority
does not approve these facilities for the manufacture of our product candidates or if it withdraws any such
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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 must also receive FDA approval for the use of any new manufacturers for commercial supply.
A failure to comply with the applicable regulatory requirements, including periodic regulatory
inspections, may result in regulatory enforcement actions against our manufacturers or us (including fines
and civil and criminal penalties, including imprisonment) suspension or restrictions of production,
injunctions, delay or denial of product approval or supplements to approved products, clinical holds or
termination of clinical trials, warning or untitled letters, regulatory authority communications warning the
public about safety issues with the product candidate, refusal to permit the import or export of the products,
product seizure, detention, or recall, operating restrictions, suits under the civil False Claims Act, corporate
integrity agreements, consent decrees, withdrawal of product approval, environmental or safety incidents
and other liabilities. If the safety of any quantities supplied is compromised due to our manufacturers’
failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval
for or successfully commercialize our product candidates.
The transition of our manufacturing operations to our new facility may result in further delays or expenses, and we
may not experience the anticipated operating efficiencies.
Our approximately 63,000 square foot manufacturing facility in Framingham, Massachusetts is now
fully operational. This facility is intended to give us control over key aspects of the supply chain for our
products and product candidates. However, we may not experience the anticipated operating efficiencies as
we commence manufacturing operations at the new facility. Any such delays may disrupt or delay the
supply of our product candidates if we have not maintained a sufficient backup supply of our product
candidates through third-party manufacturers. Moreover, changing manufacturing facilities may also require
that we conduct additional studies, make notifications to the regulatory authorities, make additional filings
to the regulatory authorities, and obtain regulatory authority approval for the new facilities, which may be
delayed or which we may never receive. We will further need to comply with the FDA’s and applicable
foreign regulatory authorities’ cGMP requirements for the production of our product candidates for clinical
trials and, if approved, commercial supply, and will be subject to FDA and comparable foreign regulatory
authority inspections. We may not be able to develop or acquire the internal expertise and resources
necessary for compliance with these requirements. If we fail to achieve the operating efficiencies that we
anticipate, our manufacturing and operating costs may be greater than expected, which could have a
material adverse impact on our operating results.
In operating our own manufacturing facility, we may be forced to devote greater resources and
management time than anticipated, particularly in areas relating to operations, quality, raw material supply,
regulatory, facilities and information technology. If we experience unanticipated employee turnover in any
of these areas, we may not be able to effectively manage our ongoing manufacturing operations and we may
not achieve the operating efficiencies that we anticipate from the new facility, which may negatively affect
our product development timeline. If we experience any unanticipated shortages of key raw materials, or
other difficulties related to our raw material supply, we may not be able to effectively manage our ongoing
manufacturing timelines which may negatively affect our product development schedule and our ability to
provide clinical trial supplies to patients in our clinical trials.
Any problems or delays we experience in preparing for commercial scale manufacturing of a product
candidate or component may result in a delay in product development timelines and FDA or comparable
foreign regulatory authority approval of the product candidate or may impair our ability to manufacture
commercial quantities or such quantities at an acceptable cost and quality, which could result in the delay,
prevention, or impairment of clinical development and commercialization of our product candidates and
may materially harm our business, financial condition, results of operations, stock price and prospects.
Any such problems could result in the delay, prevention, or impairment of clinical development and
commercialization of our product candidates and may materially harm our business, financial condition,
results of operations, stock price and prospects.
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Risks related to legal and compliance matters
We face potential product liability exposure, and if successful claims are brought against us, we may incur
substantial liability and have to limit the commercialization of any approved products and/or our product
candidates.
The use of our product candidates in clinical trials, and the sale of any product for which we obtain
regulatory approval, exposes us to the risk of product liability claims. We face inherent risk of product
liability related to the testing of our product candidates in human clinical trials, including liability relating
to the actions and negligence of our investigators, and will face an even greater risk if we commercially sell
any product candidates that we may develop. Any such product liability claims may include allegations of
defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence,
strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts.
Product liability claims might be brought against us by consumers, healthcare providers or others using,
administering or selling our products. If we cannot successfully defend ourselves against these claims, we
will incur substantial liabilities or be required to limit commercialization of our product candidates. Even
successful defense would require significant financial and management resources. Regardless of merit or
eventual outcome, liability claims may result in:
•
loss of revenue from decreased demand for our products and/or product candidates;
•
impairment of our business reputation or financial stability;
•
costs of related litigation;
•
substantial monetary awards to patients or other claimants;
•
diversion of management attention;
•
withdrawal of clinical trial participants and potential termination of clinical trial sites or entire
clinical programs;
•
the inability to commercialize our product candidates;
•
significant negative media attention;
•
decreases in our stock price;
•
initiation of investigations and enforcement actions by regulators; and
•
product recalls, withdrawals or labeling, marketing or promotional restrictions, including withdrawal
of marketing approval.
We believe we have sufficient insurance coverage in place for our business operations. However, our
insurance coverage may not reimburse us or may not be sufficient to reimburse us for any expenses or losses
we may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the future, we may
not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against
losses due to liability. We intend to expand our insurance coverage to include the sale of commercial
products if we obtain FDA or comparable foreign regulatory approval for our product candidates in
development, but we may be unable to obtain commercially reasonable product liability insurance for any
products approved for marketing, or at all. Failure to obtain and retain sufficient product liability insurance
at an acceptable cost could prevent or inhibit the commercialization of products we develop. A successful
product liability claim or series of claims brought against us could cause our stock price to fall and, if
judgments exceed our insurance coverage, could decrease our cash, and materially harm our business,
financial condition, results of operations, stock price and prospects.
We are subject to the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other anticorruption laws, as
well as import and export control laws, customs laws, sanctions laws and other laws governing our operations. If we
fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures, and legal
expenses, which could adversely affect our business, financial condition, results of operations, stock price and
prospects.
Our operations are subject to anticorruption laws, including the U.S. Foreign Corrupt Practices Act, or
FCPA, the U.K. Bribery Act 2010, or the Bribery Act, and other anticorruption laws that apply in countries
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where we do business. We also may participate in collaborations and relationships with third parties whose
actions, if noncompliant, could potentially subject us to liability under the FCPA, Bribery Act or local
anticorruption laws.
We are also subject to other laws and regulations governing our international operations, including
regulations administered by the governments of the United States and the United Kingdom and authorities
in the European Union, including applicable import and export control regulations, economic sanctions on
countries and persons, anti-money laundering laws, customs requirements and currency exchange
regulations, collectively referred to as the trade control laws.
We can provide no assurance that we will be completely effective in ensuring our compliance with all
applicable anticorruption laws or other legal requirements, including trade control laws. If we are not in
compliance with applicable anticorruption laws or trade control laws, we may be subject to criminal and
civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could
have an adverse impact on our business, financial condition, results of operations, stock price and prospects.
Likewise, any investigation of any potential violations of these anticorruption laws or trade control laws by
U.S., U.K. or other authorities could also have an adverse impact on our reputation, our business, financial
condition, results of operations, stock price and prospects.
If we fail to comply with federal and state healthcare laws, including fraud and abuse and health and other
information privacy and security laws, we could face substantial penalties and our business, financial condition,
results of operations, stock price and prospects will be materially harmed.
We are subject to many federal and state healthcare laws, such as the federal Anti-Kickback Statute, the
federal civil and criminal False Claims Acts, the civil monetary penalties statute, the Medicaid Drug Rebate
statute and other price reporting requirements, the Veterans Health Care Act of 1992, or VHCA, the federal
Health Insurance Portability and Accountability Act of 1996 (as amended by the Health Information
Technology for Economics and Clinical Health Act, or HITECH), or HIPAA, the FCPA, the ACA, and
similar state laws. Even though we do not and will not control referrals of healthcare services or bill directly
to Medicare, Medicaid or other third-party payors, certain federal and state healthcare laws, and regulations
pertaining to fraud and abuse, reimbursement programs, government procurement, and patients’ rights are
and will be applicable to our business. We would be subject to healthcare fraud and abuse and patient
privacy regulation by both the federal government and the states and foreign jurisdictions in which we
conduct our business. In the European Union, the data privacy laws are generally stricter than those that
apply in the United States and include specific requirements for the collection of personal data of European
Union persons or the transfer of personal data outside of the European Union to the United States to ensure
that European Union standards of data privacy will be applied to such data.
If we or our operations are found to be in violation of any federal or state healthcare law, or any other
laws or regulations that apply to us, we may be subject to penalties, including civil, criminal, and
administrative penalties, damages, fines, disgorgement, suspension and debarment from government
contracts, and refusal of orders under existing government contracts, exclusion from participation in U.S.
federal or state health care programs, corporate integrity agreements, and the curtailment or restructuring of
our operations, any of which could materially adversely affect our ability to operate our business and our
financial results. If any of the physicians or other healthcare providers or entities with whom we expect to
do business is found not to be in compliance with applicable laws, it may be subject to criminal, civil or
administrative sanctions, including but not limited to, exclusions from participation in government
healthcare programs, which could also materially affect our business. 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.
We are subject to new legislation, regulatory proposals and healthcare payor initiatives that may increase our costs
of compliance, and adversely affect our ability to market our products, obtain collaborators, and raise capital.
In the United States and some foreign jurisdictions, there have been a number of legislative and
regulatory changes and proposed changes regarding the healthcare system that could prevent or delay
marketing approval of our product candidates, restrict or regulate post approval activities and affect our
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ability to profitably sell any products for which we obtain marketing approval. We expect that current laws,
as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous
coverage criteria and in additional downward pressure on the price that we may receive for any approved
products, which could have a material adverse effect on customers for our products, if approved, and,
accordingly, on our results of operations.
Any reduction in reimbursement from Medicare or other government healthcare 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 commercializing our products and being able to generate
revenue, and we could be prevented from or significantly delayed in achieving profitability.
Compliance with the federal track and trace requirements may increase our operational expenses and
impose significant administrative burdens. As a result of these and other new proposals, we may determine
to change our current manner of operation, provide additional benefits or change our contract arrangements,
any of which could have a material adverse effect on our business, financial condition, results of operations,
stock price and prospects.
Our employees, independent contractors, consultants, commercial partners, principal investigators, CMOs, or CROs
may engage in misconduct or other improper activities, including noncompliance with regulatory standards and
requirements, which could have a material adverse effect on our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees,
independent contractors, consultants, commercial partners, principal investigators, CMOs, or CROs could
include intentional, reckless, negligent, or unintentional failures to comply with FDA regulations, comply
with applicable fraud and abuse laws, provide accurate information to the FDA, properly calculate pricing
information required by federal programs, report financial information or data accurately or disclose
unauthorized activities to us. This misconduct could also involve the improper use or misrepresentation of
information obtained in the course of clinical trials, which could result in regulatory sanctions and serious
harm to our reputation. Moreover, it is possible for a whistleblower to pursue a False Claims Act case
against us even if the government considers the claim unmeritorious and declines to intervene, which could
require us to incur costs defending against such a claim. 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, financial condition, results of operations, stock price and prospects, including the
imposition of significant fines or other sanctions.
Violations of or liabilities under environmental, health and safety laws and regulations could subject us to fines,
penalties or other costs that could have a material adverse effect on the success of our business.
We are subject to numerous environmental, health and safety laws and regulations, including those
governing laboratory procedures, the handling, use, storage, treatment and disposal of hazardous materials
and wastes and the cleanup of contaminated sites. Our operations involve the use of hazardous and
flammable materials, including chemicals and biological and radioactive materials. Our operations also
produce hazardous waste products. We would incur substantial costs as a result of violations of or liabilities
under environmental requirements in connection with our operations or property, including fines, penalties
and other sanctions, investigation and cleanup costs and third party claims. In the event of contamination or
injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and
any liability could exceed our resources. We also could incur significant costs associated with civil or
criminal fines and penalties.
Although we maintain workers’ compensation insurance to cover costs and expenses, we may incur due
to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide
adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or
toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or
hazardous materials.
Our internal computer systems, or those of our third-party CROs or other contractors or consultants, may fail or
suffer security breaches, which could result in a material disruption of our development programs.
Our internal computer systems, and those of our CROs, CMOs, information technology suppliers and
other contractors and consultants are vulnerable to damage from computer viruses, cyber-attacks and other
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unauthorized access, natural disasters, terrorism, war, and telecommunication and electrical failures. If such
an event were to occur and cause interruptions in our operations, it could result in a material disruption of
our development programs. For example, the loss of clinical trial data from completed, 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 or security breach were to result in a loss of
or damage to our data or applications, or inappropriate disclosure of personal, confidential or proprietary
information, we could incur liability and the further development of any of our product candidates could be
delayed.
Risks related to our operations
Our financial condition and results of operations could be adversely affected by the coronavirus disease-2019, or
COVID-19, outbreak.
In December 2019, a novel strain of coronavirus, now referred to as COVID-19, surfaced in Wuhan,
China. The virus continues to spread globally, including the United States, the United Kingdom and other
countries in which we conduct clinical trials, and has been declared a pandemic by the World Health
Organization. The impact of this pandemic has been and will likely continue to be extensive in many aspects
of society, which has resulted in and will likely continue to result in significant disruptions to the global
economy, as well as businesses and capital markets around the world. In an effort to halt the outbreak of
COVID-19, many countries, including the United States, the United Kingdom and certain other countries in
which we conduct clinical trials, placed significant restrictions on travel and business operations or issued
shelter-in-place orders. These restrictions and orders continue to remain in effect to varying degrees, the
effect of which required, and in some instances, continue to require, certain of our employees and clinical
trial staff to work remotely and avoid unnecessary travel. The effect of these restrictions and orders has
impacted the pace of enrollment in our clinical trials, and if they continue, may affect our results and
operations.
The COVID-19 pandemic is affecting the United States and global economies and has affected and may
continue to affect our operations and those of third parties on which we rely, including by causing
disruptions in our raw material and anti-PD-1 supply, the manufacturing of our product candidates, the
access to laboratory and other supplies necessary for development and packaging of our product candidates,
our commercialization processes and the conduct and the enrollment of current and future clinical trials. In
addition, the COVID-19 pandemic has affected and may continue to affect the operations of the FDA and
comparable foreign regulatory authorities, which could result in delays of reviews and approvals, including
with respect to RP1 and our other product candidates. The evolving COVID-19 pandemic has also directly
or indirectly impacted and is likely to continue to impact the pace of enrollment in our clinical trials as
patients may avoid or may not be able to travel to healthcare facilities and physicians’ offices unless due to
a health emergency, and clinical trial staff may no longer be able to get to the clinic. Such facilities and
offices have and may continue to be required to focus limited resources on non-clinical trial matters,
including treatment of COVID-19 patients, and may not be available, in whole or in part, for clinical trial
services. For example, our clinical trial of RP1 in solid organ transplant patients with CSCC, representing a
highly immunocompromised patient populations, has been and continues to be slower than expected as a
result, in part, of the COVID-19 pandemic. In addition, employee disruptions and remote working
environments related to the COVID-19 pandemic and the federal, state and local responses to such virus,
could materially impact the efficiency and pace with which we work and develop our product candidates.
The COVID-19 pandemic and the government and public health response continues to rapidly evolve
and fluctuation in infection rates in the regions in which we operate has resulted in periodic changes in
restrictions that vary from region to region and require vigilant attention and rapid response to new or
reinstated orders. In light of the COVID-19 pandemic, the FDA has issued a number of new guidance
documents. Specifically, as a result of the potential effect of the COVID-19 pandemic on many clinical trial
programs in the United States and globally, the FDA issued guidance concerning potential impacts on
clinical trial programs, changes that may be necessary to such programs if they proceed, considerations
regarding trial suspensions and discontinuations, the potential need to consult with or make submissions to
relevant ethics committees, IRBs, and the FDA, the use of alternative drug delivery methods, and
considerations with respect the outbreak’s impacts on endpoints, data collection, study procedures, and
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analysis. Additionally, in March 2020, the U.S. Congress passed the Coronavirus Aid, Relief, and Economic
Security Act, which includes a number of provisions that are applicable to the pharmaceutical industry, and
further acts, laws or regulations may be enacted or implemented in the future.
While the potential economic impact brought by, and the duration and severity of, the COVID-19
pandemic are difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial
markets may reduce our ability to access capital, which could negatively impact our short-term and long-
term liquidity. Additionally, the stock market has been unusually volatile during the COVID-19 pandemic
and such volatility may continue. To date, during certain periods of the COVID-19 pandemic, our stock
price fluctuated significantly, and such fluctuation may continue to occur. The ultimate impact of the
COVID-19 pandemic on our business will largely depend on future developments, which are highly
uncertain, cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the
duration of the pandemic, travel restrictions and social distancing in the United States and other countries,
business closures or business disruptions, the ultimate impact on financial markets and the global economy,
and the effectiveness of any COVID-19 vaccines and actions taken in the United States and other countries
to contain and treat the disease. While vaccines for COVID-19 are being, and have been developed, there is
no guarantee that any such vaccine will be effective, work as expected or be made available or will be
accepted on a significant scale and in a timely manner.
We do not yet know the full extent of the delays or impacts on our business, financing or clinical trial
activities, healthcare systems or the global economy as a whole. However, these effects could have a
material impact on our liquidity, capital resources, operations and business and those of the third parties on
which we rely. To the extent to COVID-19 pandemic materially impacts our business and financial results, it
may also have the effect of significantly heightening many of the other risk described in this “Risk Factors”
section.
We will need to expand the size of our organization, and we may experience difficulties in managing this growth,
which could disrupt our operations.
As our development and commercialization plans and strategies develop, we expect to need additional
managerial, operational, sales, marketing, financial and other personnel. Our future financial performance
and our ability to commercialize RP1 and our other product candidates will depend, in part, on our ability to
effectively manage any future growth, which would impose significant additional responsibilities on
members of management and may divert their attention away from day-to-day activities.
We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain
independent organizations, advisors and consultants to provide certain services. The services include
substantially all aspects of clinical trial management and manufacturing, as well as support for our financial
reporting and accounting functions. If the services of independent organizations, advisors and consultants
become unavailable to us or we are unable to effectively manage our outsourced activities, or if the quality
or accuracy of such services is compromised for any reason, our clinical trials may be extended, delayed or
terminated, we may not comply with our financial reporting and accounting obligations on a timely basis
and we may not be able to obtain marketing approval of RP1 and our other product candidates or otherwise
advance our business.
If we are not able to effectively expand our organization by hiring qualified new employees and
expanding our groups of consultants and contractors, we may not be able to successfully implement the
tasks necessary to further develop and commercialize RP1 and our other product candidates and,
accordingly, may not achieve our research, development and commercialization goals.
We are highly dependent on our key personnel, including Philip Astley-Sparke, our Chief Executive Officer; Robert
Coffin, Ph.D., our President and Chief Research & Development Officer; and Colin Love, Ph.D., our Chief
Operating Officer. If we are not successful in attracting, motivating and retaining highly qualified personnel, we
may not be able to successfully implement our business strategy.
Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends
upon our ability to attract, motivate and retain highly qualified managerial, scientific and medical personnel.
We are highly dependent on our management and particularly on the services of our founders, as well as our
other scientific, manufacturing, quality and medical personnel, including Philip Astley-Sparke, our Chief
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Executive Officer, Robert Coffin, Ph.D., our President and Chief Research & Development Officer, and
Colin Love, Ph.D., our Chief Operating Officer. The loss of the services of our key personnel and any of our
other executive officers, key employees, and scientific and medical advisors, and our inability to find
suitable replacements, could result in delays in product development and harm our business.
Additionally, competition for skilled personnel is intense and the turnover rate can be high, which may
limit our ability to hire and retain highly qualified personnel on acceptable terms or at all.
To induce valuable employees to remain at our company, in addition to salary and cash incentives, we
have provided stock option and restricted stock unit grants that vest over time. The value to employees of
these equity grants that vest over time may be significantly affected by movements in our stock price that
are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other
companies. Although we have employment agreements with our key employees, these employment
agreements generally provide for at-will employment, which means that any of our employees could leave
our employment at any time, with or without notice.
If we fail to establish and maintain proper and effective internal control over financial reporting our ability to
produce accurate and timely financial statements could be impaired.
We are required to maintain internal control over financial reporting. We must perform system and
process design evaluation and testing of the effectiveness of our internal controls over financial reporting to
allow management to report on the effectiveness of our internal controls over financial reporting, as
required by Section 404 of the Sarbanes-Oxley Act. We continue to be engaged in a process to document
and evaluate our internal control over financial reporting, which is both costly and challenging. In this
regard, we will need to continue to incur substantial professional fees and internal costs for our accounting
and finance functions, expend significant management efforts, continue to implement plans developed to
address areas that we have identified as requiring improvement, validate through testing that controls are
functioning as documented and implement a continuous reporting and improvement process for internal
control over financial reporting.
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 over financial
reporting, we may not be able to produce timely and accurate financial statements. If that were to happen,
our investors could lose confidence in our reported financial information, the market price of our stock
could decline and we could be subject to sanctions or investigations by the SEC, Nasdaq or other regulatory
authorities.
We believe that any internal controls and procedures, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the control system are met. We may
discover weaknesses in our system of internal financial and accounting controls and procedures that could
result in a material misstatement of our consolidated financial statements. Our internal control over
financial reporting will not prevent or detect all errors and all fraud. 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.
These inherent limitations include the realities that judgments in decision making can be faulty, and
that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people or by an unauthorized override
of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to
error or fraud may occur and not be detected.
We previously had identified material weaknesses in our internal control over financial reporting, which have now
been remediated. Any failure to maintain effective internal control over financial reporting could result in material
misstatements in our financial statements and cause investors to lose confidence in our reported financial
information, which in turn could cause the trading price of our securities to decline.
Our management is responsible for establishing and maintaining adequate internal control over our
financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. As disclosed in our
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Annual Report on Form 10-K for the year ended March 31, 2020, management identified material
weaknesses in our internal control over financial reporting as of the end of that fiscal year.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim
financial statements will not be prevented or detected on a timely basis.
Effective internal controls are necessary for us to provide reliable and accurate financial statements and
to effectively prevent fraud. We devote significant resources and time to comply with the internal control
over financial reporting requirements of the Sarbanes Oxley Act of 2002, and we continue to enhance our
controls and processes. In the year ended March 31, 2021, we remediated the previously disclosed material
weakness in our internal controls over our ability to maintain an effective control environment
commensurate with our financial reporting requirements. The Company hired additional resources in the
finance department with the accounting knowledge and skills necessary to appropriately analyze, record and
disclose accounting matters timely and accurately. The additional resources have allowed for more
appropriate structure of responsibilities within the finance department and sufficient segregation of duties.
Furthermore, we remediated the material weakness over the accounting for, and disclosure of, complex
transactions, including accounting for preferred stock, stock-based compensation, warrant liabilities and
leases. Although these material weaknesses are remediated as of March 31, 2021, we cannot be certain that
we will be able to prevent future significant deficiencies or material weaknesses. Inadequate internal
controls could cause investors to lose confidence in our reported financial information, which could have a
negative effect on investor confidence in our financial statements, the trading price of our stock and our
access to capital.
Risks related to our common stock and general risks
An active trading market for our common stock may not be sustained.
Our common stock began trading on the Nasdaq Global Select Market on July 20, 2018. Given the
limited trading history of our common stock, there is a risk that an active trading market for shares of our
common stock may not be sustained. In the absence of an active trading market for shares of our common
stock, our stockholders may not be able to sell their common stock at or above the price at which such
stockholder acquired our common stock or at the time that they would like to sell.
The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses
for purchasers of our common stock.
Our stock price has been and is likely to be volatile. The stock market in general and the market for
biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated
to the operating performance of particular companies. As a result of this volatility, you may not be able to
sell your common stock at or above the price at which it was acquired. The market price for our common
stock may be influenced by many factors, including:
•
the success of competitive products or technologies;
•
results of clinical trials of RP1 and our other product candidates or those of our competitors;
•
regulatory or legal developments in the United States and other countries;
•
developments or disputes concerning patent applications, issued patents or other proprietary rights;
•
the recruitment or departure of key personnel;
•
•
•
the level of expenses related to the development of RP1 and our other product candidates or clinical
development programs;
the results of our efforts to discover, develop, acquire or in-license additional product candidates or
drugs;
actual or anticipated changes in estimates as to financial results, development timelines or
recommendations by securities analysts;
•
variations in our financial results or those of companies that are perceived to be similar to us;
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•
changes in the structure of healthcare payment systems;
•
market conditions in the pharmaceutical and biotechnology sectors;
•
general economic, industry and market conditions;
•
political and economic instability, including the impact of COVID-19, the possibility of an economic
recession, international hostilities, acts of terrorism and governmental restrictions, inflation, trade
relationships and military and political alliances; and
•
the other factors described in this “Risk factors” section.
Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and
could cause our operating results to fall below expectations or our guidance.
Our quarterly and annual operating results may fluctuate significantly in the future, which makes it
difficult for us to predict our future operating results. From time to time, we may enter into license or
collaboration agreements with other companies that include development funding and significant upfront
and milestone payments and/or royalties, which may become an important source of our revenue.
Accordingly, our revenue may depend on development funding and the achievement of development and
clinical milestones under current and any potential future license and collaboration agreements and sales of
our products, if approved. These upfront and milestone payments may vary significantly from period to
period and any such variance could cause a significant fluctuation in our operating results from one period
to the next.
In addition, we measure compensation cost for stock-based awards made to employees at the grant date
of the award, based on the fair value of the award as determined by our board of directors, and recognize the
cost as an expense over the employee’s requisite service period. As the variables that we use as a basis for
valuing these awards change over time, including, our underlying stock price and stock price volatility, the
magnitude of the expense that we must recognize may vary significantly.
Furthermore, our operating results may fluctuate due to a variety of other factors, many of which are
outside of our control and may be difficult to predict, including the following:
•
timing and cost of, and level of investment in, research and development activities relating to our
current and any future product candidates, which will change from time to time;
•
the total expenses we incur in connection with equipping and operating our manufacturing facility;
•
our ability to enroll patients in clinical trials and the timing of enrollment;
•
•
•
•
the cost of manufacturing our current and any future product candidates, which may vary depending
on the FDA’s and comparable foreign regulatory authorities’ guidelines and requirements, the
quantity of production and the terms of any agreements with manufacturers;
expenditures that we will or may incur to acquire or develop additional product candidates and
technologies;
the timing and outcomes of clinical and preclinical studies for RP1 and our other product candidates
or competing product candidates;
competition from existing and potential future products that compete with RP1 and our other product
candidates, and changes in the competitive landscape of our industry, including consolidation among
our competitors or partners;
•
any delays in regulatory review or approval of RP1 or our other product candidates;
•
•
the level of demand for RP1 and our other product candidates, if approved, which may fluctuate
significantly and be difficult to predict;
the risk/benefit profile, cost and reimbursement policies with respect to our product candidates, if
approved, and existing and potential future products that compete with RP1 and our other product
candidates;
•
our ability to commercialize RP1 and our other product candidates, if approved, inside and outside of
the United States, either independently or working with third parties;
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•
the success of and our ability to establish and maintain collaborations, licensing or other
arrangements;
•
our ability to adequately support future growth;
•
potential unforeseen business disruptions that increase our costs or expenses;
•
political and economic instability, including the impact of COVID-19, the possibility of an economic
recession, international hostilities, acts of terrorism and governmental restrictions, inflation, trade
relationships and military and political alliances;
•
future accounting pronouncements or changes in our accounting policies; and
•
the changing and volatile global economic environment.
These factors could result in large fluctuations and unpredictability in our quarterly and annual
operating results. As a result, comparing our operating results on a period-to-period basis may not be
meaningful. Investors should not rely on our past results as an indication of our future performance.
This variability and unpredictability could also result in our failing to meet the expectations of industry
or financial analysts or investors for any period. If our revenue or operating results fall below the
expectations of analysts or investors or below any forecasts we may provide to the market, or if the
forecasts we provide to the market are below the expectations of analysts or investors, the price of our
common stock could decline substantially. Such a stock price decline could occur even when we have met
any previously publicly stated revenue and/or earnings guidance we may provide.
We have broad discretion in how we use our cash, cash equivalents and investments, and may not use these
resources effectively, which could affect our results of operations and cause our stock price to decline.
Our management has considerable discretion in the application of our cash, cash equivalents and
investments. We intend to use our resources to fund our preclinical and clinical development programs as
well as for general corporate purposes, including working capital requirements and other operating
expenses. As a result, investors will be relying upon management’s judgment with only limited information
about our specific intentions for the use of our resources. We may use our resources for purposes that do not
yield a significant return or any return at all for our stockholders. In addition, pending their use, we may
invest our cash, cash equivalents and investments in a manner that does not produce income or that loses
value.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We currently anticipate that we will retain future earnings for the development, operation and
expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable
future. Any return to stockholders will therefore be limited to the appreciation of their stock, which may
never occur, as the only way to realize any return on their investment.
Our executive officers, directors, and stockholders and their affiliates who beneficially own more than 5% of our
common stock exercise significant influence over our company, which limits your ability to influence corporate
matters and could delay or prevent a change in corporate control.
Based on the number of shares outstanding as of March 31, 2021, our executive officers, directors,
holders of 5% or more of our capital stock and their respective affiliates beneficially owned a significant
portion of our voting stock and, accordingly, these stockholders will continue to have significant influence
over matters requiring stockholder approval. For example, these stockholders will continue to significantly
influence elections of directors, amendments of our organizational documents, or approval of any merger,
sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition
proposals or offers for our common stock that you may feel are in your best interest as one of our
stockholders.
Conflicts of interest may arise because some members of our board of directors are representatives of our principal
stockholders.
Certain of our principal stockholders or their affiliates are venture capital funds or other investment
vehicles that could invest in entities that directly or indirectly compete with us. As a result of these
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relationships, when conflicts arise between the interests of the principal stockholders or their affiliates and
the interests of other stockholders, members of our board of directors that are representatives of the
principal stockholders may not be disinterested. Neither the principal stockholders nor the representatives of
the principal stockholders on our board of directors, by the terms of our amended and restated certificate of
incorporation, are required to offer us any transaction opportunity of which they become aware and could
take any such opportunity for themselves or offer it to their other affiliates, unless such opportunity is
expressly offered to them solely in their capacity as members of our board of directors.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to
fall.
If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common
stock in the public market after the expiration of contractual or legal restrictions on resale lapse, the market
price of our common stock could decline. These sales may make it more difficult for us to sell equity or
equity related securities in the future at a time and price that we deem appropriate, or to use equity as
consideration for future acquisition.
In addition, a significant number of shares of common stock that are either subject to outstanding
options and restricted stock units, reserved for future issuance under our equity incentive plans or subject to
outstanding warrants are eligible for sale in the public market to the extent permitted by the provisions of
various vesting schedules and Rule 144 and Rule 701 under the Securities Act, including our ESPP if
activated. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in
the public market, the market price of our common stock could decline.
Certain holders of shares of our common stock, or their permitted transferees, are entitled to rights with
respect to the registration under the Securities Act of shares of our common stock pursuant to the amended
and restated investors’ rights agreement by and among us and certain of our stockholders. Registration of
these shares under the Securities Act would result in the shares becoming freely tradable without restriction
under the Securities Act, except for shares purchased by affiliates. Any sales of securities by these
stockholders could have a material adverse effect on the market price of our common stock.
We may sell up to $62.5 million of shares of our common stock in “at-the-market” offerings pursuant to
the sales agreement entered into with SVB Leerink LLC on August 11, 2020 and as amended on October 21,
2020. The sale of a substantial number of shares of our common stock pursuant to the sales agreement, or
anticipation of such sales, could cause the trading price of our common stock to decline or make it more
difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might
otherwise desire. In addition, issuances of any shares of our common stock sold pursuant to the sales
agreement will have a dilutive effect on our existing stockholders.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish
rights to our technologies or product candidates.
To the extent that we raise additional capital through the sale of common stock or securities
convertible, exercisable or exchangeable into common stock, our existing stockholders’ interest will be
diluted. Debt financing, if available, would increase our fixed payment obligations and 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.
If we are unable to raise additional funds through equity or debt financings when needed, we may be
required to grant rights to develop and market one or more of our product candidates or technologies that we
would otherwise prefer to develop and market ourselves.
If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our
stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
We may evaluate various acquisitions and strategic partnerships, including licensing or acquiring
complementary products, intellectual property rights, technologies, or businesses. Any potential acquisition
or strategic partnership may entail numerous risks, including:
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•
increased operating expenses and cash requirements;
•
the assumption of additional indebtedness or contingent liabilities;
•
the issuance of our equity securities;
•
•
•
•
•
assimilation of operations, intellectual property and products of an acquired company, including
difficulties associated with integrating new personnel;
the diversion of our management’s attention from our existing product programs and initiatives in
pursuing such a strategic merger or acquisition;
retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key
business relationships;
risks and uncertainties associated with the other party to such a transaction, including the prospects
of that party, their regulatory compliance status, and their existing products or product candidates
and marketing approvals; and
our inability to generate revenue from acquired technology and/or products sufficient to meet our
objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance
costs.
In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt
obligations, incur large one-time expenses and acquire intangible assets that could result in significant
future amortization expense or intangible asset impairment charges. Moreover, we may not be able to locate
suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to
technology or products that may be important to the development of our business. Any of the foregoing may
materially harm our business, financial condition, results of operations, stock price and prospects.
Unfavorable market and economic conditions may have serious adverse consequences on our business, financial
condition, results of operations, stock price and prospects.
Our results of operations could be adversely affected by general conditions in the global economy and
in the global financial markets. The most recent global financial crisis caused extreme volatility and
disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a
variety of risks to our business, including a reduced ability to raise additional capital when needed on
acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting
in supply disruption. Any of the foregoing could harm our business and we cannot anticipate all of the ways
in which the economic climate and financial market conditions could adversely impact our business.
Global financial markets have been experiencing extreme disruption in recent months, including,
among other things, extreme volatility in securities prices. We are unable to predict the likely duration and
severity of the current disruptions in financial markets and adverse economic conditions throughout the
world. These economic developments affect businesses such as ours and those of third parties on which we
rely in a number of ways that could result in unfavorable consequences to us. Current economic conditions
or a deepening economic downturn in the United States and elsewhere may reduce our ability to access
capital, which could negatively impact our short-term and long-term liquidity.
Although we are not aware of any downgrades, material losses, or other significant deterioration in the
fair value of our cash equivalents or short-term investments, we cannot assure you that deterioration of the
global credit and financial markets would not negatively impact our current portfolio of cash equivalents or
short-term investments, or our ability to meet our financing objectives. Furthermore, our stock price may
decline due, in part, to the volatility of the stock market and general economic downturns.
Exchange rate fluctuations may materially affect our results of operations and financial conditions.
Owing to the international scope of our operations, fluctuations in exchange rates, particularly between
the U.S. dollar and the British pound and the euro, may adversely affect us. Although we are based in the
United States, we have significant research and development operations in the United Kingdom, and source
third-party manufacturing, consulting and other services in the United Kingdom and the European
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Union. As a result, our business and the price of our common stock may be affected by fluctuations in
foreign exchange rates, which may have a significant impact on our results of operations and cash flows
from period to period. Currently, we do not have any exchange rate hedging arrangements in place.
Item 1B.
Unresolved staff comments
None.
Item 2.
Properties
Our corporate headquarters are located in Woburn, Massachusetts, where we occupy approximately
18,712 square feet pursuant to a lease expiring in 2029, with an option to extend by an additional five years.
We also lease an approximately 12,000 square-foot facility in Oxfordshire, United Kingdom, containing
research and development, laboratory and office space. This lease expires in April 2031 and we have the
right to terminate it in April 2026.
In June 2018, we entered into an agreement to lease approximately 63,000 square feet of office,
manufacturing and laboratory space in Framingham, Massachusetts. Pursuant to the lease agreement, the
lease term commenced in December 2018 and the rent commenced in August 2019. The initial lease term is
ten years from the rent commencement date and includes two optional five-year extensions.
We believe that our current facilities are suitable and adequate to meet our current and planned needs.
Our leases can be renewed, and we believe that suitable alternative spaces will be available as needed in the
future, on commercially reasonable terms. We do not own any real property.
Item 3.
Legal proceedings
We are not currently a party to any material legal proceedings.
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
Our common stock has been listed on the Nasdaq Global Select Market under the symbol “REPL” since
July 20, 2018. Prior to that date, there was no public trading market for our common stock.
Holders of common stock
As of the close of business on May 17, 2021, there were approximately 12 holders of record of our
common stock. This number does not reflect beneficial owners whose shares are held in street name.
Dividend policy
We have never declared or paid any dividends on our capital stock. We currently intend to retain all
available funds and any future earnings for use in the operation of our business and do not anticipate paying
any dividends on our common stock in the foreseeable future. Any future determination to declare dividends
will be made at the discretion of our board of directors and will depend on our financial condition, operating
results, capital requirements, contractual restrictions, business prospects, general business conditions and
other factors that our board of directors may deem relevant.
Securities authorized for issuance under equity compensation plans
Information regarding our equity compensation plans and the securities authorized for issuance
thereunder is set forth herein under Part III, Item 12 below.
Recent sales of unregistered securities
None.
Use of proceeds from registered securities
Shares of our common stock began trading on the Nasdaq Global Select market on July 20, 2018. The
offer and sale of all the shares in the initial public offering, or IPO, were registered under the Securities Act
pursuant to a registration statement on Form S-1 (File No. 333-225846), which was declared effective by the
SEC on July 19, 2018. There has been no material change in the planned use of proceeds from our IPO as
described in the Prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act on July 23,
2018.
Purchases of equity securities by the Issuer and affiliated purchasers
None.
Item 6.
Selected financial data
Not applicable
Item 7.
Management’s discussion and analysis of financial condition and results of operations
You should read the following discussion and analysis of our financial condition and results of
operations in conjunction with our consolidated financial statements and related notes and other financial
information included elsewhere in this Annual Report on Form 10-K. In addition to historical information,
some of the statements contained in this discussion and analysis or set forth elsewhere in this Annual Report
on Form 10-K, including information with respect to our plans and strategy for our business, constitute
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have based
these forward-looking statements on our current expectations and projections about future events. The
following information and any forward-looking statements should be considered in light of factors discussed
elsewhere in this Annual Report
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on Form 10-K, particularly including those risks identified in Part I, Item 1A “Risk factors” and our other
filings with the Securities Exchange Commission, or SEC.
We caution you that forward-looking statements are not guarantees of future performance and that our
actual results of operations, financial condition and liquidity, and the development of the industry in which
we operate may differ materially from the forward-looking statements contained in this Annual Report on
Form 10-K. Statements made herein are as of the date of the filing of this Annual Report on Form 10-K with
the SEC and should not be relied upon as of any subsequent date. Even if our results of operations, financial
condition and liquidity, and the development of the industry in which we operate are consistent with the
forward-looking statements contained in this Annual Report on Form 10-K, they may not be predictive of
results or developments in future periods. We disclaim any obligation, except as specifically required by law
and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our
expectations or in events, conditions or circumstances on which any such statements may be based or that
may affect the likelihood that actual results will differ from those set forth in the forward-looking
statements.
Overview
General
We are a clinical-stage biotechnology company committed to applying our leading expertise in the field
of oncolytic immunotherapy to transform the lives of cancer patients. We use our proprietary Immulytic
platform to design and develop product candidates that are intended to maximally activate the immune
system against cancer.
Oncolytic immunotherapy is an emerging drug class, which we intend to establish as the second
cornerstone of immune-based cancer treatments, alongside checkpoint blockade. Oncolytic immunotherapy
exploits the ability of certain viruses to selectively replicate in and directly kill tumors, as well as induce a
potent, patient-specific, anti-tumor immune response. Our product candidates incorporate multiple
mechanisms of action into a practical “off-the-shelf” approach that is intended to maximize the immune
response against a patient’s cancer and to offer significant advantages over personalized vaccine
approaches. We believe that the bundling of multiple approaches for the treatment of cancer into single
therapies will simplify the development path of our product candidates, while also improving patient
outcomes at a lower cost to the healthcare system than the use of multiple different drugs.
The foundation of our Immulytic platform consists of a proprietary, engineered strain of herpes simplex
virus 1, or HSV-1, that has been “armed” with a fusogenic glycoprotein intended to substantially increase
anti-tumor activity. Our Immulytic platform enables us to incorporate various genes into HSV-1 that are
intended to further augment the inherent properties of HSV-1 in order to both directly destroy tumor cells
and induce an anti-tumor immune response. We currently have three product candidates in our development
pipeline, RP1, our lead product candidate, RP2 and RP3.
We are conducting a number of clinical trials of RP1, both as a monotherapy and in combination with
anti-PD-1 therapy, with a focus on immune-responsive tumors. We are actively enrolling patients in the
CERPASS trial, a randomized, controlled Phase 2 clinical trial of RP1 with cutaneous squamous cell
carcinoma, or CSCC, RP1’s lead indication in agreement with our partner Regeneron. CERPASS is a
registration-directed clinical trial evaluating RP1 in combination with cemiplimab, an anti-PD-1 therapy
developed by Regeneron, versus cemiplimab alone. CERPASS is currently being amended, in agreement
with Regeneron, to include two independent primary endpoints, complete response (CR) rate and overall
response rate (ORR), rather than only ORR, and to reduce the sample size from 240 to 180 patients.
Regeneron has granted to us a non-exclusive royalty-free license to cemiplimab for use in this trial, is
funding one-half of the clinical trial costs, and is supplying cemiplimab at no cost. If this clinical trial
generates compelling clinical data demonstrating the benefits of the combined treatment, we believe the data
could support a filing with regulatory authorities seeking marketing approval. We expect the primary data
read-out from this Phase 2 clinical trial in 2022.
We continue our collaboration with BMS under which it has granted us a non-exclusive, royalty-free
license to, and is supplying at no cost, its anti-PD-1 therapy, nivolumab, for use in combination with RP1 in
our multi-cohort Phase 1/2 IGNYTE clinical trial. This trial includes a registration directed Phase 2
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expansion cohort enrolling 125 patients with anti-PD-1 failed cutaneous melanoma who are being treated
with RP1 in combination with nivolumab. We initiated this cohort after completing enrollment in a prior
Phase 2 cohort in the same clinical trial of approximately 30 patients with melanoma, which demonstrated
the safety and clinical activity of the combination of RP1 and nivolumab in patients with melanoma who
failed prior anti-PD-1 when given alone or in combination with CTLA-4 blockade. In March 2021 we held a
Type B meeting with the FDA to discuss the design of this cohort in the IGNYTE trial. In this meeting, the
FDA expressed that while a randomized controlled clinical trial would always be preferred for registration
purpose, that in this patient population with no clear standard of care, if the clinical data is sufficiently
compelling then the data could be considered for submission by the FDA under the accelerated approval
pathway. The FDA also indicated that a randomized confirmatory trial would also be needed as is required
under the accelerated approval pathway. The design of the confirmatory trial is intended to be discussed
with the FDA prior to a BLA submission. In connection with a presentation at SITC in October 2020 we
announced updated clinical data from our multi-cohort Phase 1/2 clinical trial evaluating RP1 in
combination with nivolumab in patients with melanoma and non-melanoma skin cancers. As reported, RP1
in combination with nivolumab has continued to be well tolerated, and we believe demonstrates continued
promising anti-tumor activity in patients with skin cancers, including in patients with anti-PD-1 failed
melanoma, and in patients with CSCC. We expect that the primary data read-out from the registration
directed Phase 2 melanoma cohort will be in 2022.
We continue to enroll patients in other IGNYTE Phase 2 cohorts under our collaboration with BMS in
which we are evaluating RP1 in combination with nivolumab. Currently, enrollment is ongoing in a 45
patient cohort with non-melanoma skin cancer (including the recent addition of 15 patients who have failed
prior anti-PD-1 therapy), a 15 patient cohort with MSI-H/dMMR tumors and a 30 patient cohort with anti-
PD(L)-1 failed NSCLC. We recently began dosing a patient in the NSCLC cohort. Due in part to COVID-19
related disruptions, we now expect the original 30 patient non-melanoma skin cancer cohort to be fully
accrued by mid-2021. We continue to accumulate data in the MSI-H/dMMR cohort and expect to decide
whether to pursue MSI-H/dMMR tumors into registration-directed development by the end of 2021.
We have also opened for enrollment a Phase 1b clinical trial of single agent RP1 in solid organ
transplant recipients with CSCC, or ARTACUS or the ARTACUS trial, which we believe to be potentially
registrational (in its own right or, subject to discussion with regulatory authorities, following enrollment of
additional patients, including as a potential label expansion after an initial approval of RP1 in a different
indication). We are currently enrolling patients in this clinical trial to assess the safety and efficacy of RP1
in liver and kidney transplant recipients with recurrent CSCC and are currently targeting about 30 patients
for this trial. Enrollment in this clinical trial has been impacted by COVID-19, as the patient population is
severely immune-compromised and considered very high risk. Nevertheless, we have begun dosing patients
and expect to present initial data from this clinical trial in the second half of the year.
We are also developing additional product candidates, RP2 and RP3, that have been further engineered
to enhance anti-tumor immune responses and are intended to address additional tumor types, including
traditionally less immune responsive tumor types. In addition to the expression of GALV-GP R(-) and
human GM-CSF as in RP1, RP2 has been engineered to express an antibody-like molecule intended to block
the activity of CTLA-4, a protein that inhibits the full activation of an immune response, including to
tumors. RP3, which does not include the expression of GM-CSF, has been engineered with the intent to
further stimulate an anti-tumor immune response through activation of immune co-stimulatory pathways
through expression of the ligands for CD40 and 4-1BBL, in addition to anti-CTLA-4 and GALV-GP R(-).
We initiated a Phase 1 clinical trial of RP2 alone and in combination with nivolumab in the second half
of 2019. This clinical trial is also being conducted as part of our collaboration with BMS, under which BMS
has granted us a non-exclusive, royalty-free license to, and will supply at no cost, nivolumab, for use in
combination with RP2. In November 2020, we and BMS agreed to increase the number of patients in the
combination part of the clinical trial from 12 to 30 patients. In October 2020, we presented positive data
from the single agent RP2 portion of the clinical trial that showed deep and durable responses, including
demonstration of tumor response in uninjected lesions and in patients with difficult to treat advanced
cancers. This data supports the hypothesis that anti-CTLA-4 delivered intra-tumorally through oncolytic
virus replication, with accompanying antigen release and presentation, can provide potent anti-tumor
effects.
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Following the monotherapy phase of this clinical trial with RP2, enrollment in the expansion phase using
RP2 in combination with nivolumab is currently underway and we expect to present initial data in mid-
2021.
We have obtained clearance from the Medicines and Healthcare Products Regulatory Agency in the
United Kingdom to begin clinical development with RP3 and in December 2020 we initiated dosing in this
clinical trial. This Phase 1 clinical trial is designed to evaluate RP3 alone and combined with anti-PD-1
therapy in advanced solid tumor patients. Initial data from this clinical trial is expected to be presented in
the second half of 2021.
RP1, RP2 and RP3 are administered by direct injection into solid tumors, guided either visually or by
ultrasound, computerized tomography, or CT, or other imaging methods. We believe that direct injection
maximizes virus-mediated tumor cell death, provides the most efficient delivery of virus-encoded immune
activating proteins into the tumor with the goal of activating systemic immunity, and limits the systemic
toxicities that could be associated with intravenous administration. Activation of systemic immunity
through local administration is intended to lead to the induction of anti-tumor immune responses leading to
clinical response of tumors that have not themselves been injected.
Financial
Since our inception, we have devoted substantially all of our resources to developing our Immulytic
platform building our intellectual property portfolio, conducting research and development of our product
candidates, business planning, raising capital and providing general and administrative support for our
operations. To date, we have financed our operations primarily with proceeds from the sale of equity
securities and to a lesser extent the proceeds from the issuance of debt securities. We do not have any
products approved for sale and have not generated any revenue from product sales.
Since our initial public offering, or IPO, on July 24, 2018, we have raised an aggregate of
approximately $569.0 million in net proceeds to fund our operations, of which $101.2 million was from our
IPO, $463.4 million was from three separate follow-on offerings, or the Public Offerings, that we closed in
November 2019, June 2020 and October 2020, respectively, and $4.4 million was from at-the-market
offerings. We sold 7,407,936 shares of common stock in our IPO, an aggregate of 13,619,822 shares of our
common stock and pre-funded warrants to purchase 5,284,238 shares of our common stock in the Public
Offerings, and 287,559 shares of common stock through our at-the-market facility.
Funds affiliated with two separate institutional investors hold all of our outstanding pre-funded
warrants. Other than as set forth in Note 8 of our consolidated financial statements appearing elsewhere in
this Annual Report on Form 10-K, the shares of our common stock into which our outstanding pre-funded
warrants are exercisable are not included in the number of issued and outstanding shares of our common
stock set forth in this Annual Report on Form 10-K.
In addition, on August 8, 2019, we entered into a Loan and Security Agreement with Hercules Capital,
Inc., or Hercules, which we refer to as the Hercules Loan Agreement, pursuant to which we borrowed
$10.0 million under a secured term loan facility in the amount of $30.0 million. The Hercules Loan
Agreement was subsequently amended on June 1, 2020, in order to, among other things, increase the
secured term loan facility from $30.0 million to $40.0 million. On December 15, 2020, we paid a total of
$10.8 million, representing the outstanding principal, accrued and unpaid interest, fees, costs and expenses
due and owing under the Hercules Loan Agreement and related loan documents, in repayment of all of our
outstanding obligations thereunder, and thereby terminated the Hercules Loan Agreement and the related
loan documents.
Since our inception, we have incurred significant operating losses. Our ability to generate product
revenue sufficient to achieve profitability will depend on the successful development and eventual
commercialization of one or more of our product candidates. Our net losses were $80.9 million and
$52.6 million for the years ended March 31, 2021 and 2020, respectively. As of March 31, 2021, we had an
accumulated deficit of $193.2 million. These losses have resulted primarily from costs incurred in
connection with research and development activities and general and administrative costs associated with
our operations. We expect to continue to incur significant expenses and increasing operating losses for at
least the next several years.
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We anticipate that our expenses and capital requirements will increase substantially in connection with
our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product
candidates, and if and as we:
•
conduct our current and future clinical trials with RP1, RP2 and RP3;
•
further preclinical development of our platform;
•
operate our own in-house manufacturing facility;
•
seek to identify and develop additional product candidates;
•
•
•
seek marketing approvals for any of our product candidates that successfully complete clinical trials,
if any;
establish a sales, marketing and distribution infrastructure to commercialize any products for which
we may obtain marketing approval;
until our manufacturing facility is fully validated, continued limited manufacturing by third parties
for clinical development;
•
maintain, expand and protect our intellectual property portfolio;
•
hire and retain additional clinical, quality control, scientific and general and administration
personnel;
•
acquire or in-license other drugs and technologies; and
•
add operational, financial and management information systems and personnel, including personnel
to support our research and development programs, any future commercialization efforts and
operations as a public company.
We will not generate revenue from product sales unless and until we successfully complete clinical
development and obtain regulatory approval for RP1 or our other product candidates. If we obtain
regulatory approval for any of our product candidates and do not enter into a commercialization partnership
in any jurisdiction, we expect to incur significant expenses related to developing our internal
commercialization capability to support product sales, marketing, and distribution.
As a result, we will need additional funding to support our continuing operations and pursue our
growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we
expect to finance our operations through a combination of equity offerings, debt financings, lines of credit,
collaborations, strategic alliances, and marketing, distribution, or licensing arrangements. We may be unable
to raise additional funds or enter into such other agreements or arrangements when needed on favorable
terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have
to significantly delay, scale back, or discontinue the development and commercialization of one or more of
our product candidates.
Because of the numerous risks and uncertainties associated with pharmaceutical product development,
we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be
able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become
profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then
we may be unable to continue our operations at planned levels and be forced to reduce or terminate our
operations.
As of March 31, 2021, we had cash and cash equivalents and short-term investments of $476.3 million.
We believe that our existing cash and cash equivalents and short-term investments will enable us to fund our
operating expenses and capital expenditure requirements through at least 12 months from the issuance of the
consolidated financial statements included in this Annual Report on Form 10-K.
See “— Liquidity and capital resources” and “Risk factors — Risks related to our financial position and
need for additional capital.”
The COVID-19 pandemic
We are continuing to monitor the global outbreak and spread of COVID-19 and have taken steps to
identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and actions
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taken by governmental and health authorities to address the COVID-19 pandemic. For example, we have
implemented a global work from home policy for certain employees who are able to perform their duties
remotely. For those employees working from our facilities, including certain essential employees in our
laboratory and who perform manufacturing functions, and certain other employees we deem essential from
time to time, we have implemented stringent safety measures designed to comply with applicable federal,
state and local guidelines instituted in response to the COVID-19 pandemic. The COVID-19 pandemic is
affecting the United States and global economies and has affected and may continue to affect our operations
and those of third parties on which we rely, including by causing disruptions in our raw material and anti-
PD-1 supply, the manufacturing of our product candidates and our commercialization processes. In addition,
timing of patient enrollment and treatment in certain of our ongoing clinical studies has been impacted by
the pandemic. For example, the enrollment of our clinical trial of RP1 in liver and kidney transplant patients
with CSCC, representing highly immunocompromised patient populations, has been slower than expected
for reasons we attribute to the COVID-19 pandemic. However, the extent of these delays is currently
unknown and has and will likely continue to vary by clinical study. In addition, we may incur unforeseen
costs as a result of disruptions in clinical supply or preclinical study or clinical trial delays. The full extent
to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and
financial condition will depend on future developments that are highly uncertain and cannot be accurately
predicted, including new information that may emerge concerning COVID-19, the actions taken in an effort
to contain it or to potentially treat or continue to vaccinate against COVID-19 and the economic impact on
local, regional, national and international markets. We continue to actively monitor this situation and the
possible effects on our financial condition, liquidity, operations, suppliers, industry and workforce. For
additional information, see “Risk Factors — Our financial condition and results of operations could be
adversely affected by the coronavirus disease-2019, or COVID-19, outbreak.” in Part I, Item 1A of this
Annual Report on Form 10-K.
Components of our results of operations
Revenue
To date, we have not generated any revenue from product sales as we do not have any approved
products and do not expect to generate any revenue from the sale of products in the near future. If our
development efforts for RP1 or any other product candidates that we may develop in the future are
successful and result in regulatory approval, or if we enter into collaboration or license agreements with
third parties, we may generate revenue in the future from a combination of product sales or payments from
those collaborations or license agreements.
Operating expenses
Our expenses since inception have consisted solely of research and development costs and general and
administrative costs.
Research and development expenses
Research and development expenses consist primarily of costs incurred for our research activities,
including our discovery efforts and the development of our product candidates, and include:
•
•
•
•
expenses incurred under agreements with third parties, including clinical research organizations, or
CROs, that conduct research, preclinical activities and clinical trials on our behalf as well as contract
manufacturing organizations, or CMOs, that manufacture our product candidates for use in our
preclinical and clinical trials;
salaries, benefits and other related costs, including stock-based compensation expense, for personnel
engaged in research and development functions;
costs of outside consultants, including their fees, stock-based compensation and related travel
expenses;
the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and
clinical trial materials;
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•
•
costs related to compliance with regulatory requirements in connection with the development of our
product candidates; and
facility-related expenses, which include direct depreciation costs and allocated expenses for rent and
maintenance of facilities and other operating costs.
These costs will be partially offset by our agreement with Regeneron related to our CERPASS trial.
We expense research and development costs as incurred. We recognize external development costs
based on an evaluation of the progress to completion of specific tasks using information provided to us by
our service providers. Payments for these activities are based on the terms of the individual agreements,
which may differ from the pattern of costs incurred, and are reflected in our consolidated financial
statements as prepaid or accrued research and development expenses.
Our direct external research and development expenses are tracked on a program-by-program basis and
consist of costs, such as fees paid to consultants, contractors, CMOs, and CROs in connection with our
preclinical and clinical development activities. We do not allocate personnel costs, costs associated with our
discovery efforts, laboratory supplies, and facilities, including depreciation or other indirect costs, to
specific product development programs because these costs are deployed across multiple product
development programs and, as such, are not separately classified. All non-employee costs associated with
our manufacturing facility have been fully burdened to our RP1 program.
The table below summarizes our research and development expenses by product candidate or
development program for each of the periods presented:
Direct research and development expenses by program:
RP1
RP2 & RP3
Unallocated research and development expenses:
Personnel related (including stock-based compensation)
Other
Total research and development expenses
Year Ended
March 31,
2021
2020
$27,517
3,004
$14,474
—
22,939
3,294
14,646
9,641
$56,754
$38,761
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 that our research and development expenses will continue to increase for the foreseeable future as we
continue enrollment and initiate additional clinical trials and continue to discover and develop additional
product candidates. The successful development and commercialization of our product candidates is highly
uncertain. This is due to the numerous risks and uncertainties associated with product development and
commercialization, including the following:
•
the scope, rate of progress, expense and results of our ongoing clinical trials, as well as future
clinical trials or other product candidates and other research and development activities that we may
conduct;
•
the number and scope of preclinical and clinical programs we decide to pursue;
•
our ability to maintain our current research and development programs and to establish new ones;
•
uncertainties in clinical trial design;
•
the rate of enrollment in clinical trials;
•
the successful completion of clinical trials with safety, tolerability, and efficacy profiles that are
satisfactory to the FDA or any comparable foreign regulatory authority;
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•
the receipt of regulatory approvals from applicable regulatory authorities;
•
•
our success in operating our manufacturing facility, or securing manufacturing supply through
relationships with third parties;
our ability to obtain and maintain patents, trade secret protection, and regulatory exclusivity, both in
the United States and internationally;
•
our ability to protect our rights in our intellectual property portfolio;
•
the commercialization of our product candidates, if and when approved;
•
•
the acceptance of our product candidates, if approved, by patients, the medical community, and third-
party payors;
our ability to successfully develop our product candidates for use in combination with third-party
products or product candidates;
•
negative developments in the field of immuno-oncology;
•
competition with other products; and
•
significant and changing government regulation and regulatory guidance.
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 another regulatory authority were to require us to conduct
clinical trials beyond those that we anticipate will be required for the completion of clinical development of
a product candidate, or if we experience significant trial delays due to patient enrollment, the COVID-19
pandemic, or other reasons, we could be required to expend significant additional financial resources and
time on the completion of clinical development. We may never succeed in obtaining regulatory approval for
any of our product candidates.
General and administrative expenses
General and administrative expenses consist primarily of salaries and other related costs, including
stock-based compensation, for personnel in our executive, finance, corporate and business development and
administrative functions. General and administrative expenses also include professional fees for legal,
patent, accounting, auditing, tax and consulting services; travel expenses; and facility-related expenses,
which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and
other operating costs.
We expect that our general and administrative expenses will increase in the future as we increase our
general and administrative headcount to support our continued research and development and potential
commercialization of our product candidates. We also expect to continue to incur increased expenses,
including accounting, audit, legal, regulatory and tax-related services associated with maintaining
compliance with exchange listing and SEC requirements; director and officer insurance costs; and investor
and public relations costs.
Other income (expense), net
Research and development incentives
Research and development incentives consists of reimbursements of research and development
expenditures from governmental authorities. We participate, through our subsidiary in the United Kingdom,
in the research and development program provided by the United Kingdom tax relief program, such that
a percentage of up to 14.5% of our qualifying research and development expenditures are reimbursed by the
United Kingdom government, and such incentives are reflected as other income.
Investment income
Investment income consists of income earned on our cash and cash equivalents and short-term
investments.
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Interest expense on finance lease liability
Interest expense on finance lease liability consists of amortization of finance charges under our
financing lease.
Interest expense on debt obligations
Interest expense on debt obligations consists of the amortization of debt discount and cash paid for
interest under the term loan facility with Hercules.
Loss on extinguishment of debt
Loss on extinguishment of debt consists of the loss from extinguishment of debt obligations under the
term loan facility with Hercules.
Other income (expense), net
Other income (expense), net consists primarily of realized and unrealized foreign currency transaction
gains and losses.
Income taxes
Since our inception and through March 31, 2021, we have not recorded any income tax benefits for the
net losses we incurred in each jurisdiction in which we operate, as we believe, based upon the weight of
available evidence, that it is more likely than not that all of our net operating loss carryforwards will not be
realized.
Results of operations
Comparison of the years ended March 31, 2021 and 2020
The following table summarizes our results of operations for the years ended March 31, 2021 and 2020:
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Research and development incentives
Investment income
Interest expense on finance lease liability
Interest expense on debt obligations
Loss on extinguishment of debt
Other (expense) income
Total other (expense) income, net
Year Ended March 31,
2021
2020
Change
(Amounts in thousands)
$ 56,754
23,201
$ 38,761
17,437
$ 17,993
5,764
79,955
56,198
23,757
(79,955
)
(56,198
)
(23,757
)
2,807
916
(2,242
(818
(913
(665
)
)
)
)
3,084
2,424
(1,185
(734
—
(16
)
)
)
(915
)
3,573
(277
(1,508
(1,057
(84
(913
(649
)
)
)
)
)
)
(4,488
)
Net loss attributable to common stockholders
(80,870
)
(52,625
)
(28,245
)
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Research and development expenses
Direct research and development expenses by program:
RP1
RP2 & RP3
Unallocated research and development expenses:
Personnel related (including stock-based compensation)
Other
Total research and development expenses
Year Ended
March 31,
2021
2020
Change
$27,517
3,004
$14,474
—
22,939
3,294
14,646
9,641
$13,043
3,004
—
8,293
(6,347
)
$56,754
$38,761
$17,993
Research and development expenses for the year ended March 31, 2021 were $56.8 million, compared
to $38.8 million for the year ended March 31, 2020. The increase of $18.0 million was due primarily to an
increase of $16.0 million in direct research costs related to our clinical trials for RP1, RP2 and RP3, as well
as a net increase in unallocated research and development costs of $1.9 million. The increase in RP1 costs
was due primarily to an increase in clinical trial costs in the year ended March 31, 2021 associated with the
advancement of our ongoing clinical trials as well as costs associated with operations of our manufacturing
facility allocated to RP1. The increase in costs associated with RP2 and RP3 are primarily associated with
the continued clinical trial development of these product candidates.
In addition, the increase in unallocated research and development expenses is mainly attributable to an
$8.3 million increase in personnel-related costs, including a $6.6 million increase in payroll and fringe
benefits and a stock-based compensation increase of $2.1 million. The increase in personnel-related costs
largely reflected the hiring of additional personnel in our research and development functions as we
expanded the development plan of our product candidates in multiple indications. Personnel related costs
for the years ended March 31, 2021 and 2020 included stock-based compensation expense of $5.7 million
and $3.7 million, respectively. Other costs decreased primarily due to our manufacturing operations focused
on the potential registrational studies associated with our RP1 development plan with multiple cohorts.
General and administrative expenses
General and administrative expenses were $23.2 million for the year ended March 31, 2021, compared
to $17.4 million for the year ended March 31, 2020. The increase of $5.8 million primarily reflects an
increase of approximately $3.7 million in personnel related costs, including an increase in stock-based
compensation of $2.0 million, which is driven by the hiring of additional personnel in our general and
administrative functions as we expanded our R&D operations in the United States. Additionally, the change
is driven, in part, by an increase of approximately $1.3 million in facility and other variable costs due to an
increase in costs associated with maintaining our directors and officers insurance policy.
Total other (expense) income, net
Other (expense) income for the year ended March 31, 2021 was $(0.9) million compared to
$3.6 million for the year ended March 31, 2020. The decrease of $4.5 million is primarily attributable to a
$1.5 million decrease in investment income as a result of declining market conditions on a year-over-year
basis, which have decreased the rate of return on investments, and a $1.1 million increase in expense related
to interest on our financing lease liability.
Liquidity and capital resources
Since our inception, we have not generated any revenue from product sales and have incurred
significant operating losses and negative cash flows from our operations. We have not yet commercialized
any of our product candidates, which are in various phases of preclinical and clinical development, and we
do not expect to generate revenue from sales of any products for the foreseeable future, if at all.
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Sources of liquidity
To date, we have financed our operations primarily with proceeds from the sale of equity securities and,
to a lesser extent, proceeds from the issuance of debt securities. Through March 31, 2021, we had received
net proceeds of $655.8 million from our sales of equity instruments and $10.0 million from our incurrence
of debt under the term loan facility with Hercules, which was repaid in full in December 2020. As of
March 31, 2021, we had cash and cash equivalents and short-term investments of $476.3 million.
In July 2018, we completed our IPO and issued and sold 7,407,936 shares of our common stock at a
public offering price of $15.00 per share, resulting in net proceeds of $101.2 million after deducting
underwriting discounts, commissions and other offering expenses of approximately $9.9 million. In the
fourth calendar quarter of 2019, we closed a registered public offering for the issuance and sale of 4,516,561
shares of our common stock at a public offering price of $13.61 per share and pre-funded warrants to
purchase 2,200,000 shares of our common stock at a purchase price of $13.6099 per pre-funded warrant,
which was equal to the public offering price per share of the common stock less the $0.0001 per share
exercise price of each pre-funded warrant. We received aggregate net proceeds of approximately
$85.6 million after deducting underwriting discounts, commissions and other offering expenses of
approximately $5.8 million. In June 2020, we closed a second registered public offering for the issuance and
sale of 3,478,261 shares of our common stock at a public offering price of $23.00 per share and pre-funded
warrants to purchase 1,521,738 shares of our common stock at a purchase price of $22.9999 per pre-funded
warrant, which was equal to the public offering price per share of common stock less the $0.0001 per share
exercise price of each pre-funded warrant. We received aggregate net proceeds of approximately
$107.8 million after deducting underwriting discounts, commissions and other offering expenses of
approximately $7.2 million. In October 2020, we closed a third registered public offering for the issuance
and sale of 5,625,000 shares of our common stock at a public offering price of $40.00 per share and pre-
funded warrants to purchase 1,562,500 shares of our common stock at a purchase price of $39.9999 per pre-
funded warrant, the public offering price per share of common stock less the $0.0001 per share exercise
price of each pre-funded warrant. We received aggregate net proceeds of approximately $270.0 million after
deducting underwriting discounts, commissions and other offering expenses of approximately $17.5 million.
In addition to registered public equity offerings, we also established an at-the-market offering program
pursuant to a sales agreement that we entered into with SVB Leerink LLC, or the Agent, on August 8, 2019,
or the 2019 Sales Agreement. Under the 2019 Sales Agreement, and prior to its amendment in June 2020,
we could sell from time to time, at our option, up to an aggregate of $75.0 million of shares of our common
stock. In June 2020, we amended the 2019 Sales Agreement to reduce the aggregate offering amount
thereunder from $75.0 million to $30.0 million. We sold 287,559 shares of our common stock under the
2019 Sales Agreement for net proceeds of approximately $4.4 million. On August 11, 2020, in connection
with our entry into separate sales agreement with the Agent, or the 2020 Sales Agreement, we and the Agent
mutually agreed to terminate the 2019 Sales Agreement. Under the 2020 Sales Agreement, and prior to its
amendment in October 2020, we could sell from time to time, at our option, up to an aggregate of
$75.0 million of shares of our common stock. In October 2020, we amended the 2020 Sales Agreement to
reduce the aggregate offering amount thereunder from $75.0 million to $62.5 million. We have not sold any
shares of our common stock under the 2020 Sales Agreement.
Our incurrence of debt was conducted entirely under the Hercules Loan Agreement, as amended,
pursuant to which we borrowed $10.0 million of a maximum of $40.0 million. On December 15, 2020, we
entered into a Payoff Letter with Hercules and paid a total of $10.8 million to Hercules in connection
therewith, representing the outstanding principal, accrued and unpaid interest, fees, costs and expense due
and owed to Hercules, thereby terminating the Hercules Loan Agreement and the related loan documents.
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Cash flows
The following table summarizes our cash flows for each of the periods presented:
Net cash used in operating activities
Net cash (used in) provided by investing activities
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Year Ended
March 31,
2021
2020
(Amounts in thousands)
)
)
$ (61,389
(188,776
372,462
721
$ (60,552
(5,233
100,166
(135
)
)
)
$ 123,018
$ 34,246
Operating activities
During the year ended March 31, 2021, net cash used in operating activities was $61.4 million,
primarily resulting from our net loss of $80.9 million, partially offset by an increase in non-cash charges of
$16.0 million, primarily consisting of stock-based compensation expense, and an increase in cash of
$3.5 million related to changes in our operating assets and liabilities. Net cash used by our changes in our
operating assets and liabilities for the twelve months ended March 31, 2021 consisted primarily of a
$3.4 million increase in accrued expenses and other current liabilities, a net $2.5 million increase in cash
related to ASC 842 (including changes in operating lease liabilities, operating lease, right-of-use asset and
financing lease right-of-use asset), a $1.7 million decrease in prepaid expenses and other current assets, a
$1.0 million decrease in accounts payable and a $0.3 million increase in research and development
incentives receivable from the United Kingdom government due to the timing and amount of our qualifying
expenditures. The changes in accounts payable were primarily due to the timing of vendor invoicing and
payments.
During the year ended March 31, 2020, net cash used in operating activities was $60.6 million,
primarily resulting from our net loss of $52.6 million and net cash used by changes in our operating assets
and liabilities of $15.4 million, partially offset by non-cash charges of $7.5 million. Net cash used by
changes in our operating assets and liabilities for the year ended March 31, 2020 consisted primarily of a
$14.4 million net increase related to the adoption of ASC 842 (including changes in long-term prepaid rent
operating lease liabilities, operating lease, right-of-use asset and financing lease, right-of-use-asset), a
$3.8 million decrease in accounts payable and a $0.6 million increase in research and development
incentives receivable from the United Kingdom government due to the timing and amount of our qualifying
expenditures, partially offset by a $0.9 million decrease in prepaid expenses and other current assets, and a
$2.5 million increase in accrued expenses and other current liabilities. The changes in accounts payable and
accrued expenses were primarily due to the timing of vendor invoicing and payments. The decrease in
prepaid expenses and other current assets was primarily due to the recognition of prepaid amounts paid to
vendors.
Investing activities
During the year ended March 31, 2021, net cash used in investing activities was $188.8 million,
consisting of $392.4 million in purchases of available for sale securities which were primarily driven by the
receipt of proceeds from two registered public offerings during the fiscal year ended March 31, 2021, as
well as $2.4 million in purchases of property, plant and equipment, partially offset by $206.1 million in
proceeds from sales and maturities of short-term investments.
During the year ended March 31, 2020, net cash used in investing activities was $5.2 million,
consisting of $149.7 million in purchases of available for sale securities which was primarily driven by the
receipt of proceeds for a registered public offering during the fiscal year ended March 31, 2020, as well as
$6.5 million in purchases of property, plant and equipment, partially offset by $151.0 million in proceeds
from sales and maturities of short-term investments.
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Financing Activities
During the year ended March 31, 2021, net cash provided by financing activities was $372.5 million,
consisting of $286.1 million from the issuance of common stock, $91.7 million from the issuance of pre-
funded warrants to purchase common stock, $5.7 million in proceeds from the exercise of stock options,
partially offset by $10.0 million in debt payments under the Hercules Loan Agreement and $0.8 million of
fees associated with the extinguishment of the obligations under the Hercules Loan Agreement.
During the year ended March 31, 2020, net cash provided by financing activities was $100.2 million,
consisting of $57.5 million in net proceeds from the issuance of common stock and $28.2 million in
proceeds from the issuance of pre-funded warrants to purchase common stock, $10.0 million in proceeds
from the incurrence of long-term debt, $4.4 million in proceeds from the issuance of common stock through
sales under our at-the-market offering program and $0.6 million in proceeds from the exercise of stock
options, partially offset by $0.4 million in payments of issuance costs and $0.1 million in principal
payments of finance lease obligations.
Hercules Loan Agreement
On August 8, 2019 and as amended on June 1, 2020, we and certain of our affiliates entered into the
Hercules Loan Agreement with Hercules, which provided for aggregate borrowings of up to $40 million in
the form of term loans. We borrowed $10.0 million at closing under the Hercules Loan Agreement in
August 2019 and subject to the achievement of certain milestones, had the ability to borrow the unused
$30.0 million available in three separate $10.0 million advances between October 1, 2020 and December 15,
2020, July 1, 2020 and June 30, 2021, and July 1, 2021 and December 15, 2021, respectively.
On December 15, 2020, we entered into a Payoff Letter with respect to the Hercules Loan Agreement.
Pursuant to the Payoff Letter, we paid a total of $10.8 million to Hercules, representing the outstanding
principal, accrued and unpaid interest, fees, costs and expenses due and owed to Hercules under the
Hercules Loan Agreement. Upon the execution of the Payoff Letter, in repayment of all of our outstanding
obligations thereunder, the Hercules Loan Agreement and the related loan documents were terminated.
Borrowings under the Hercules Loan Agreement bore interest at a rate per annum equal to 8.75%.
Under the Hercules Loan Agreement, we were required to make monthly interest-only payments through
September 1, 2022. As of March 31, 2021, there was no amount outstanding under the Hercules Loan
Agreement due and owing.
The Term Loan Facility with Hercules was secured by substantially all of our assets, excluding our
intellectual property, and subject to certain exceptions and exclusions. All liens on our assets held by
Hercules were released in connection with the execution of the Payoff Letter.
Funding requirements
Our plan of operation is to continue implementing our business strategy, continue research and
development of RP1 and our other product candidates and continue to expand our research pipeline
and our internal research and development capabilities. We expect our expenses to increase
substantially in connection with our ongoing activities, particularly as we advance the preclinical activities
and clinical trials of our product candidates and if and as we:
•
conduct our current and future clinical trials with RP1, RP2 and RP3;
•
further preclinical development of our platform;
•
operate our own in-house manufacturing facility;
•
seek to identify and develop additional product candidates;
•
•
seek marketing approvals for any of our product candidates that successfully complete clinical trials,
if any;
establish a sales, marketing and distribution infrastructure to commercialize any products for which
we may obtain marketing approval;
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•
•
•
•
until our planned manufacturing facility is fully validated, continued limited manufacturing by third
parties for clinical development.
maintain, expand and protect our intellectual property portfolio;
acquire or in-license other drugs and technologies; and
add operational, financial and management information systems and personnel, including personnel
to support our research and development programs, any future commercialization efforts and
operations as a public company.
As of March 31, 2021, we had cash and cash equivalents and short-term investments of $476.3 million.
We believe that our existing cash, cash equivalents and short-term investments as of March 31, 2021, will
enable us to fund our overall operations into the second half of 2024. We have based these estimates on
assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than
we expect.
Because of the numerous risks and uncertainties associated with the development of RP1 and other
product candidates and programs, and because the extent to which we may enter into collaborations with
third parties for development of our product candidates is unknown, we are unable to estimate the timing
and amounts of increased capital outlays and operating expenses associated with completing the research
and development of our product candidates. Our future capital requirements will depend on many factors,
including those described in this section and above under “— Operating expenses — Research and
development expenses.”
Developing novel biopharmaceutical products, including conducting preclinical studies 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 marketing approval for any product candidates or
generate revenue from the sale of any products for which we may obtain marketing approval. In addition,
our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any,
will be derived from sales of therapies that we do not expect to be commercially available for many years, if
ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently
have any committed external source of funds. To the extent that we raise additional capital through the sale
of our equity or convertible debt securities, our shareholders’ interest may be diluted, and the terms of these
securities may include liquidation or other preferences and anti-dilution protections that could adversely
affect the rights of our common stockholder. Additional debt or
preferred equity financing, if available, may involve agreements that include restrictive covenants that
may limit our ability to take specific actions, such as incurring debt adversely impact our ability to conduct
our business, and may require the issuance of warrants, which could potentially dilute your ownership
interest.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with
third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research
programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable
to raise additional funds through equity or debt financings or collaborations, strategic alliances or licensing
arrangements with third parties when needed, we may be required to delay, limit, reduce and/or terminate
our product development programs or any future commercialization efforts or grant rights to develop and
market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual obligations and commitments
The following table summarizes our contractual obligations as of March 31, 2021 and the effects that
such obligations are expected to have on our liquidity and cash flows in future periods:
Manufacturing commitments
Lease Commitments
(1)
Total
Total
Less than 1 year
1 to 3 years
4 to 5 years More than 5 years
Payments due by period
(Amounts in thousands)
1,651
63,121
64,772
1,651
3,457
5,108
—
7,170
7,170
—
7,523
7,523
—
44,971
44,971
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(1)
Amounts in the table reflect commitments for costs associated with our external CMO, which we
engaged to manufacture clinical trial materials.
We enter into contracts in the normal course of business with CROs, CMOs and other third parties for
clinical trials and preclinical research studies and testing. Manufacturing and research commitments in the
preceding table include agreements that are enforceable and legally binding on us and that specify all
significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction. For obligations with cancellation provisions, the
amounts included in the preceding table are limited to the non-cancelable portion of the agreement terms or
the minimum cancellation fee.
Collaborations
BMS
In February 2018, we entered into a Clinical Trial Collaboration and Supply Agreement with Bristol-
Myers Squibb Company, or BMS. Pursuant to the agreement, BMS is providing to us, at no cost, nivolumab,
its anti-PD-1 therapy, for use in combination with RP1 in our ongoing Phase 1/2 clinical trial. Under the
agreement, we will sponsor, fund and conduct the clinical trial in accordance with an agreed-upon protocol.
BMS granted us a non-exclusive, non-transferrable, royalty-free license (with a right to sublicense) under its
intellectual property to use nivolumab in the clinical trial and has agreed to supply nivolumab, at no cost to
us, for use in the clinical trial. Both parties will own the study data produced in the clinical trial, other than
study data related solely to nivolumab, which will belong solely to BMS, or study data related solely to
RP1, which will belong solely to us. In January 2020, this agreement was expanded to cover an additional
cohort of 125 patients with anti-PD-1 failed melanoma.
Unless earlier terminated, the agreement will remain in effect until (i) the completion of the clinical
trial, (ii) all related clinical trial data have been delivered to both parties and (iii) the completion of any
statistical analyses and bioanalyses contemplated by the clinical trial protocol or any analysis otherwise
agreed upon by the parties. The agreement may be terminated by either party (i) in the event of an uncured
material breach by the other party, (ii) in the event the other party is insolvent or in bankruptcy proceedings
or (iii) for safety reasons. Upon termination, the licenses granted to us to use nivolumab in the clinical trial
will terminate. The agreement contains representations, warranties, undertakings and indemnities customary
for a transaction of this nature.
In April 2019, we entered into a separate agreement with BMS on terms similar to the terms set forth
in the agreement described above, pursuant to which BMS will provide, at no cost to us, nivolumab for use
in our Phase 1 clinical trial of RP2 in combination with nivolumab.
Regeneron
In May 2018, we entered into a Master Clinical Trial Collaboration and Supply Agreement with
Regeneron Pharmaceuticals, Inc., or Regeneron. Pursuant to the agreement we agreed to undertake one or
more clinical trials with Regeneron for the administration of our product candidates in combination with
cemiplimab, an anti-PD-1 therapy developed by Regeneron, across multiple solid tumor types, the first of
which is our ongoing Phase 2 clinical trial testing RP1 in combination with cemiplimab versus cemiplimab
alone in patients with CSCC. Each clinical trial will be conducted pursuant to an agreed study plan which,
among other things, will identify the name of the sponsor and which party will manage the particular study,
and include the protocol, the budget and a schedule of clinical obligations. The first study plan related to the
Phase 2 clinical trial in CSCC has been agreed.
Pursuant to the terms of the agreement, each party granted the other party a non-exclusive license of
their respective intellectual property and agreed to contribute the necessary resources needed to fulfill their
respective obligations, in each case, under the terms of agreed study plans. Development costs of a
particular clinical trial will be split equally. The agreement contains representations, warranties,
undertakings and indemnities customary for a transaction of this nature. The agreement also contains certain
time-based covenants that restrict us from entering into a third-party arrangement with respect to the use of
our product
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candidates in combination with an anti-PD-1 therapy and that restrict Regeneron from entering into a third-
party arrangement with respect to the use of cemiplimab in combination with an HSV-1 virus, in each case,
for the treatment of a tumor type that is the subject of a clinical trial to which the covenants apply. Unless
otherwise mutually agreed in a future study plan, these covenants are only applicable to our ongoing
Phase 2 clinical trial in CSCC, and expire upon the one-year anniversary of the commencement of the
applicable study plan.
The agreement may be terminated by either party if (i) there is no active study plan for which a final
study report has not been completed and the parties have not entered into a study plan for an additional
clinical trial within a period of time after the delivery of the most recent final study report or (ii) in the
event of a material breach.
Critical accounting policies and significant judgments and estimates
Our management’s discussion and analysis of financial condition and results of operations is based on
our consolidated financial statements, which have been prepared in accordance with generally accepted
accounting principles in the United States. The preparation of our consolidated financial statements and
related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets
and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated
financial statements. We base our estimates on historical experience, known trends and events and various
other factors that we believe are reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from
these estimates under different assumptions or conditions.
While our significant accounting policies are described in greater detail in Note 2 to our consolidated
financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the following
accounting policies are those most critical to the judgments and estimates used in the preparation of our
consolidated financial statements.
Accrued research and development expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate
our accrued research and development expenses. This process involves reviewing open contracts and
purchase orders, communicating with our personnel to identify services that have been performed on our
behalf and estimating the level of service performed and the associated cost incurred for the service when
we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers
invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones
are met; however, some require advanced payments. We make estimates of our accrued expenses as of each
balance sheet date in the consolidated financial statements based on facts and circumstances known to us at
that time. Examples of estimated accrued research and development expenses include fees paid to:
•
CROs in connection with performing research activities and conducting preclinical studies and
clinical trials on our behalf;
•
CMOs in connection with the production of preclinical and clinical trial materials;
•
investigative sites or other service providers in connection with clinical trials;
•
vendors in connection with preclinical and clinical development activities; and
•
vendors related to product manufacturing and development and distribution of preclinical and
clinical supplies.
We base our expenses related to preclinical studies and clinical trials on our estimates of the services
received and efforts expended pursuant to quotes and contracts with multiple CMOs and CROs that supply,
conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these
agreements are subject to negotiation, vary from contract to contract and may result in uneven payment
flows. There may be instances in which payments made to our vendors will exceed the level of services
provided and result in a prepayment of the expense. Payments under some of these contracts depend on
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factors such as the successful enrollment of patients and the completion of clinical trial milestones. In
accruing service fees, we estimate the time period over which services will be performed and the level of
effort to be expended in each period. If the actual timing of the performance of services or the level of effort
varies from the estimate, we adjust the accrual or the amount of prepaid expenses accordingly. Although we
do not expect our estimates to be materially different from amounts actually incurred, our understanding of
the status and timing of services performed relative to the actual status and timing of services performed
may vary and may result in reporting amounts that are too high or too low in any particular period. To date,
there have not been any material adjustments to our prior estimates of accrued research and development
expenses.
Stock-based compensation
We issue stock-based awards to employees, directors, consultants and non-employees in the form of
stock options and restricted stock units. We measure such stock-based awards in accordance with ASC 718,
Compensation — Stock Compensation, which requires all stock-based awards to be recognized in the
consolidated statements of operations and comprehensive loss based on their fair value on the date of the
grant and the related compensation expense for those awards is recognized over the requisite service period,
which is generally the vesting period of the respective award. We have, to date, only issued stock-based
awards with service-based vesting conditions and record the expense for these awards using the straight-line
method. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes
option-pricing model, which requires inputs based on certain subjective assumptions, including the expected
stock price volatility, the expected term of the option, the risk-free interest rate for a period that
approximates the expected term of the option, and our expected dividend yield. See Note 9 to our
consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for more
information. Forfeitures are accounted for as they occur. The fair value of each stock-based award is
estimated on the date of grant based on the fair value of our common stock on that same date.
We classify stock-based compensation expense in our consolidated statements of operations in the same
manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service
payments are classified.
Off-balance sheet arrangements
We did not have any off-balance sheet arrangements during the periods presented, and we do not
currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Recently issued accounting pronouncements
Refer to Note 2, Summary of Significant Accounting Policies of the “Notes to Consolidated Financial
Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K for a description of recent
accounting pronouncements that are applicable to our business and may potentially have an impact on our
financial position and results of operations
Emerging growth company status
As an “emerging growth company,” the Jumpstart Our Business Startups Act of 2012 permits us to take
advantage of an extended transition period to comply with new or revised accounting standards applicable
to public companies until those standards would otherwise apply to private companies. We have irrevocably
elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting
standards when they are required to be adopted by public companies that are not emerging growth
companies.
Item 7A.
Quantitative and qualitative disclosures about market risks
Interest rate sensitivity
As of March 31, 2021, we had cash and cash equivalents and short-term investments of $476.3 million,
which consisted of cash equivalents, U.S. Treasury securities and U.S. government agency securities.
Interest
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income is sensitive to changes in the general level of interest rates; however, due to the nature of these
investments, an immediate 10% change in interest rates would not have a material effect on the fair market
value of our investment portfolio.
Foreign currency exchange risk
Our headquarters are located in the United States, where the majority of our general and administrative
expenses are incurred in U.S. dollars. The majority of our research and development costs are incurred by
our subsidiary in Oxfordshire, United Kingdom, whose functional currency is the British pound. We are
exposed to foreign exchange rate risk. During the years ended March 31, 2021 and 2020, we recognized net
foreign currency transaction losses of $0.7 million and $16,000, respectively. These losses are primarily
related to unrealized and realized foreign currency gains and losses as a result of transactions entered into
by our United Kingdom subsidiary in currencies other than the British pound, primarily the euro. These
foreign currency transaction losses were recorded as a component of other income (expense), net in our
consolidated statements of operations. We believe that a 10% change in the exchange rate between the
British pound and the euro would not have a material impact on our financial position or results of
operations.
As we continue to grow our business, our results of operations and cash flows will be subject to
fluctuations due to changes in foreign currency exchange rates, which could adversely impact our results of
operations. To date, we have not entered into any foreign currency hedging contracts to mitigate our
exposure to foreign currency exchange risk.
Item 8.
Financial statements and supplementary data
See the consolidated financial statements filed as part of this Annual Report on Form 10-K as listed
under Item 15 below.
Item 9.
Changes in and disagreements with accountants on accounting and financial disclosures
None.
Item 9A.
Controls and procedures
Evaluation of disclosure controls and procedures
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, refers to controls and procedures that are designed to ensure that information required to be
disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures designed to ensure that such
information is accumulated and communicated to a company’s management, including its principal
executive and principal financial officers, as appropriate to allow timely decisions regarding required
disclosure. Under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our
disclosure controls and procedures as of March 31, 2021. Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at
a reasonable assurance level as of March 31, 2021.
In designing and evaluating our disclosure controls and procedures, management recognizes that
disclosure controls and procedures, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.
Additionally, in designing disclosure controls and procedures, our management necessarily was required to
apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in achieving its stated goals under
all potential future conditions; over time, controls may become inadequate because of changes in conditions,
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or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations
in a control system, misstatements due to error or fraud may occur and not be detected.
Management’s report on internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and procedures that:
(i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets;
(ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that our
receipts and expenditures are being made only in accordance with authorizations of our
management and directors; and
(iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management of the Company has assessed the effectiveness of the Company’s internal control over
financial reporting as of March 31, 2021. In making its assessment of internal control over financial
reporting, management used the criteria established in Internal Control — Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this
evaluation, management concluded that our internal control over financial reporting was effective as of
March 31, 2021.
This annual report does not include an audit report of the Company’s registered public accounting firm
regarding internal control over financial reporting. Management’s report was not subject to audit by the
Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission
that permit the Company to provide only management’s report in this Annual Report on Form 10-K.
Remediation of previously reported material weaknesses
As previously reported in Item 9A of our Annual Report on Form 10-K for the fiscal year ended
March 31, 2020, management identified material weaknesses in our internal control over financial reporting.
Since identifying the material weaknesses, our management, with the oversight of the Audit Committee of
our Board of Directors, engaged in efforts to remediate the material weaknesses identified. During the
quarter ended March 31, 2021, our management completed testing of the remediation activities and
determined that the newly implemented controls were operating effectively and have been operating
effectively for a sufficient period to conclude that the previously identified material weaknesses have been
remediated.
Changes in internal control over financial reporting
There have been no changes in our internal control over financial reporting during the fourth quarter of
the fiscal year ended March 31, 2021 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
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Item 10.
Directors, executive officers and corporate governance
PART III
The text of our Code of Business Conduct and Ethics, which applies to our directors and employees
(including our principal executive officer, principal financial officer, and principal accounting officer or
controller, and persons performing similar functions), is posted in the “Corporate Governance” section of
our website, www.replimune.com. A copy of the Code of Business Conduct and Ethics can be obtained free
of charge on our website. We intend to disclose on our website any amendments to, or waivers from, our
Code of Business Conduct and Ethics that are required to be disclosed pursuant to the rules of the Securities
and Exchange Commission and Nasdaq. The information contained on our website is not considered part of,
or incorporated by reference into, this Annual Report on Form 10-K or any other filing that we make with
the Securities and Exchange Commission.
The remaining information required under this item is incorporated herein by reference to our
definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the
Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended
March 31, 2021.
Item 11.
Executive compensation
The information required under this item is incorporated herein by reference to our definitive proxy
statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange
commission not later than 120 days after the close of our fiscal year ended March 31, 2021.
Item 12.
Security ownership of certain beneficial owners and management and related stockholder matters
Securities authorized for issuance under equity compensation plans
The following table provides information as of March 31, 2021, regarding our common stock that may
be issued under (1) the 2017 Equity Compensation Plan, or the 2017 Plan; (2) the 2018 Omnibus Incentive
Compensation Plan, or the 2018 Plan; or (3) the Employee Stock Purchase Plan, or the ESPP.
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
Weighted-Average Exercise
Price of Outstanding
Options, Warrants and
Rights
Number of Securities
Available for Future
Issuance Under Equity
Compensation Plans
Plan Category:
Equity compensation plans approved
by stockholders
2017 Plan
2018 Plan
(1)
ESPP
Total
1,611,893
4,864,266
6,476,159
2.94
16.68
—
1,282,506
1,031,868
2,314,374
(1)
Includes 15,975 shares of common stock subject to outstanding restricted stock units.
(2)
Does not include restriced stock units.
The remaining information required under this item is incorporated herein by reference to our
definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the
Securities and Exchange commission not later than 120 days after the close of our fiscal year ended
March 31, 2021.
Item 13.
Certain relationships and related transactions, and director independence
The information required under this item is incorporated herein by reference to our definitive proxy
statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange
commission not later than 120 days after the close of our fiscal year ended March 31, 2021.
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Item 14.
Principal accountant fees and services
The information required under this item is incorporated herein by reference to our definitive proxy
statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange
commission not later than 120 days after the close of our fiscal year ended March 31, 2021.
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Item 15.
Exhibits and financial statement schedules
(a)
1.
Consolidated financial statements.
PART IV
For a list of the consolidated financial statements included herein, see Index on page F-1 of this report.
2.
Financial statement schedules.
All required information is included in the financial statements or notes thereto.
3.
List of exhibits.
The documents listed in the exhibit index immediately preceding the signature page of this Annual
Report on Form 10-K are incorporated by reference or are filed or furnished with this Annual Report on
Form 10-K, in each case as indicated therein.
Item 16.
10-K summary
None.
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REPLIMUNE GROUP, INC.
Financial Statements
For the Years Ended March 31, 2021 and 2020
Report of independent registered public accounting firm
Consolidated balance sheets
Consolidated statements of operations
Consolidated statements of comprehensive loss
Consolidated statements of stockholders’ equity
Consolidated statements of cash flows
Notes to consolidated financial statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-1
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Replimune Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Replimune Group, Inc. and its
subsidiaries (the “Company”) as of March 31, 2021 and 2020, and the related consolidated statements of
operations, of comprehensive loss, of stockholders’ equity and of cash flows for the years then ended,
including the related notes (collectively referred to as the “consolidated financial statements”). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
the Company as of March 31, 2021 and 2020, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in the United States of
America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on the Company’s consolidated 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 of these consolidated financial statements 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 consolidated 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
consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis
for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
May 20, 2021
We have served as the Company’s auditor since 2018.
F-2
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Research and development incentives receivable
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Restricted cash
Right-to-use asset – operating leases
Right-to-use asset – financing leases
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Operating lease liabilities, current
Financing lease liabilities, current
Total current liabilities
Long term debt, net of debt discount
Operating lease liabilities, non-current
Financing lease liabilities, non-current
Total liabilities
Commitments and contingencies (Note 12)
Stockholders’ equity
Common stock, $0.001 par value; 150,000,000 shares authorized as of
March 31, 2021 and March 31, 2020; 46,566,481 and 36,668,743 shares issued
and outstanding as of March 31, 2021 and March 31, 2020, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
March 31,
2021
March 31,
2020
$ 182,518
293,784
2,953
4,492
$ 59,500
109,055
2,962
2,734
483,747
7,442
1,636
5,751
44,522
174,251
6,860
1,636
4,425
46,925
$ 543,098
$ 234,097
$
$
2,355
8,735
970
2,487
3,434
5,156
873
2,411
14,547
11,874
—
5,078
24,745
44,370
9,801
3,737
24,967
50,379
47
37
692,243
296,961
(193,168
)
(112,298
)
(394
)
(982
)
498,728
183,718
$ 543,098
$ 234,097
The accompanying notes are an integral part of these consolidated financial statements.
F-3
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share amounts)
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Research and development incentives
Investment income
Interest expense on finance lease liability
Interest expense on debt obligations
Loss on extinguishment of debt
Other (expense) income
Total other (expense) income, net
Year Ended March 31,
2021
2020
$
$
56,754
23,201
79,955
38,761
17,437
56,198
(79,955
)
(56,198
)
2,807
916
(2,242
(818
(913
(665
)
)
)
)
(915
)
3,084
2,424
(1,185
(734
—
(16
)
)
)
3,573
Net loss attributable to common stockholders
Net loss per share attributable to common stockholders, basic and
diluted
$
$
(80,870
)
(1.75
)
$
$
(52,625
)
(1.54
)
Weighted average common shares outstanding, basic and diluted
46,248,969
34,261,548
The accompanying notes are an integral part of these consolidated financial statements.
F-4
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands)
Net Loss
Other comprehensive loss:
Foreign currency translation gain (loss)
Net unrealized (loss) gain on short-term investments, net of tax of $0
Comprehensive loss
Year Ended March 31,
2021
2020
$(80,870
)
$(52,625
)
866
(278
)
)
(236
309
$(80,282
)
$(52,552
)
The accompanying notes are an integral part of these consolidated financial statements.
F-5
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except share amounts)
Balances as of March 31, 2019
Issuance of common stock through at-
the-market sales, net of offering costs
of $137
Issuance of common shares upon closing
of follow-on public offering, net of
issuance costs and underwriter fees of
$4,017
Issuance of prefunded warrants to
purchase common stock, net of
issuance costs and underwriter fees of
$1,797
Foreign currency translation
adjustment
Unrealized gain on short-term
investments
Exercise of stock options
Stock-based compensation expense
Impact of adoption of ASC 842
Net loss
Balances as of March 31, 2020
Issuance of prefunded warrants to
purchase common stock, net of $5,850
issuance costs
Issuance of common stock, net of
issuance costs and underwriter fees of
$18,892
Foreign currency translation
adjustment
Unrealized loss on short-term
investments
Exercise of stock options
Stock-based compensation expense
Net loss
Common stock
Shares
31,656,950
Amount
32
Additional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
loss
Total
stockholders’
equity
198,645
(59,766
)
(1,055
)
137,856
287,559 —
4,431
—
—
4,431
4,516,561
5
57,448
—
—
57,453
— —
28,145
— —
—
—
—
—
28,145
(236
)
(236
)
— —
207,673 —
— —
— —
$37
36,668,743
—
551
7,741
—
—
—
93
— (52,625
$296,961 $ (112,298
)
)
309
—
—
—
(982
)
$
309
551
7,741
93
(52,625
$ 183,718
)
— —
91,650
—
—
91,650
9,103,261
8
286,099
286,107
— —
—
—
866
866
794,477
— —
2
— —
— —
—
5,743
11,790
—
—
—
— (80,870
)
)
(278
—
—
—
(394
)
(278
5,745
11,790
(80,870
)
)
498,728
Balances as of March 31, 2021
46,566,481
47
692,243
(193,168
)
The accompanying notes are an integral part of these consolidated financial statements.
F-6
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense
Depreciation and amortization
Net amortization of premiums and discounts on short-term investments
Noncash interest expense
Loss on extinguishment of debt
Changes in operating assets and liabilities:
Research and development incentives receivable
Prepaid expenses and other current assets
Operating lease, right-of-use-asset
Finance lease, right-of-use-asset
Long term prepaid rent
Accounts payable
Accrued expenses and other current liabilities
Operating lease liabilities
Net cash used in operating activities
Cash flows from investing activities:
Purchases of property, plant and equipment
Purchase of short-term investments
Proceeds from sales and maturities of short-term investments
Net cash (used in) investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock in follow-on public offering, net of underwriting
fees and discounts
Proceeds from issuance of prefunded warrants to purchase common stock, net of underwriting
fees and discounts
Proceeds from issuance of common stock through ATM sales
Proceeds from long-term debt
Exercise of stock options
Payment of debt issuance costs
Principal payment of finance lease obligation
Principal payment of long-term debt
Payment of long-term debt extinguishment costs
Net cash provided by financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental disclosure of cash flow information:
Cash paid during the period for interest
Supplemental disclosure of non-cash investing and financing activities:
Net unrealized (loss) gain on short-term investments
Purchases of property and equipment included in accounts payable
Lease assets obtained in exchange for new financing lease liabilities
Lease assets obtained in exchange for new operating lease liabilities
Adjustments for non-cash lease termination
Year Ended March 31,
2021
2020
$ (80,870
)
$ (52,625
)
11,790
1,711
1,376
181
913
325
(1,707
447
2,403
—
(1,031
3,413
(340
(61,389
)
)
)
)
7,741
533
(945
156
)
(628
933
588
1,274
(15,787
(3,821
2,479
(450
(60,552
)
)
)
)
)
)
)
(2,392
(392,434
206,050
(188,776
)
)
)
(6,540
(149,682
150,989
(5,233
)
286,107
57,453
91,650
—
)
)
)
)
5,745
(100
(145
(10,000
(795
372,462
721
123,018
61,136
$ 184,154
28,145
4,431
10,000
551
(355
(59
—
—
100,166
(135
34,246
26,890
$ 61,136
)
)
)
$
$
$
$
$
$
636
$
578
)
$
$
309
(278
98
209
— $ 48,224
5,152
177
$
— $
1,580
The accompanying notes are an integral part of these consolidated financial statements.
F-7
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
1. Nature of the business
Replimune Group, Inc. (the “Company”) is a clinical-stage biotechnology company focused on the
development of oncolytic immunotherapies to treat cancer. Replimune Group, Inc., whose predecessor was
founded in 2015, is the parent company of its wholly owned, direct and indirect subsidiaries: Replimune
Limited (“Replimune UK”); Replimune, Inc. (“Replimune US”); Replimune Securities Corporation; and
Replimune (Ireland) Limited.
The Company is subject to risks and uncertainties common to early-stage companies in the
biotechnology industry, including, but not limited to, development by competitors of new technological
innovations, dependence on key personnel, protection of proprietary technology, compliance with
government regulations and the ability to secure additional capital to fund operations. Product candidates
currently under development will require significant additional research and development efforts, including
preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require
significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance
and reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain
when, if ever, the Company will realize significant revenue from product sales.
Basis of presentation
The accompanying consolidated financial statements have been prepared on the basis of continuity of
operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of
business. The Company has incurred recurring losses since its inception, including net losses of $80,870 and
-$52,625 for the years ended March 31, 2021 and 2020, respectively. In addition, as of March 31, 2021, the
Company had an accumulated deficit of $193,168. The Company expects to continue to generate operating
losses for the foreseeable future. As of the issuance date of these consolidated financial statements, the
Company expects that its cash and cash equivalents and short-term investments will be sufficient to fund its
operating expenses and capital expenditure requirements through at least 12 months from the issuance of the
consolidated financial statements.
Impact of COVID-19
In December 2019, a novel strain of coronavirus, which causes the disease known as COVID-19, was
reported to have surfaced in Wuhan, China. Since then, COVID-19 coronavirus has spread globally. In
March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and the U.S.
government imposed travel restrictions on travel between the United States, Europe and certain other
countries. The impact of this pandemic has been, and will likely continue to be, extensive in many aspects
of society, which has resulted, and will likely continue to result, in significant disruptions to the global
economy as well as businesses and capital markets around the world.
In response to public health directives and orders and to help minimize the risk of the virus to
employees, the Company has taken precautionary measures, including implementing work-from-home
policies for the Company’s employees, other than those in its laboratory, those performing manufacturing
functions and certain other employees as deemed appropriate from time to time. For those employees, the
Company has implemented stringent safety measures designed to comply with applicable federal, state and
local guidelines instituted in response to the COVID-19 pandemic. The Company has taken these and other
precautionary steps while maintaining business continuity in order to continue to progress its programs.
While there has been no prolonged material disruption to the Company’s business to date, the impact of the
virus, including work-from-home policies, may negatively impact productivity, disrupt the Company’s
business, and delay its preclinical research and clinical trial activities and its development program
timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and
other limitations on the Company’s ability to conduct its business in the ordinary course. Other impacts to
the Company’s business may include temporary closures of its suppliers and disruptions or restrictions on
its employees’ ability to travel. Any
F-8
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
1. Nature of the business (Continued)
prolonged material disruption to the Company’s employees or suppliers could adversely impact the
Company’s preclinical research and clinical trial activities, financial condition and results of operations,
including its ability to obtain financing.
2. Summary of significant accounting policies
Principles of consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America, or GAAP, and include the accounts of the
Company and its direct and indirect wholly owned subsidiaries, Replimune UK, Replimune US, Replimune
Securities Corporation and Replimune (Ireland) Limited after elimination of all intercompany accounts and
transactions.
Use of estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts
of expenses during the reporting periods. Significant estimates and assumptions reflected in these
consolidated financial statements include, but are not limited to, the accrual for research and development
expenses and the valuation of stock-based awards. The Company bases its estimates on historical
experience, known trends and other market-specific or other relevant factors that it believes to be reasonable
under the circumstances.
The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results
of operations and financial condition, including, expenses, research and development costs and employee-
related amounts, will depend on future developments that are highly uncertain, including as a result of new
information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19.
We have made estimates of the impact of COVID-19 within our financial statements and there may be
changes to those estimates in future periods.
Estimates are periodically reviewed in light of reasonable changes in circumstances, facts and
experience. Changes in estimates are recorded in the period in which they become known. Actual results
could differ from those estimates or assumptions.
Foreign currency and currency translation
The functional currency for the Company’s wholly owned foreign subsidiary, Replimune UK, is the
British pound. Assets and liabilities of Replimune UK are translated into United States dollars at the
exchange rate in effect on the balance sheet date. Revenues and expenses are translated at the average
exchange rate in effect during the period. Unrealized translation gains and losses are recorded as a
cumulative translation adjustment, which is included in the consolidated statements of stockholders’ equity
as a component of accumulated other comprehensive loss. Adjustments that arise from exchange rate
changes on transactions denominated in a currency other than the local currency are included in other
income (expense), net in the consolidated statements of operations as incurred.
Concentrations of credit risk and of significant suppliers
Financial instruments that potentially expose the Company to concentrations of credit risk consist
primarily of cash and cash equivalents as well as short-term investments. The Company deposits its cash in
financial institutions in amounts that may exceed federally insured limits, and has not experienced any
losses
F-9
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
2. Summary of significant accounting policies (Continued)
on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk
associated with commercial banking relationships.
The Company relies, and expects to continue to rely, on a small number of vendors to manufacture
supplies and raw materials for its development programs. These programs could be adversely affected by a
significant interruption in these manufacturing services or the availability of raw materials.
Cash and cash equivalents
The Company considers all highly liquid investments with original maturities of three months or less at
date of purchase to be cash equivalents. Cash equivalents consisted of money market funds for the years
ended March 31, 2021 and 2020, respectively. As of March 31, 2021 and 2020, the amount of cash
equivalents included in cash and cash equivalents totaled $150,734 and $36,712, respectively.
Restricted cash
The Company holds restricted cash in segregated bank accounts in connection with a letter of credit. As
of March 31, 2021 and 2020, restricted cash consisted of $1,636, held for the benefit of the landlords in
connection with our leases. These amounts have been classified as non-current assets on the Company’s
consolidated balance sheets.
Short-term investments
The Company’s short-term debt security investments are classified as available-for-sale and are carried
at fair value, with the unrealized gains and losses reported as a component of accumulated other
comprehensive income (loss) in stockholders’ equity (deficit). Realized gains and losses and declines in
value determined to be other than temporary are based on the specific identification method and are
included as a component of other income (expense), net in the consolidated statements of operations.
The Company evaluates its short-term debt security investments with unrealized losses for other-than-
temporary impairment. When assessing short-term debt security investments for other-than-temporary
declines in value, the Company considers such factors as, among other things, how significant the decline in
value is as a percentage of the original cost, how long the market value of the investment has been less than
its original cost, the Company’s ability and intent to retain the short-term debt security investment for a
period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general.
If any adjustment to fair value reflects a decline in the value of the short-term debt security investment that
the Company considers to be “other than temporary,” the Company reduces the short-term debt security
investment to fair value through a charge to the consolidated statements of operations. No such adjustments
were necessary during the periods presented.
The Company’s short-term debt security investments as of March 31, 2021 and 2020 had maturities of
less than two years.
Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and amortization.
Depreciation and amortization expense is recognized using the straight-line method over the estimated
useful lives of the respective assets as follows:
Office equipment
Computer equipment
Plant, plant and laboratory equipment
Leasehold improvements
Estimated Useful life
5 years
3 years
5 years
Lesser of lease term or 10 years
F-10
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
2. Summary of significant accounting policies (Continued)
Costs for capital assets not yet placed into service are capitalized as construction-in-progress and
depreciated in accordance with the above guidelines once placed into service. Upon retirement or sale, the
cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in loss from operations. Expenditures for repairs and maintenance are
charged to expense as incurred.
Impairment of long-lived assets
Long-lived assets consist of property, plant and equipment. Long-lived assets to be held and used are
tested for recoverability whenever events or changes in business circumstances indicate that the carrying
amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to
perform an impairment review include significant underperformance of the business in relation to
expectations, significant negative industry or economic trends and significant changes or planned changes in
the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for
recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use
and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be
recognized when estimated undiscounted future cash flows expected to result from the use of an asset group
are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of
the impaired asset group over its fair value, determined based on discounted cash flows. To date, the
Company has not recorded any impairment losses on long-lived assets.
Fair value measurements
Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined
as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. Valuation techniques used to measure fair value must maximize the
use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried
at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy,
of which the first two are considered observable and the last is considered unobservable:
•
Level 1 — Quoted prices in active markets for identical assets or liabilities.
•
•
Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active
markets for similar assets or liabilities, quoted prices in markets that are not active for identical or
similar assets or liabilities, or other inputs that are observable or can be corroborated by observable
market data.
Level 3 — Unobservable inputs that are supported by little or no market activity that are significant
to determining the fair value of the assets or liabilities, including pricing models, discounted cash
flow methodologies and similar techniques.
The Company’s short-term investments and cash equivalents are carried at fair value, determined
according to the fair value hierarchy described above (see Note 3). The carrying values of research and
development incentives receivable, prepaid expenses and other current assets, accounts payable and accrued
expenses and other current liabilities approximate their fair values due to the short-term nature of these
assets and liabilities.
Debt issuance costs
Debt issuance costs consist of payments made to secure commitments under certain debt financing
arrangements. These amounts are recognized as interest expense over the period of the financing
arrangement
F-11
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
2. Summary of significant accounting policies (Continued)
using the effective interest method. If the financing arrangement is canceled or forfeited, or if the utility of
the arrangement to the Company is otherwise compromised, these costs are recognized as interest expense
immediately. The Company’s consolidated financial statements present debt issuance costs related to a
recognized debt liability as a direct reduction from the carrying amount of that debt liability.
Segment information
The Company manages its operations as a single operating segment for the purposes of assessing
performance and making operating decisions. The Company’s current focus is on developing oncolytic
immunotherapies for the treatment of cancer.
Research and development costs
Research and development costs are expensed as incurred. Research and development expenses consist
of costs incurred in performing research and development activities, including salaries, stock-based
compensation and benefits, facilities costs and laboratory supplies, depreciation and external costs of
outside vendors engaged to conduct preclinical development, clinical development activities and clinical
trials as well as to manufacture clinical trial materials. Non-refundable prepayments for goods or services
that will be used or rendered for future research and development activities are deferred and capitalized.
Such amounts are recognized as an expense as the goods are delivered or the related services are performed,
or until it is no longer expected that the goods will be delivered or the services rendered. Upfront payments
for materials and supplies acquired for particular research and development activities that have no
alternative future use in other research and development projects or otherwise, and therefore have no
separate economic value, are expensed as research and development costs at the time the costs are incurred.
Research contract costs and accruals
The Company has entered into various research and development-related contracts with companies
both inside and outside of the United States. These agreements are generally cancelable, and related costs
are recorded as research and development expenses as incurred. The Company records accruals for
estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company
analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices
received and contracted costs. Significant judgments and estimates are made in determining the accrued
balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The
Company’s historical accrual estimates have not been materially different from the actual costs.
Patent costs
All patent-related costs incurred in connection with filing and prosecuting patent applications are
expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are
classified as general and administrative expenses.
Stock-based compensation
The Company accounts for share-based payment awards granted to employees, consultants, and non-
employees and directors using the fair value of the Company’s common stock on the grant date and
compensation expense is recognized for those awards over the requisite service period, which is generally
the vesting period of the respective award. The grant date fair value is utilized for time-vested restricted
stock units (“RSUs”) and the fair value of each stock option grant is estimated on the date of grant using the
Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions,
including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a
F-12
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
2. Summary of significant accounting policies (Continued)
period that approximates the expected term of the option, and the Company’s expected dividend yield (see
Note 9). Forfeitures are accounted for as they occur. To date, the Company has issued stock-based awards
with only service-based vesting conditions and records the expense for these awards using the straight-line
method.
The Company classifies stock-based compensation expense in its consolidated statements of operations
in the same manner in which the award recipient’s payroll costs are classified or in which the award
recipient’s service payments are classified.
Research and development incentives and receivable
The Company, through its subsidiary in the United Kingdom, receives reimbursements of certain
research and development expenditures as part of a United Kingdom government’s research and
development tax reliefs program. Under the program, a percentage of qualifying research and development
expenses incurred by the Company’s subsidiary in the United Kingdom are reimbursed up to 14.5%.
Management has assessed the Company’s research and development activities and expenditures to
determine which activities and expenditures are likely to be eligible under the research and development
incentive program described above. At each period end, management estimates the reimbursement available
to the Company based on available information at the time.
The Company recognizes income from the research and development incentives when the relevant
expenditure has been incurred, the associated conditions have been satisfied and there is reasonable
assurance that the reimbursement will be received. The Company records these research and development
incentives as other income. The research and development incentives receivable represents an amount due
in connection with the above program. The Company recorded other income from research and development
incentives of $2,807 and $3,084 during the years ended March 31, 2021 and 2020, respectively, in the
consolidated statements of operations and a research and development incentives receivable of $2,953 and
$2,962 as of March 31, 2021 and 2020, respectively, on the consolidated balance sheets.
Comprehensive loss
Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that
result from transactions and economic events other than those with stockholders. For the year ended
March 31, 2021, comprehensive loss included $866 of foreign currency translation adjustments and $(278)
of unrealized losses on short-term investments, net of tax. For the year ended March 31, 2020,
comprehensive loss included $(236) of foreign currency translation adjustments and $309 of unrealized
gains on short-term investments, net of tax.
Income taxes
The Company accounts for income taxes using 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 recognized in the consolidated financial statements or in the Company’s tax returns. Deferred tax
assets and liabilities are determined on the basis of the differences between the consolidated 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. Changes in deferred tax assets and liabilities are recorded in the
provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be
recovered from future taxable income and, to the extent it believes, based upon the weight of available
evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a
valuation allowance is
F-13
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
2. Summary of significant accounting policies (Continued)
established through a charge to income tax expense. Potential for recovery of deferred tax assets is
evaluated by estimating the future taxable profits expected and considering prudent and feasible tax
planning strategies.
The Company accounts for uncertainty in income taxes recognized in the consolidated financial
statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the
tax position must be evaluated to determine the likelihood that it will be sustained upon external
examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the
tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial
statements. The amount of the benefit that may be recognized is the largest amount that has a greater than
50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the
effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as
the related net interest and penalties.
Net income (loss) per share
The Company follows the two-class method when computing net income (loss) per share as the
Company has issued shares that meet the definition of participating securities. The two-class method
determines net income (loss) per share for each class of common and participating securities according to
dividends declared or accumulated and participation rights in undistributed earnings. The two-class method
requires income available to common stockholders for the period to be allocated between common and
participating securities based upon their respective rights to receive dividends as if all income for the period
had been distributed.
Basic net income (loss) per share attributable to common stockholders is computed by dividing the net
income (loss) attributable to common stockholders by the weighted average number of shares of common
stock outstanding for the period. Diluted net income (loss) attributable to common stockholders is computed
by adjusting net income (loss) attributable to common stockholders to reallocate undistributed earnings
based on the potential impact of dilutive securities. Diluted net income (loss) per share attributable to
common stockholders is computed by dividing the diluted net income (loss) attributable to common
stockholders by the weighted average number of shares of common stock outstanding for the period,
including potential dilutive common shares assuming the dilutive effect of common stock equivalents.
In periods in which the Company reports a net loss attributable to common stockholders, diluted net
loss per share attributable to common stockholders is the same as basic net loss per share attributable to
common stockholders, since dilutive common shares are not assumed to have been issued if their effect is
anti-dilutive.
Recently adopted accounting pronouncements
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure
Framework- Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The
amendments in this ASU require certain existing disclosure requirements in Topic 820 to be modified or
removed, and certain new disclosure requirements to be added to the Topic. In addition, this ASU allows
entities to exercise more discretion when considering fair value measurement disclosures. The Company
adopted ASU 2018-13 on April 1, 2020. The adoption of ASU 2018-13 did not have a material impact on
the Company’s consolidated financial statements.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808):
Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”), which clarifies that certain
transactions between collaborative arrangement participants should be accounted for as revenue under
Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account.
F-14
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
2. Summary of significant accounting policies (Continued)
In those situations, all the guidance in Topic 606 should be applied, including recognition, measurement,
presentation, and disclosure requirements. The standard adds unit-of-account guidance in Topic 808 to align
with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the
collaborative arrangement or a part of the arrangement is within the scope of Topic 606, and requires that in
a transaction with a collaborative arrangement participant that is not directly related to sales to third parties,
presenting the transaction together with revenue recognized under Topic 606 is precluded if the
collaborative arrangement participant is not a customer. The standard is effective for interim and annual
periods beginning after December 15, 2019, with early adoption permitted, including adoption in any
interim period for public business entities for periods in which financial statements have not been issued.
Amendments in the standard should be applied retrospectively to the date of initial application of Topic 606,
but entities may elect to apply the amendments in this Update retrospectively either to all contracts or only
to contracts that are not completed at the date of initial application of Topic 606, and should disclose the
election. An entity may also elect to apply the practical expedient for contract modifications that is
permitted for entities using the modified retrospective transition method in Topic 606. The Company
adopted ASU 2018-18 on April 1, 2020. The adoption of ASU 2018-18 did not have a material impact on
the Company’s consolidated financial statements.
Recently issued accounting pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326).
The standard changes how entities will measure credit losses for most financial assets and certain other
instruments that are not measured at fair value through net income. Financial assets measured at amortized
cost will be presented at the net amount expected to be collected by using an allowance for credit losses. In
April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial
Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,
which clarifies and corrects certain unintended applications of the guidance contained in each of the
amended Topics. Additionally, in May 2019, the FASB issued ASU No. 2019-05, Financial Instruments —
Credit Losses (Topic 326), which provides an option to irrevocably elect to measure certain individual
financial assets at fair value instead of amortized cost. The standard is effective for fiscal years and interim
periods beginning after December 15, 2022. Early adoption is permitted for all periods beginning after
December 15, 2018. The adoption of ASU 2016-13 is not expected to have a material impact on the
Company’s consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740) — Simplifying the
Accounting for Income Taxes (ASU 2019-12), as part of its initiative to reduce complexity in the accounting
standards. The amendments in ASU 2019-12 eliminates certain exceptions related to the approach for
intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the
recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and
simplifies other aspects of the accounting for income taxes. The standard is effective for fiscal years and
interim periods beginning after December 15, 2020. The Company is currently evaluating the impact of this
new guidance on its financial statements and related disclosures but does not expect the adoption of ASU
2019-12 to have a material impact on the Company’s consolidated financial statements.
F-15
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
3. Fair value of financial assets and liabilities
The following tables present information about the Company’s financial assets and liabilities measured
at fair value on a recurring basis:
Assets
Money market funds
US Government Agency bonds
US Treasury bonds
Assets
Money market funds
Commercial paper
US Treasury bonds
US Government Agency bonds
Corporate debt securities
Fair Value Measurements as of
March 31, 2021 Using:
Level 1
Level 2
Level 3
Total
$ — $150,734
—
67,012
— 226,772
$ — $150,734
—
67,012
— 226,772
$ — $444,518
$ — $444,518
Fair Value Measurements as of
March 31, 2020 Using:
Level 1
Level 2
Level 3
Total
$ — $ 36,712
21,884
35,810
15,295
36,066
—
—
—
—
$ — $ 36,712
21,884
35,810
15,295
36,066
—
—
—
—
$ — $145,767
$ — $145,767
The underlying securities held in the money market funds held by the Company are all government
backed securities. During the years ended March 31, 2021 and 2020, there were no transfers between levels.
Valuation of cash equivalents and short-term investments
Money market funds, commercial paper, U.S. Treasury bonds, U.S. Government Agency bonds and
corporate debt securities were valued by the Company using quoted prices in active markets for similar
securities, which represent a Level 2 measurement within the fair value hierarchy. Cash equivalents
consisted of money market funds at March 31, 2021 and March 31, 2020.
4. Short-term investments
Short-term investments by investment type consisted of the following:
US Government agency bonds
US Treasury bonds
March 31, 2021
Gross
unrealized
gains
Gross
unrealized
losses
$ 12
55
$ 67
$(17
(5
)
)
$(22
)
Amortized
cost
$ 67,017
226,722
$293,739
Fair value
$ 67,012
226,772
$293,784
F-16
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
4. Short-term investments (Continued)
Commercial paper
US Government agency bonds
US Treasury bonds
Corporate debt securities
March 31, 2020
Gross
unrealized
gains
Gross
unrealized
losses
$ 66
78
220
24
$388
$ —
—
—
(65
)
$(65
)
Amortized
cost
$ 21,818
15,217
35,590
36,107
$108,732
Fair value
$ 21,884
15,295
35,810
36,066
$109,055
5. Property, plant and equipment, net
Property, plant and equipment, net consisted of the following:
Office equipment
Computer equipment
Plant and laboratory equipment
Leasehold improvements
Construction in progress
Less: Accumulated depreciation and amortization
March 31,
2021
March 31,
2020
$
830
1,695
6,369
784
412
$ 721
1,658
3,669
532
1,217
10,090
(2,648
)
7,797
(937
)
$ 7,442
$6,860
Depreciation and amortization expense was $1.7 million and $0.5 million for the years ended
March 31, 2021 and 2020, respectively, and recorded within research and development and general and
administrative expenses in the consolidated statement of operations.
6. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following:
Accrued research and development costs
Accrued compensation and benefits costs
Accrued professional fees
Other
F-17
March 31,
2021
March 31,
2020
$3,862
3,952
407
514
$8,735
$2,009
2,065
779
303
$5,156
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
7. Long-term debt
Long-term debt consisted of the following:
Principal amount of long-term debt
Unamortized debt discount
Long-term debt, net of discount
Hercules Loan Agreement
March 31,
2021
March 31,
2020
$ — $10,000
(199
—
)
$ — $ 9,801
On August 8, 2019, (the “Closing Date”) the Company and certain of its affiliates entered into a Loan
and Security Agreement (as amended, the “Hercules Loan Agreement”) with Hercules Capital, Inc.
(“Hercules”) pursuant to which Hercules agreed to make available to the Company a secured term loan
facility in the amount of $30,000 (the “Term Loan Facility”), subject to certain terms and conditions. The
Company borrowed $10,000 under the Hercules Loan Agreement in one advance as a single tranche term
Loan on the Closing Date upon which the Company paid a $225 facility charge and incurred $130 in
additional closing and legal fees.
On June 1, 2020, the Company entered into the First Amendment to the Hercules Loan Agreement (the
“Hercules First Amendment”), to, among other things, increase the aggregate principal amount of the
secured term loan facility from $30,000 to $40,000. Pursuant to the Hercules First Amendment, subject to
the achievement of certain milestones, the Company could have borrowed three tranches of up to $10,000
between October 1, 2020 and December 15, 2020, July 1, 2020 and June 30, 2021, and July 1, 2021 and
December 15, 2021, respectively. The Company incurred $100 in additional closing and legal fees in
connection with Hercules First Amendment which were capitalized and will be amortized as part of the
effective yield.
On December 15, 2020, the Company entered into a Payoff Letter with respect to the Hercules Loan
Agreement, which resulted in a loss on extinguishment of debt of $913 including both cash and non-cash
expense. Pursuant to the Payoff Letter, the Company paid a total of $10,839 to Hercules, representing
$10,000 in outstanding principal, $495 end of term charge, $300 early termination fee due and $44 in
accrued interest owed to Hercules under the Hercules Loan Agreement. In connection with the execution of
the Payoff Letter and the repayment of the Company’s outstanding obligations under the Hercules Loan
Agreement, the Hercules Loan Agreement and the related loan documents were terminated.
The Term Loan Facility was secured by substantially all of the Company’s assets, but excluding its
intellectual property, and subject to certain exceptions and exclusions. All liens on the Company’s assets
held by Hercules were released in connection with the execution of the Payoff Letter.
In connection with entering into the Hercules Loan Agreement the Company paid Hercules $355 of
upfront fees, including closing costs and legal fees associated with entering into the agreement, which were
recorded as a debt discount. In connection with entering into the Hercules First Amendment, the Company
paid $100 of upfront fees, including closing costs and legal fees associated with entering into the
amendment, which were recorded as debt discount. The debt discount is reflected as a reduction of the
carrying value of long-term debt on the Company’s consolidated balance sheet for the year ended March 31,
2020.
The Company recognized aggregate interest expense under the Hercules Loan Agreement of $818 and
$734 during the years ended March 31, 2021 and 2020, respectively, which included non-cash interest
expense of $181 and $156. Non-cash interest expense included the amortization of the debt discount of $82
and $60, and the accretion of the final payment of $99 and $96, respectively, for the years ended March 31,
2021 and 2020.
F-18
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
7. Long-term debt (Continued)
There were no principal payments due or paid under the Hercules Loan Agreement during the year
ended March 31, 2021.
8. Stockholders’ Equity
Common stock
As of March 31, 2021 and 2020, the Company’s certificate of incorporation, as amended and restated,
authorized the Company to issue up to 150,000,000 shares of common stock, par value $0.00l per share.
As of March 31, 2021 and 2020, the Company had reserved 14,572,115 and 10,449,033 shares of
common stock for the exercise of outstanding stock options and the vesting of restricted share units, the
number of shares remaining available for grant under the Company’s 2018 Omnibus Incentive
Compensation Plan and the Company’s Employee Stock Purchase Plan (see Note 9) and the exercise of the
outstanding warrants to purchase shares of common, respectively.
Undesignated preferred stock
As of March 31, 2021, the Company’s certificate of incorporation, as amended and restated, authorized
the Company to issue up to 10,000,000 shares of undesignated preferred stock, par value $0.001 per share.
There were no undesignated preferred shares issued or outstanding as of March 31, 2021.
ATM program
In August 2019, the Company entered into a Sales Agreement (as amended, the “Sales Agreement”)
with SVB Leerink LLC (the “Agent”), pursuant to which the Company could sell, from time to time, at its
option, up to an aggregate amount of $75,000 of shares of the Company’s common stock, $0.001 par value
per share through the Agent, as the Company’s sales agent. In June 2020, the 2019 Sales Agreement was
amended to reduce the aggregate offering amount under the 2019 Sales Agreement from $75,000 of shares
to $30,000 of shares.
On August 11, 2020, the 2019 Sales Agreement was terminated by the execution by the Company and
the Agent of a new sales agreement, which was subsequently amended on October 21, 2020 (as amended,
the “2020 Sales Agreement”). Under the 2020 Sales Agreement the Company may sell, from time to time, at
its option, up to an aggregate of $62,500 of shares of the Company’s common stock, $0.001 par value per
share (the “Shares”), through the Agent, as the Company’s sales agent.
Any Shares to be offered and sold under the 2020 Sales Agreement will be issued and sold (i) by
methods deemed to be an “at the market offering” (“ATM”), as defined in Rule 415(a)(4) promulgated under
the Securities Act of 1933, as amended or in negotiated transactions, if authorized by the Company, and
(ii) pursuant to, and only upon the effectiveness of, a registration statement on Form S-3 filed by the
Company with the Securities and Exchange Commission on August 11, 2020 for an offering of up to
$350,000 of various securities, including shares of the Company’s common stock, preferred stock, debt
securities, warrants and/or units for sale to the public in one or more public offerings.
Subject to the terms of the 2020 Sales Agreement, the Agent will use reasonable efforts to sell the
Shares from time to time, based upon the Company’s instructions (including any price, time or size limits or
other customary parameters or conditions the Company may impose). The Company cannot provide any
assurances that it will issue any Shares pursuant to the 2020 Sales Agreement. The Company will pay the
Agent a commission of up to 3.0% of the gross proceeds from the sale of the Shares, if any. The Company
has also agreed to provide the Agent with customary indemnification rights.
F-19
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
8. Stockholders’ Equity (Continued)
During the year ended March 31, 2020, the Company issued and sold 287,559 shares, respectively, of
common stock under the 2019 Sales Agreement, for gross proceeds of $4,568 less offering fees of $137 for
net proceeds of $4,431 under the ATM. The Company did not issue or sell any shares under the 2020 Sales
Agreement during the year ended March 31, 2021.
Equity offerings
In November 2019, pursuant to an underwriting agreement (the “November 2019 Underwriting
Agreement”) with J.P. Morgan Securities LLC and SVB Leerink LLC, as representatives of the several
underwriters named therein (the “November 2019 Underwriters”), the Company issued and sold to the
November 2019 Underwriters (a) 4,516,561 shares of the Company’s common stock (the “November 2019
Shares”), inclusive of the November 2019 Underwriters partially exercised 30-day option and purchased an
additional 838,530 shares of the Company’s common stock, and (b) pre-funded warrants to purchase
2,200,000 shares of the Company’s common stock (the “November 2019 Pre-Funded Warrants”). The
November 2019 shares were sold to the November 2019 Underwriters (the “November 2019 Offering”) at
the public offering price of $13.61 per share and the pre-funded warrants were sold at a public offering price
of $13.6099 per November 2019 Pre-Funded Warrant, which represented the per share public offering price
for November 2019 Shares less a $0.0001 per share exercise price for each such November 2019 Pre-funded
Warrant. The Company received aggregate net proceeds of approximately $85,598 in the November 2019
Offering, after deducting underwriting discounts, commissions and other offering expenses payable by the
Company of approximately $5,814.
Funds affiliated with Redmile Group, LLC purchased all of the November 2019 Pre-Funded Warrants.
The November 2019 Pre-Funded Warrants are exercisable at any time after the date of issuance. A holder of
November 2019 Pre-Funded Warrants may not exercise the November 2019 Pre-Funded Warrant if the
holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of the
Company’s common stock outstanding immediately after giving effect to such exercise.
In June 2020, pursuant to an underwriting agreement (the “June 2020 Underwriting Agreement”) with
J.P. Morgan Securities LLC and SVB Leerink LLC, as representatives of the several underwriters named
therein (“the June 2020 Underwriters”), the Company sold to the June 2020 Underwriters (a) 3,478,261
shares of the Company’s common stock (the “June 2020 Shares”), inclusive of the underwrites 30-day
option to purchase up to an additional 652,173 shares of the Company’s commons stock, and (b) pre-funded
warrants to purchase 1,521,738 shares of the Company’s common stock (the “June 2020 Pre-Funded
Warrants”).The June 2020 Shares of the Company’s common stock were sold to the June 2020 Underwriters
at the public offering price of $23.00 per share and the June 2020 Pre-Funded Warrants were sold at a public
offering price of $22.9999 per June 2020 Pre-Funded Warrant, which represented the per share public
offering price for the June 2020 shares less a $0.0001 per share exercise price for each such June 2020 Pre-
Funded Warrant. The Company received aggregate net proceeds of approximately $107,782 after deducting
underwriting discounts, commissions and other offering expenses payable by the Company of approximately
$7,217.
Funds affiliated with Redmile Group, LLC and funds affiliated with a second institutional investor
purchased all of the June 2020 Pre-Funded Warrants. The June 2020 Pre-Funded Warrants are exercisable at
any time after the date of issuance. A holder of June 2020 Pre-Funded Warrants may not exercise the
June 2020 Pre-Funded Warrants if the holder, together with its affiliates, would beneficially own more than
9.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect
to such exercise. A holder of June 2020 Pre-Funded Warrants may increase or decrease this percentage up to
19.99% by providing at least 61 days’ prior notice to the Company.
In October 2020, pursuant to an underwriting agreement with J.P. Morgan Securities LLC and SVB
Leerink LLC, as representatives of the several underwriters named therein, the Company issued and sold to
F-20
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
8. Stockholders’ Equity (Continued)
the underwriters (a) 5,625,000 shares of the Company’s common stock, inclusive of the underwriters 30-day
option to purchase up to an additional 937,500 shares of the Company’s common stock, and (b) pre-funded
warrants to purchase 1,562,500 shares of the Company’s common stock (the “October 2020 Pre-Funded
Warrants”). The shares of the Company’s common stock were sold to the underwriters at the public offering
price of $40.00 per share and the pre-funded warrants were sold at a public offering price of $39.9999 per
October 2020 Pre-Funded Warrant, which represented the per share public offering price for the Company’s
common stock less a $0.0001 per share exercise price for each such pre-funded warrant. The Company
received aggregate net proceeds of approximately $269,975 after deducting underwriting discounts,
commissions and other offering expenses payable by the Company of approximately $17,525.
Funds affiliated with Redmile Group, LLC and funds affiliated with a second institutional investor
purchased all of the October 2020 Pre-Funded Warrants. The October 2020 Pre-Funded Warrants are
exercisable at any time after the date of issuance. A holder of October 2020 Pre-Funded Warrants may not
exercise the October 2020 Pre-Funded Warrants if the holder, together with its affiliates, would beneficially
own more than 9.99% of the number of shares of the Company’s common stock outstanding immediately
after giving effect to such exercise. A holder of October 2020 Pre-Funded Warrants may increase or
decrease this percentage up to 19.99% by providing at least 61 days’ prior notice to the Company.
Other than as set forth in Note 10 to these consolidated financial statements, including in the
calculation of basic and diluted net loss per share attributable to common stockholders, the 5,284,238 shares
of the Company’s common stock into which the November 2019 Pre-Funded Warrants, the June 2020 Pre-
Funded Warrants and October 2020 Pre-Funded Warrants are exercisable are not included in the number of
issued and outstanding shares of the Company’s common stock set forth herein. As of March 31, 2021, none
of the November 2019 Pre-Funded Warrants, the June 2020 Pre-Funded Warrants, or the October 2020 Pre-
Funded Warrants had been exercised.
9. Stock-based compensation
Stock-based compensation expense
The following table summarizes the classification of stock-based compensation expense in the
consolidated statements of operations for the years ended March 31, 2021 and 2020 as follows:
Research and development
General and administrative
Twelve Months Ended
March 31,
2021
2020
$ 5,749
6,041
$3,689
4,052
$11,790
$7,741
The following table summarizes stock-based compensation expense by award type for the years ended
March 31, 2021 and 2020 as follows:
Stock options
Restricted stock units
F-21
Twelve Months Ended
March 31,
2021
2020
$11,778
12
$7,741
—
$11,790
$7,741
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
9. Stock-based compensation (Continued)
2015 Enterprise Management Incentive Share Option Plan
The 2015 Enterprise Management Incentive Share Option Plan of Replimune UK (the “2015 Plan”)
provided for Replimune UK to grant incentive stock options, non-statutory stock options, stock awards,
stock units, stock appreciation rights and other stock-based awards. Incentive stock options are granted only
to the Company’s employees, including officers and directors who are also employees. Non-statutory stock
options are granted to employees, members of the board of directors, outside advisors and consultants of the
Company.
2017 Equity Compensation Plan
In July 2017, in conjunction with the Reorganization, the 2015 Plan was terminated, and all awards
were cancelled with replacement awards issued under the 2017 Equity Compensation Plan (the “2017
Plan”). Subsequent to the Reorganization, no additional grants will be made under the 2015 Plan and any
outstanding awards under the 2015 Plan will continue with their original terms. The Company concluded
that the cancellation of the 2015 Plan and issuance of replacement awards under the 2017 Plan was a
modification with no change in the material rights and preferences and therefore no recorded change in the
fair value of each respective award.
The Company’s 2017 Plan provides for the Company to grant incentive stock options or non-statutory
stock options, stock awards, stock units, stock appreciation rights and other stock-based awards. Incentive
stock options may be granted only to the Company’s employees, including officers and directors who are
also employees. Restricted stock awards and non-statutory stock options may be granted to employees,
officers, members of the board of directors, advisors and consultants of the Company. The maximum
number of common shares that may be issued under the 2017 Plan was 2,659,885 of which none remained
available for future grants as of March 31, 2021. Shares with respect to which awards have expired,
terminated, surrendered or cancelled under the 2017 Plan without having been fully exercised will be
available for future awards under the 2017 Plan. In addition, shares of common stock that are tendered to
the Company by a participant to exercise an award are added to the number of shares of common stock
available for the grant of awards.
2018 Omnibus Incentive Compensation Plan
On July 9, 2018, the Company’s board of directors adopted, and the Company’s stockholders approved
the 2018 Omnibus Incentive Compensation Plan (the “2018 Plan”), which became effective immediately
prior to the effectiveness of the registration statement for the Company’s initial public offering. The 2018
Plan provides for the issuance of incentive stock options, non-qualified stock options, stock awards,
stock units, stock appreciation rights and other stock-based awards. The number of shares initially reserved
for issuance under the 2018 Plan is 3,617,968 shares. If any options or stock appreciation rights, including
outstanding options and stock appreciation rights granted under the 2017 Plan (up to 2,520,247 shares),
terminate, expire, or are canceled, forfeited, exchanged, or surrendered without having been exercised, or if
any stock awards, stock units or other stock-based awards, including outstanding awards granted under the
2017 Plan, are forfeited, terminated, or otherwise not paid in full in shares of common stock, the shares of
the Company’s common stock subject to such grants will be available for purposes of our 2018 Plan. The
number of shares reserved for issuance under the 2018 Plan will increase automatically on the first day of
each April equal to 4.0% of the total number of shares of Company stock outstanding on the last trading day
in the immediately preceding fiscal year, or such lesser amount as determined by the Board. On April 1,
2020, the number of shares reserved for issuance under the 2018 Plan automatically increased by 1,466,749
shares pursuant to the terms of the 2018 Plan. On April 1, 2019, the number of shares reserved for issuance
under the 2018 Plan automatically increased by 1,266,278 shares pursuant to the terms of the 2018 Plan. As
of March 31, 2021, 1,282,506 shares remained available for future grants under the 2018 Plan.
F-22
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
9. Stock-based compensation (Continued)
The 2015 Plan, the 2017 Plan and the 2018 Plan was administered by the board of directors or, at the
discretion of the board of directors, by a committee of the board of directors. However, the board of
directors shall administer and approve all grants made to non-employee directors. The exercise prices,
vesting and other restrictions are determined at the discretion of the board of directors, except that the
exercise price per share of incentive stock options may not be less than 100% of the fair market value of the
common stock on the date of grant (or 110% of fair value in the case of an award granted to employees who
hold more than 10% of the total combined voting power of all classes of stock at the time of grant) and the
term of stock options may not be greater than five years for an incentive stock option granted to a 10%
stockholder and greater than ten years for all other options granted. Stock options awarded under both plans
expire ten years after the grant date, unless the board of directors sets a shorter term. Vesting periods for
both plans are determined at the discretion of the board of directors. Incentive stock options granted to
employees and non-statutory options granted to employees, officers, members of the board of directors,
advisors, and consultants of the Company typically vest over four years. In 2021 the board of directors
initiated the award of restricted stock units, or RSUs, under the 2018 Plan in addition to stock option awards
available as part of the Company’s equity incentive for employees, officers, advisors and consultants of the
Company. The RSUs typically vest over four roughly equal installments on the approximate anniversary
date of the date of grant.
Employee Stock Purchase Plan
On July 9, 2018, the Company’s board of directors adopted and the Company’s stockholders approved
the Employee Stock Purchase Plan (the “ESPP”), which became effective immediately prior to the
effectiveness of the registration statement for the Company’s IPO. The total shares of common stock
initially reserved for issuance under the ESPP is limited to 348,612 shares. In addition, as of the first trading
day of each fiscal year during the term of the ESPP (excluding any extensions), an additional number of
shares of the Company’s common stock equal to 1% of the total number of shares outstanding on the last
trading day in the immediately preceding fiscal year or 697,224 shares, whichever is less (or such lesser
amount as determined by the Company’s board of directors) will be added to the number of shares
authorized under the ESPP. In accordance, on April 1, 2020 and 2019, the number of shares reserved for
issuance under the ESPP automatically increased by 366,687 and 316,569 shares, respectively, for a total of
1,031,868 shares reserved for the ESPP. If the total number of shares of common stock to be purchased
pursuant to outstanding purchase rights on any particular date exceed the number of shares then available
for issuance under the ESPP, then the plan administrator will allocate the available shares pro-rata and
refund any excess payroll deductions or other contributions to participants. The Company’s ESPP is not
currently active.
Stock option valuation
The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The
Company lacks company-specific historical and implied volatility information. Therefore, it estimated its
expected stock volatility based on the historical volatility of a publicly traded set of peer companies. For
options with service-based vesting conditions, the expected term of the Company’s stock options has been
determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The
expected term of stock options granted to non-employees is equal to the contractual term of the option
award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the
time of grant of the award for time periods approximately equal to the expected term of the award. Expected
dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to
pay any cash dividends in the foreseeable future.
F-23
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
9. Stock-based compensation (Continued)
The estimated grant-date fair value of the Company’s stock options issued to employees was calculated
using the Black-Scholes option-pricing model. The following table presents, on a weighted-average basis,
the assumptions used in the Black-Scholes model, for the stock options granted to employees and directors:
Risk-free interest rate
Expected term (in years)
Expected volatility
Expected dividend yield
Stock options
Twelve Months Ended
March 31,
2021
0.93
6.3
75.4
0
%
%
%
2020
2.12
6.0
71.4
0
%
%
%
A summary of stock option activity under the Company’s equity incentive plans for the year ended
March 31, 2021 is as follows:
Outstanding as of March 31, 2020
Granted
Exercised
Cancelled
Outstanding as of March 31, 2021
Options exercisable as of March 31, 2020
Options exercisable as of March 31, 2021
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Term (Years)
$ 9.78
18.10
7.23
14.00
13.26
$ 5.67
$ 8.38
8.03
9.22
6.41
7.95
7.20
6.79
Number of
Shares
4,964,381
2,622,519
(794,477
(332,239
)
)
6,460,184
2,117,721
2,698,708
Aggregate
Intrinsic
Value
$ 15,345
$ 24,859
$116,193
$ 11,733
$ 59,717
As of March 31, 2021 and 2020, there was $35.6 million and $18.7 million of unrecognized
compensation cost related to unvested common stock options, which is expected to be recognized over a
weighted average period of 3.00 years.
The weighted average grant-date fair value of stock options granted during the years ended March 31,
2021 and 2020 was $12.03 and $9.70, respectively. The total fair value of options vested during the years
ended March 31, 2021 and 2020 was $10,182 and $5,440, respectively. The aggregate intrinsic value of
stock options is calculated as the difference between the exercise price of the stock options and the fair
value of the Company’s common stock for those stock options that had exercise prices lower than the fair
value of the Company’s common stock. The intrinsic value of stock options exercised during the years
ended March 31, 2021 and 2020 was $24.9 million and $2.3 million, respectively.
Restricted stock units
During the year ended March 31, 2021, the Company instituted RSU awards as a component of its
overall employee benefit program and granted its first RSU award to a member of the executive team, which
included 15,975 shares at an average grant date fair value of $34.15 per share. These RSUs vest in four
substantially equal installments beginning approximately on the first anniversary of the grant date and
continuing on each of the next three anniversaries thereof, subject to the employee’s continued employment
F-24
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
9. Stock-based compensation (Continued)
with, or services to, the Company on each vesting date. Each RSU represents the right to receive one share
of the Company’s common stock when and if the applicable vesting conditions are satisfied.
A summary of the changes in the Company’s RSUs during the year ended March 31, 2021 is as
follows:
Outstanding as of March 31, 2020
Granted
Vested
Cancelled
Outstanding as of March 31, 2021
Number of
Restricted
Shares
Weighted
Average
Grant Date
Fair Value
—
15,975
—
—
15,975
$ —
34.15
—
—
34.15
At March 31, 2021 there was $0.5 million of total unrecognized compensation cost related to unvested
RSUs, which will be recognized over a weighted-average period of 3.9 years. There was no unrecognized
compensation cost related to unvested RSUs as of March 31, 2020.
10. Net loss per share
The following table sets forth the computation of the Company’s basic and diluted net loss per share
attributable to common stockholders (in thousands, except per share amounts):
Twelve Months Ended
March 31,
2021
2020
Numerator:
Net loss attributable to common stockholders
$
(80,870 $
)
(52,625
)
Denominator:
Weighted average common shares outstanding, basic and diluted
46,248,969
34,261,548
Net loss per share attributable to common stockholders, basic and
diluted
$
(1.75 $
)
(1.54
)
The November 2019 Pre-Funded Warrants, the June 2020 Pre-Funded Warrants and October 2020 Pre-
Funded Warrants are included as outstanding common stock in the calculation of basic and diluted net loss
per share attributable to common stockholders.
The Company’s potentially dilutive securities, which include stock options and warrants to purchase
shares of series seed preferred stock, have been excluded from the computation of diluted net loss per share
as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common
shares outstanding used to calculate both basic and diluted net loss per share attributable to common
stockholders is the same. The Company excluded the following potential common shares, presented based
F-25
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
10. Net loss per share (Continued)
on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to
common stockholders for the periods indicated because including them would have had an anti-dilutive
effect:
Options to purchase common stock
Warrants to purchase convertible preferred stock (as converted to
common stock)
Twelve Months Ended
March 31,
2021
2020
6,476,159
4,964,381
497,344
497,344
6,973,503
5,461,725
11. Significant agreements
Agreement with Bristol-Myers Squibb Company
In February 2018, the Company entered into an agreement with Bristol-Myers Squibb Company
(“BMS”). Pursuant to the agreement, BMS will provide to the Company, at no cost, a compound for use in
the Company’s ongoing clinical trial of RP1. Under the agreement, the Company will sponsor, fund and
conduct the clinical trial in accordance with an agreed-upon protocol. BMS granted the Company a non-
exclusive, non-transferrable, royalty-free license (with a right to sublicense) under its intellectual property
to its compound in the clinical trial and agreed to supply its compound, at no cost to the Company, for use in
the clinical trial. In January 2020, this agreement was expanded to cover an additional cohort of 125 patients
with anti-PD-1 failed melanoma.
Unless earlier terminated, the agreement will remain in effect until (i) the completion of the clinical
trial, (ii) all related clinical trial data have been delivered to both parties and (iii) the completion of any
statistical analyses and bioanalyses contemplated by the clinical trial protocol or any analysis otherwise
agreed upon by the parties. The agreement may be terminated by either party (i) in the event of an uncured
material breach by the other party, (ii) in the event the other party is insolvent or in bankruptcy proceedings
or (iii) for safety reasons. Upon termination, the licenses granted to the Company to use BMS’s compound
in the clinical trial will terminate.
In April 2019, the Company entered into a separate agreement with BMS on terms similar to the terms
set forth in the agreement described above, pursuant to which BMS will provide to the Company, at no cost,
nivolumab for use in the Company’s Phase 1 clinical trial of RP2 in combination with nivolumab.
Agreement with Regeneron Pharmaceuticals, Inc.
In May 2018, the Company entered into an agreement with Regeneron Pharmaceuticals, Inc.
(“Regeneron”). The Company and Regeneron are each independently developing compounds for the
treatment of certain tumor types. Pursuant to the agreement, the Company and Regeneron will undertake
one or more clinical trials using a combination of the compounds being developed by each entity. Under the
agreement, each study will be conducted under terms set out in a separately agreed upon study plan that will
identify the name of the sponsor and which party will manage the particular clinical trial, and include the
protocol, the budget and a schedule of clinical obligations. In June 2018, under the terms of the agreement
between the Company and Regeneron, the parties agreed to the first study plan. The Company and
Regeneron have agreed to the protocol, budget, sample testing and clinical obligations schedule under the
study plan. Development and supply costs associated with the study plan will be split equally between the
Company and Regeneron.
F-26
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
11. Significant agreements (Continued)
Pursuant to the terms of the agreement, each party granted the other party a non-exclusive license under
its respective intellectual property and agreed to contribute the necessary resources needed to fulfill its
respective obligations, in each case, under the terms of the agreed-upon or to-be agreed upon study plans.
Development costs of a particular clinical trial will be split equally between the Company and Regeneron in
accordance with the agreed upon study plan.
The agreement may be terminated by either party if (i) there is no active study plan for which a final
study report has not been completed and the parties have not entered into a study plan for an additional
clinical trial within a period of time after the delivery of the most recent final study report or (ii) in the
event of a material breach.
The agreement with Regeneron is accounted for under ASC 808, Collaborative Arrangements
(“ASC 808”), as both parties are active participants and each party pays its own compound costs and share
equally in development costs. The Company will account for costs incurred as part of the study, including
costs to supply compounds for use in the study, as research and development expenses within the
consolidated statement of operations. The Company will recognize any amounts received from Regeneron in
connection with this agreement as an offset to research and development expense within the consolidated
statement of operations.
Under the terms of the agreement, on a quarterly basis the Company and Regeneron true-up costs of the
study and make corresponding payments to the party that incurred the majority of the costs. During
the years ended March 31, 2021 and 2020, the Company did not make any payments under the terms of the
agreement from Regeneron. During the years ended March 31, 2021 and 2020, the Company received
payments under the terms of the agreement from Regeneron of $5.1 million and $3.0 million, respectively.
As of March 31, 2021 and 2020, the Company recorded $1.3 million and $971 of receivables from
Regeneron in connection with this agreement in prepaid expenses and other current assets in the
consolidated balance sheet, respectively.
12. Commitments and contingencies
Leases
The Company leases real estate assets and equipment, and determination if an arrangement is a lease
occurs at inception. For leases with terms greater than 12 months, the Company records a related right-of-
use (“ROU”) asset and lease liability at the present value of lease payments over the term. Many leases
include fixed rental escalation clauses, renewal options and/or termination options that are factored into the
determination of lease payments when appropriate. The Company’s leases do not provide an implicit rate,
and thus the Company estimated the incremental borrowing rate in calculating the present value of the lease
payments. The Company has elected not to record a ROU asset and lease obligation for short-term leases
(with terms less than 12 months) or separate non-lease components from associated lease components for its
real estate lease assets. As a result, all contract consideration is allocated to the single lease component.
The Company’s leases have remaining lease terms of eight years to eighteen years. Some of our leases
include one or more options to renew with renewal terms that can extend the lease for additional years, or
options to terminate the leases, both at the Company’s discretion. The Company’s lease terms include
options to extend or terminate leases when the Company concludes it is reasonably certain that it would
exercise those options. Lease expense for minimum lease payments is recognized on a straight-line basis
based on the fixed components of a lease arrangement. The Company amortizes this expense over the term
of the lease beginning with the date of initial possession, which is the date the Company can enter the leased
space and begin to make improvements in preparation for its intended use. Variable lease components
represent amounts that are not fixed in nature and are not tied to an index or rate, and are recognized as
incurred.
F-27
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
12. Commitments and contingencies (Continued)
The table below presents the lease-related assets and liabilities recorded on the consolidated balance
sheet as of March 31, 2021:
Lease cost
Finance lease costs:
Amortization of right-to-use asset
Interest on lease liabilities
Operating lease costs
Total lease cost
Twelve Months Ended
March 31,
2021
2020
$2,428
2,242
948
$1,274
1,185
885
$5,618
$3,344
For the years ended March 31, 2021 and 2020, the Company incurred finance lease amortization costs
of $2,428 and $1,274, respectively, of which $2,070 and $1,034 are recognized in research and development
expenses. In addition, the Company incurred interest expense on finance leases of $2,242 and $1,185, of
which $1,881 and $944 are recognized in research and development expenses for the years ended March 31,
2021 and 2020, respectively. For the years ended March 31, 2021 and 2020, the Company recognized $948
and $885, respectively, of operating lease costs within general and administrative expenses. The following
table summarizes the maturity of the Company’s lease liabilities on an undiscounted cash flow basis and a
reconciliation to the operating and financing lease liabilities recognized on our balance sheet as of
March 31, 2021:
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: interest
Total lease liabilities
March 31, 2021
Operating leases
Financing lease
Total
$ 970
980
989
998
1,008
4,066
9,011
2,963
$6,048
$ 2,487
2,562
2,639
2,718
2,799
40,905
54,110
26,878
$ 3,457
3,542
3,628
3,716
3,807
44,971
63,121
29,841
$27,232
$33,280
F-28
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
12. Commitments and contingencies (Continued)
The following table provides lease disclosure as of and for the year ended March 31, 2021:
March 31, 2021
March 31, 2020
Leases
Right-to-use operating lease asset
Right-to-use finance lease asset
Total lease assets
Operating lease liabilities, current
Finance lease liabilities, current
Operating lease liabilities, non-current
Finance lease liabilities, non-current
Total lease liabilities
Other information
Cash paid for amounts included in the measurement of lease
liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Right-to-use asset obtained in exchange for new operating lease
liabilities
Right-to-use asset obtained in exchange for new financing lease
liabilities
Weighted-average remaining lease term – operating leases
$ 5,751
44,522
$50,273
$
970
2,487
5,078
24,745
$33,280
$
823
$ 2,240
$
145
$ 4,425
46,925
$51,350
$
873
2,411
3,737
24,967
$31,988
$
747
$ 1,185
$
59
$ 5,152
$ —
8.9 years
$48,224
8.7 years
Weighted-average remaining lease term – financing leases
18.3 years
19.3 years
Weighted-average discount rate – operating leases
Weighted-average discount rate – financing leases
9.8
%
8.3
%
7
%
8
%
The variable lease costs and short-term lease costs were insignificant for the years ended March 31,
2021 and 2020, respectively.
Manufacturing commitments
The Company has entered into an agreement with a contract manufacturing organization to provide
clinical trial products. As of March 31, 2021 and 2020, the Company had committed to minimum payments
under these arrangements totaling $1,651 and $3,569 through March 31, 2021.
Indemnification agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and
terms to vendors, lessors, business partners and other parties with respect to certain matters including, but
not limited to, losses arising out of breach of such agreements or from intellectual property infringement
claims made by third parties. In addition, the Company has entered into indemnification agreements with
members of its executive management team and its board of directors that will require the Company, among
other things, to indemnify them against certain liabilities that may arise by reason of their status or service
as directors or officers. The maximum potential amount of future payments the Company could be required
F-29
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
12. Commitments and contingencies (Continued)
to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not
incurred any material costs as a result of such indemnifications. The Company is not aware of any claims
under indemnification arrangements, and therefore it has not accrued any liabilities related to such
obligations in its consolidated financial statements as of March 31, 2021 or 2020.
Legal proceedings
The Company is not a party to any litigation and does not have contingency reserves established for
any litigation liabilities.
13. Benefit plans
The Company established a defined-contribution savings plan under Section 401(k) of the Code (the
“401(k) Plan”). The 401(k) Plan covers substantially all employees who meet minimum age and service
requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis.
Matching contributions to the 401(k) Plan may be made at the discretion of the Company’s board of
directors. During the years ended March 31, 2021 and 2020, the Company made contributions totaling $723
and $232, respectively, to the 401(k) Plan.
We provide a pension contribution plan for our employees in the United Kingdom, pursuant to which
we match our employees’ contributions each year in amounts up to 8% of their annual base salary.
14. Income taxes
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was
enacted in the United States. The CARES Act provides numerous tax provisions and other stimulus
measures, including temporary changes regarding the prior and future utilization of net operating losses and
technical corrections from prior tax legislation for tax depreciation of certain qualified improvement
property. We evaluated the provisions of the CARES Act and do not anticipate the associated impacts, if
any, will have a material effect on our financial position.
During the years ended March 31, 2021 and 2020, the Company recorded no income tax benefits for
the net losses incurred due to the uncertainty of the realization of such losses. The Company’s net loss
before income taxes were generated in the United States and the United Kingdom.
Net loss before income taxes for the years ended March 31, 2021 and 2020 were as follows:
United States
Foreign (United Kingdom)
Total
Year Ended March 31,
2021
2020
)
(22,775
)
(58,095
(12,963
(39,662
)
)
(80,870
)
(52,625
)
F-30
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
14. Income taxes (Continued)
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax
rate for the years ended March 31, 2021 and 2020 is as follows:
U.S. Federal statutory income tax rate
State taxes, net of federal benefit
Research and development credits
Research and development expenses
Return to provision
Stock compensation
Foreign tax rate differential
Change in valuation allowance
Other
Year Ended March 31,
2021
2020
%
-21.0
%
-2.4
%
-0.8
%
1.9
%
0
%
-3.9
%
0.0
%
25.9
%
0.3
%
-21.0
%
-1.6
%
0
%
2.2
%
1.9
%
0
%
2.8
%
16.0
%
-0.3
0.0
%
0.00
%
Components of the Company’s deferred tax assets as of March 31, 2021 and 2020 were as follows:
Deferred tax assets
Federal net operating loss carryforwards
Foreign net operating loss carryforwards
State net operating loss carryforwards
Research & development credits
Property, plant and equipment
Capitalized start-up costs
Stock compensation
Accrued expense
Lease liability
Total deferred tax assets
Deferred tax liabilities
Right of Use Asset
Other
Total deferred tax liabilities
Valuation Allowance
Net deferred tax assets
Year Ended March 31,
2021
2020
7.083
22,195
2,358
787
5,068
1,597
4,838
739
8,462
53,127
2,450
9,092
1,054
—
5,499
1,748
2,526
341
8,705
31,415
)
(13,090
(13,998
)
(9
)
(88
)
)
(13,099
(14,086
)
)
(40,028
(17,329
)
—
—
As of March 31, 2021, the Company had federal and foreign net operating loss carryforwards of
approximately $33,731 and $116,815, respectively, which can be carried forward indefinitely. As of
March 31, 2021, the Company had state net operating loss carryforwards of $37,311, which will begin to
expire in 2039.
F-31
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
14. Income taxes (Continued)
As of March 31, 2021, the Company had federal and state research and development carryforwards of
approximately $687 and $126, respectively, which will begin to expire in 2041 and 2036, respectively.
Utilization of the U.S. federal and state net operating loss carryforwards may be subject to a substantial
annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding
provisions of state law, due to ownership changes that have occurred previously or that could occur in the
future. These ownership changes may limit the amount of net operating loss carryforwards that can be
utilized annually to offset future taxable income and tax liabilities, respectively. The Company has not
completed a study to assess whether a change of ownership has occurred, or whether there have been
multiple ownership changes since its formation, due to the significant cost and complexity associated with
such a study. Any limitation may result in expiration of a portion of the net operating loss carryforwards
before utilization. Further, until a study is completed by the Company and any limitation is known, no
amounts are being presented as an uncertain tax position.
Changes in the valuation allowance for deferred tax assets during the years ended March 31, 2021 and
2020 related primarily to the increase in net operating loss carryforwards were as follows:
Valuation allowance as of beginning of year
Increases recorded to income tax provision
Increases recorded to income tax provision for equity
Decreases recorded to income tax provision for equity
Valuation allowance as of end of year
Year Ended March 31,
2021
2020
$17,329
22,624
76
$ 9,396
$ 8,047
$
$ —
$ — $ (114
)
40,028
$17,329
0
0
As of March 31, 2021 and 2020, the Company had not recorded any amounts for unrecognized tax
benefits. The Company’s policy is to record interest and penalties related to income taxes as part of its
income tax provision. As of March 31, 2021 and 2020, the Company had no accrued interest or penalties
related to uncertain tax positions and no amounts had been recognized in the Company’s consolidated
statements of operations and comprehensive loss.
The Company files income tax returns in the United States, Massachusetts and the United Kingdom as
prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the
Company is subject to examination by U.S. federal, state and foreign jurisdictions, where applicable. There
are currently no pending tax examinations. The Company is open to future tax examination in the U.S.
under statute from 2018 to the present and in the United Kingdom from 2017 to the present.
As of March 31, 2021 and 2020, income taxes on undistributed earnings of the Company’s subsidiary
have not been provided for as the Company planned to indefinitely reinvest these amounts, had the ability to
do so, and the cumulative undistributed foreign earnings were in an overall deficit.
15. Geographic information
The Company operates in two geographic regions: the United States (Massachusetts) and the United
Kingdom (Oxfordshire). Information about the Company’s long-lived assets held in different geographic
regions is presented in the tables below:
F-32
TABLE OF CONTENTS
REPLIMUNE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
15. Geographic information (Continued)
United States
United Kingdom
16. Quarterly financial data (unaudited)
March 31, 2021 March 31, 2020
$6,866
576
$7,442
$6,357
503
$6,860
The following information has been derived from unaudited consolidated financial statements that, in
the opinion of management, include all recurring adjustments necessary for a fair statement of such
information.
Operating Expenses
Net loss attributable to common stockholders
Net loss per share attributable to common stockholders,
Three Months Ended
March 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
22,184
)
(21,499
20,275
(21,783
)
19,663
(20,095
)
17,833
(17,493
)
basic and diluted
(0.42
)
(0.44
)
(0.46
)
(0.44
)
Operating Expenses
Net loss attributable to common stockholders
Net loss per share attributable to common stockholders,
Three Months Ended
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
16,385
(15,789
)
16,664
(16,189
)
12,242
(11,139
)
10,907
(9,508
)
basic and diluted
(0.41
)
(0.46
)
(0.35
)
(0.30
)
F-33
TABLE OF CONTENTS
Exhibit index
Exhibit
Number
3.1
3.2
4.1
4.2
4.3*
4.4
4.5
4.6
10.1†
10.2†
10.3†
10.4†
10.5†
10.6†
10.7†
10.8†
3.2
4.1
4.2
4.1
4.1
4.4
Exhibit Description
Third Amended and Restated Certificate of
Incorporation of the Registrant (conformed to include
the Certificate of Amendment to the Third Amended
and Restated Certificate of Incorporation filed on
September 9, 2019).
Incorporated by Reference
Form
10-K
Date
Number
June 3, 2020
3.1
Amended and Restated By-laws of the Registrant.
8-K
Form of Common Stock Certificate of the Registrant.
S-1/A
Amended and Restated Investors’ Rights Agreement,
dated July 10, 2017, by and among the Registrant and
the investors set forth therein.
S-1
Description of the Registrant’s Securities registered
pursuant to Section 12 of the Securities Exchange Act
of 1934.
July 24, 2018
July 10, 2018
June 22, 2018
Form of Pre-Funded Warrant (2019).
Form of Pre-Funded Warrant (2020).
Form of Indenture to be entered into between the
Registrant and a trustee acceptable to the Registrant.
Form of Indemnification Agreement by and between the
Registrant and its directors and officers.
2017 Equity Compensation Plan and Sub-Plan for U.K.
Employees and forms of agreements thereunder.
2018 Omnibus Incentive Compensation Plan and Sub-
Plan for U.K. Employees and forms of agreements
thereunder.
Employee Stock Purchase Plan.
Employment Agreement, effective as of October 1,
2015, by and between Robert Coffin and Replimune,
Inc.
Employment Agreement, effective as of October 1,
2015, by and between Philip Astley-Sparke and
Replimune, Inc.
Employment Agreement, effective as of November 1,
2015, by and between Pamela Esposito and Replimune,
Inc.
Employment Agreement, dated as of September 16,
2015, by and between Colin Love and Replimune
Limited.
8-K
8-K
S-3
November 18, 2019
June 10, 2020
August 8, 2019
S-1/A
July 10, 2018
10.1
S-1/A
June 26, 2018
10.2
S-1/A
July 10, 2018
10.3
S-1/A
S-1
July 10, 2018
June 22, 2018
10.4
10.5
S-1
S-1
June 22, 2018
10.6
June 22, 2018
10.7
S-1/A
July 10, 2018
10.9
10.9†
10.10†
Employment Agreement, dated as of November 27,
2019, by and between Jean Franchi and Replimune, Inc.
Employment Agreement, dated as of May 25, 2020, by
and between Andrea Pirzkall and Replimune, Inc.
8-K
December 9, 2019
10.1
10-Q
August 7, 2020
10.1
TABLE OF CONTENTS
Exhibit
Number
Exhibit Description
Form
Date
Number
Incorporated by Reference
10.11†* Amended and Restated Employment Agreement, dated
as of May 3, 2021, by and between Sushil Patel and
Replimune, Inc.
10.12†* Employment Agreement, dated as of May 10, 2021, by
and between Tanya Lewis and Replimune, Inc.
10.13†* Stock Option Grant Agreement, effective as of May 3,
2021, by and between Sushil Patel and the Registrant.
10.14†* Restricted Stock Unit Grant Agreement, effective as of
May 3, 2021, by and between Sushil Patel and the
Registrant.
10.15†
10.16†
10.17
10.18
10.19
Separation Agreement and Release, dated as of
December 23, 2019, by and between Howard Kaufman
and Replimune, Inc.
Separation Agreement and Release, dated as of April 3,
2020, by and between Stephen Gorgol and Replimune,
Inc.
Lease, dated as of April 1, 2016, by and between
Cummings Properties, LLC and the Registrant.
Lease, dated as of April 4, 2016, by and between MEPC
Milton Park No. 1 Limited and MEPC Milton Park No.
2 Limited, and Replimune Limited.
Deed of Variation, dated June 29, 2020, by and among
MEPC Milton Park No. 1 Limited and MEPC Milton
Park No. 2 Limited, and Replimune Limited.
10.20‡
Clinical Trial Collaboration and Supply Agreement,
dated as of February 26, 2018, by and between Bristol-
Myers Squibb Company and the Registrant.
10-Q
February 13, 2020
10.2
10-K
June 3, 2020
10.13
S-1
S-1
June 22, 2018
10.8
June 22, 2018
10.9
10-Q
August 7, 2020
10.3
S-1/A
July 10, 2018
10.12
10.21‡ Master Clinical Trial Collaboration and Supply
S-1/A
July 17, 2018
10.13
Agreement, dated as of May 29, 2018, by and between
Regeneron Pharmaceuticals, Inc. and the Registrant.
Indenture of Lease, dated as of June 22, 2018, by and
between CRP/King 33 NY Ave. Owner, L.L.C. and the
Registrant.
S-1
June 22, 2018
10.12
Lease, dated as of June 7, 2019, by and between ND/CR
Unicorn LLC and the Registrant.
8-K
June 13, 2019
10.1
Payoff Letter to Loan and Security Agreement by and
among the Registrant, Replimune, Inc., Replimune
Limited and Hercules Capital, Inc., dated December 15,
2020.
Clinical Trial Collaboration and Supply Agreement
(RP-2), dated as of April 12, 2019, by and between
Bristol-Myers Squibb Company and Replimune, Inc.
Subsidiaries of the Registrant.
Consent of PricewaterhouseCoopers LLP, Independent
10-Q
February 4, 2021
4.1
10-K
June 3, 2020
10.22
10.22
10.23
10.24
10.25
21.1*
23.1*
TABLE OF CONTENTS
Exhibit
Number
31.1*
31.2*
32.1**
32.2**
Exhibit Description
Form
Date
Number
Incorporated by Reference
Registered Public Accounting Firm.
Certification of the Chief Executive Officer, as required
by Section 302 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. 1350).
Certification of the Chief Accounting Officer, as
required by Section 302 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. 1350).
Certification of the Chief Executive Officer, as required
by Section 906 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. 1350).
Certification of the Chief Accounting Officer, as
required by Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. 1350).
101.INS*
Inline XBRL Instance Document.
101.SCH*
Inline XBRL Taxonomy Extension Schema Document.
101.CAL*
Inline XBRL Taxonomy Extension Calculation
Linkbase Document.
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase
Document.
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase
Document.
101.PRE*
Inline XBRL Taxonomy Extension Presentation
Linkbase Document.
*
Filed herewith.
**
Furnished and not filed herewith.
†
‡
Indicates management contract or compensatory plan.
Indicates confidential treatment has been requested with respect to specific portions of this exhibit.
Omitted portions have been filed with the Securities and Exchange Commission pursuant to Rule 406
of the Securities Act of 1933, as amended.
TABLE OF CONTENTS
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Signatures
Date: May 20, 2021
REPLIMUNE GROUP, INC.
By:
/s/ PHILIP ASTLEY-SPARKE
Philip Astley-Sparke
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following
persons in the capacities and on the dates indicated.
Name
Title
Date
/s/ PHILIP ASTLEY-SPARKE
Philip Astley-Sparke
/s/ JEAN FRANCHI
Jean Franchi
/s/ ROBERT COFFIN
Robert Coffin
/s/ KAPIL DHINGRA
Kapil Dhingra
/s/ HYAM LEVITSKY
Hyam Levitsky
/s/ PAOLO PUCCI
Paolo Pucci
/s/ JASON RHODES
Jason Rhodes
/s/ JOSEPH SLATTERY
Joseph Slattery
/s/ SANDER SLOOTWEG
Sander Slootweg
/s/ OTELLO STAMPACCHIA
Otello Stampacchia
/s/ DIETER WEINAND
Dieter Weinand
Chief Executive Officer and Director
(Principal Executive Officer)
May 20, 2021
Chief Financial Officer and Treasurer,
(Principal Financial and Accounting
Officer)
May 20, 2021
President and Chief Research &
Development Officer and Director
May 20, 2021
Director
Director
Director
Director
Director
Director
Director
Director
May 20, 2021
May 20, 2021
May 20, 2021
May 20, 2021
May 20, 2021
May 20, 2021
May 20, 2021
May 20, 2021
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 4.3
The following description sets forth certain material terms and provisions of Replimune Group, Inc.’s (“we,” “us,” and “our”) securities that are
registered under Section 12 of the Securities Exchange Act of 1934, as amended.
DESCRIPTION OF CAPITAL STOCK
The following description is a summary and does not purport to be complete. It is subject to, and qualified in its entirety by reference to, our Third
Amended and Restated Certificate of Incorporation, as amended (our “Certificate of Incorporation”), and our Amended and Restated By-laws (our
“Bylaws”), each of which are incorporated by reference or filed as an exhibit to our Annual Report on Form 10-K of which this Exhibit 4.3 is a part. The
terms of these securities also may be affected by the Delaware General Corporation Law (the “DGCL”).
Authorized Capital Stock
The Company’s authorized capital stock consists of 150,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of
undesignated preferred stock, par value $0.001 per share.
Common Stock
Subject to any preferential rights that may be applicable to any outstanding shares of preferred stock from time to time, holders of our common
stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders. The holders of our common stock do not have any
cumulative voting rights. Holders of our common stock are entitled to receive ratably any dividends declared by our board of directors out of funds legally
available for that purpose, subject to any preferential dividend rights of any outstanding preferred stock. Our common stock has no preemptive rights,
conversion rights or other subscription rights or redemption or sinking fund provisions.
In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in all assets remaining
after payment of all debts and other liabilities and any liquidation preference of any outstanding preferred stock.
Preferred Stock
Pursuant to our Certificate of Incorporation, our board of directors has the authority, without further action by our stockholders, to designate up to
10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences
and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the
number of shares constituting, or the designation of, such series, any or all of which may be greater than the rights of common stock.
The DGCL provides that the holders of preferred stock will have the right to vote separately as a class on any proposal involving fundamental
changes in the rights of holders of that preferred stock. This right is in addition to any voting rights that may be provided for in the applicable certificate of
designation.
Pre-Funded Warrants
In November 2019, we issued and sold pre-funded warrants to purchase an aggregate of 2,200,000 shares of our common stock at an offering price
of $13.6099 per pre-funded warrant in an underwritten public offering pursuant to a shelf registration on Form S-3. In June 2020, we issued and sold pre-
funded warrants to purchase an aggregate of 1,521,738 shares of our common stock at an offering price of $22.999 per pre-funded warrant and, in October
2020, we issued and sold pre-funded warrants to purchase an aggregate of 1,562,500 shares of our common stock at an offering price of $39.999 per pre-
funded warrant, in each case, in an underwritten public offering pursuant to a shelf registration on Form S-3 (the “2020 Pre-Funded Warrants”).
Each pre-funded warrant entitles the holder to purchase one share of our common stock at an exercise price of $0.0001 per share. The pre-funded
warrants do not expire and may be exercised at any time after their original issuance. Under the pre-funded warrants, we may not effect the exercise of any
pre-funded warrant, and a holder will not be entitled to exercise any portion of any pre-funded warrant, which, upon giving effect to such exercise, would
cause (i) the aggregate number of shares of our common stock beneficially owned by the holder (together with its affiliates) to exceed 9.99% of the number
of shares of our common stock outstanding immediately after giving effect to the exercise, or (ii) the combined voting power of our securities beneficially
owned by the holder of the pre-funded warrant (together with its affiliates) to exceed 9.99% of the combined voting power of all of our securities then
outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the pre-funded
warrants. However, any holder may increase or decrease such percentage to any other percentage upon at least 61 days’ prior notice from the holder to us;
provided, that a holder of a 2020 Pre-Funded Warrant may not increase such percentage to a percentage in excess of 19.99%.The exercise price of the pre-
funded warrants and the number of shares of our common stock issuable upon exercise of the pre-funded warrants is subject to appropriate adjustment in
the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock and
also upon any distributions of assets, including cash, stock or other property to our stockholders. The exercise price will not be adjusted below the par value
of our common stock.
Anti-Takeover Effects of Provisions of Delaware Law and Our Certificate of Incorporation and Bylaws
The provisions of Delaware law and of our Certificate of Incorporation and Bylaws may have the effect of discouraging, delaying or preventing a
change in control or an unsolicited acquisition proposal that a stockholder might consider favorable, including a proposal that might result in the payment
of a premium over the market price for the shares held by stockholders. These provisions are summarized in the following paragraphs.
Classified Board of Directors. Our Certificate of Incorporation and Bylaws provide that our board of directors is divided into three classes of
directors, with the directors in each class serving staggered three-year terms and with the number of directors in each class to be as nearly equal as possible.
The classification of our board of directors has the effect of requiring at least two annual stockholder meetings, instead of one, to replace a majority of the
members of our board of directors.
Authorized but Unissued or Undesignated Capital Stock. Our authorized capital stock consists of 150,000,000 shares of common stock and
10,000,000 shares of preferred stock. The authorized but unissued (and in the case of preferred stock, undesignated) stock may be issued by our board of
directors in one or more transactions. In this regard, our Certificate of Incorporation grants our board of directors broad power to establish the rights and
preferences of authorized and unissued preferred stock. The issuance of shares of preferred stock pursuant to our board of directors’ authority described
above could decrease the amount of earnings and assets available for distribution to holders of common stock and adversely affect the rights and powers,
including voting rights, of such holders and may have the effect of delaying, deferring or preventing a change in control. Our board of directors does not
currently intend to seek stockholder approval prior to any issuance of preferred stock, unless otherwise required by law.
Special Meetings of Stockholders. Our Certificate of Incorporation provides that special meetings of the stockholders may be called only by or at
the direction of our board of directors. Our Bylaws prohibit the conduct of any business at a special meeting other than as specified in the notice for such
meeting.
Requirements for Advance Notification of Stockholder Nominations and Proposals. Our Bylaws establish advance notice procedures with respect
to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of our board of
directors or a committee of our board of directors. In order for any matter to be “properly brought” before a meeting, a stockholder will have to comply
with advance notice requirements and provide us with certain information. Additionally, vacancies and newly created directorships may be filled only by a
vote of a majority of the directors then in office, even though less than a quorum, and not by the stockholders. Our Bylaws allow the presiding officer at a
meeting of the stockholders to adopt rules and regulations for the conduct of meetings which may have the effect of precluding the conduct of certain
business at a meeting if the rules and regulations are not followed. These provisions may also defer, delay or discourage a potential acquirer from
conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
Stockholder Action by Written Consent. Our Certificate of Incorporation prohibits the taking of any action of our stockholders by written consent
without a meeting.
Amendments to Our Certificate of Incorporation and Bylaws. The DGCL provides that, unless a corporation’s certificate of incorporation provides
otherwise, the affirmative vote of holders of shares constituting a majority of the votes of all shares entitled to vote may approve amendments to the
certificate of incorporation. Our Certificate of Incorporation and Bylaws provide that the affirmative vote of holders of at least 75% of the outstanding
shares of capital stock, voting together as a single class, and entitled to vote in the election of directors, will be required to amend, alter, change or repeal
our Certificate of Incorporation and Bylaws. This requirement of a supermajority vote to approve amendments to our Certificate of Incorporation and
Bylaws could enable a minority of our stockholders to exercise veto power over such amendments.
No Cumulative Voting. The DGCL provides that stockholders are not entitled to cumulate votes in the election of directors unless the corporation’s
certificate of incorporation provides otherwise. Our Certificate of Incorporation does not expressly provide for cumulative voting.
Delaware Anti-Takeover Statute. We are governed by the provisions of Section 203 of the Delaware General Corporation Law. In general,
Section 203 prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years
after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.
A “business combination” includes mergers, asset sales or other transactions resulting in a financial benefit to the stockholder. An “interested stockholder”
is a person who, together with affiliates and associates, owns, or within three years of the date on which it is sought to be determined whether such person
is an interested stockholder, did own, 15% or more of the corporation’s outstanding voting stock. These provisions may have the effect of delaying,
deferring, or preventing a change in our control.
Registration Rights
Certain holders of our common stock, or their transferees, are entitled to registration rights with respect to registration of the resale of such shares
under the Securities Act of 1933, as amended, pursuant to the amended and restated investors’ rights agreement, by and among us and certain of our
investors.
Stock Exchange Listing
Our common stock is listed on the Nasdaq Global Select Market under the symbol “REPL.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit 10.11
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is entered into by and between Replimune, Inc. (the
“Company”) and Sushil Patel (the “Executive”) as of May 3, 2021.
WHEREAS, the Company desires to employ the Executive as its Chief Commercial Officer, and the Executive desires to serve in such capacity on
behalf of the Company;
WHEREAS, the Executive previously entered into an Employment Agreement, effective May 3, 2021, with Replimune Group, Inc. (the “Prior
Agreement”);
WHEREAS, the parties desire to correct certain errors in the Prior Agreement, including the following: (i) the contracting entity was intended to
be the Company and not Replimune Group, Inc. and (ii) the Executive’s equity awards described in the Prior Agreement were intended to be inducement
awards under Rule 5635(c)(4) of the Nasdaq Stock Market Listing Rules and not awards issued under the Replimune Group, Inc. 2018 Omnibus Incentive
Compensation Plan, and to make certain other changes; and
WHEREAS, the Prior Agreement is hereby superseded in its entirety by this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Company and the
Executive hereby agree as follows:
1.
Employment.
(a) Term. The initial term of this Agreement shall begin on May 3, 2021 (the “Effective Date”) and shall continue until this Agreement is
terminated, such period is referred to herein as the “Term.”
(b) Duties.
(i) During the Term, the Executive shall serve as the Chief Commercial Officer of the Company, with duties, responsibilities, and
authority commensurate therewith, and shall report to the Chief Executive Officer of the Company (the “CEO”). The Executive shall perform all duties and
accept all responsibilities incident to such position as may be reasonably assigned to the Executive by the CEO.
(ii) The Executive represents to the Company that the Executive is not subject to or a party to any employment agreement, non-
competition covenant, or other agreement that would be breached by, or prohibit the Executive from, executing this Agreement and performing fully the
Executive’s duties and responsibilities hereunder. The Executive acknowledges that during his prior employment, he may have had access to trade secrets
or proprietary information of his prior employer that may continue to be of value to his prior employer. The Executive represents that he will not disclose
his prior employer’s trade secrets or proprietary information to anyone within the Company, use those trade secrets and proprietary information in the
course of his duties with the Company or bring those trade secrets and proprietary information onto the Company’s premises.
(c) Best Efforts. During the Term, the Executive shall devote his best efforts and full time and attention to promote the business and affairs
of the Company and its affiliated entities, and may be engaged in other business activities only to the extent the Executive has received the prior written
consent of the Nominating and Governance Committee (the “N&G Committee”) of the Board of Directors of the Company (the “Board”) and such
activities do not materially interfere or conflict with the Executive’s obligations to the Company hereunder, including, without limitation, obligations
pursuant to Section 15 below. The foregoing shall not be construed as preventing the Executive from (i) serving on civic, educational, philanthropic or
charitable boards or committees and (ii) managing personal investments, so long as such activities are permitted under the Company’s code of conduct and
employment policies and do not violate the provisions of Section 15 below.
(d) Principal Place of Employment. The Executive understands and agrees that his principal place of employment will be in the Company’s
offices located in Woburn, MA, or elsewhere in the Boston, MA metropolitan area, and that the Executive will be required to travel for business in the
course of performing his duties for the Company. For clarity, given the Coronavirus pandemic and related complications of relocating it is acknowledged
that initially the Executive will begin employment working remote from his current location in California.
2. Compensation.
(a) Base Salary. During the Term, the Company shall pay the Executive a base salary (“Base Salary”), at the annualized rate of $430,000,
which shall be paid in installments in accordance with the Company’s normal payroll practices. The Executive’s Base Salary shall be reviewed annually by
the CEO, pursuant to the normal performance review policies for senior-level executives, and may be adjusted from time to time as the Compensation
Committee of the Board (the “Compensation Committee”) deems appropriate. The Compensation Committee may take any actions of the Board pursuant
to this Agreement.
(b) Annual Bonus. The Executive shall be eligible to be awarded an annual discretionary bonus for each fiscal year during the Term, based
on the establishment and attainment of individual and corporate performance goals and targets established by the Compensation Committee (“Annual
Bonus”) in its sole discretion. The target amount of the Executive’s Annual Bonus for any fiscal year during the Term is 40% of the Executive’s annual
Base Salary. Any Annual Bonus awarded shall be paid after the end of the fiscal year to which it relates, at the same time and under the same terms and
conditions as the bonuses for other executives of the Company; provided that the Executive must be employed in good standing on the date that the
Executive’s Annual Bonus is paid. The Annual Bonus shall be subject to the terms of the annual bonus plan that is applicable to other executives of the
Company, including the requirement as to continued employment in good standing, subject to the provisions of Section 7 below.
2
(c) Relocation and Pre-Relocation Expenses. For up to one year after the Effective Date, the Company shall reimburse the Executive for
reasonable travel expenses, including economy airfare for flights between California and Boston, MA, local transportation costs and lodging expenses.
Following the one-year anniversary of the Effective Date, the parties agree to review the travel arrangement and certain adjustments may be made,
including extending the reimbursement period beyond one year. Upon the Executive’s relocation to the Boston, MA metropolitan area during the Term, the
Executive shall be eligible to receive reimbursement of reasonable relocation expenses for the move to the Boston, MA metropolitan area from California.
Such reasonable relocation expenses shall be limited to moving company services, packing and unpacking services, one-way economy airfare for members
of the Executive’s immediate family, and vehicle transportation services.
(d) Sign-On Bonus. As an inducement for the Executive to join the Company in the role of Chief Commercial Officer, the Company shall
pay the Executive a sign-on bonus in the aggregate amount of $50,000 (the “Sign-On Bonus”). The Sign-On Bonus will be paid in one lump sum within 30
days following the Effective Date, provided that the Executive is employed on the payment date. The Sign-On Bonus shall not be for services rendered, but
is an incentive payment to encourage the Executive to commence employment with the Company and agree to the restrictive covenants set forth below. As
such, the Executive will be required to repay a prorated amount of the Sign-On Bonus paid to him if, prior to the first anniversary of the Effective Date, the
Executive’s employment terminates either (1) by the Company for Cause (as defined below), or (2) by the Executive for any reason other than Good
Reason (as defined below). The prorated amount shall be determined by multiplying the Sign-On Bonus by a fraction, the numerator of which is the days
between the Effective Date and the termination date and the denominator of which is 365.
(e) Equity Awards. Subject to the approval of the Compensation Committee, which has already been obtained contingent on the Executive’s
commencement of employment, as an inducement for the Executive to join the Company in the role of Chief Commercial Officer and agree to the
restrictive covenants set forth below, the Executive will be granted the Option and the Restricted Stock Units (as further described below), which are
intended to be inducement awards under Rule 5635(c)(4) of the Nasdaq Stock Market Listing Rules and will be granted outside of the Replimune
Group, Inc. 2018 Omnibus Incentive Compensation Plan (the “Plan”). Although granted as inducement awards outside of the Plan, the Option and the
Restricted Stock Units shall be subject to the terms of the Plan as if issued thereunder.
(i) Stock Option. The Executive will be granted a nonqualified stock option to purchase 125,000 shares of Company common
stock, subject to the terms of the nonqualified stock option agreement for inducement grants provided by the Company (the “Option”). Vesting and
exercisability of the Option will be over four years from the date of grant with 25% vesting and becoming exercisable on the first anniversary of the date of
grant, and the remainder vesting and becoming exercisable in substantially equal monthly for three years thereafter. The exercise price of the Option will be
the closing price of the Company’s common stock on the date the Option is granted.
(ii) Restricted Stock Units. The Executive will be granted 88,333 restricted stock units, subject to the terms of the restricted stock
unit agreement for inducement grants provided by the Company (“Restricted Stock Units”). The Restricted Stock Units will vest as to 25% on May 15,
2022 and the remainder will vest in substantially equal annual installments for three years thereafter.
3
3. Retirement and Welfare Benefits. During the Term, the Executive shall be eligible to participate in the Company’s health, life insurance, long-term
disability, retirement and welfare benefit plans, and programs available to similarly-situated employees of the Company, pursuant to their respective terms
and conditions. Nothing in this Agreement shall preclude the Company or any Affiliate (as defined below) of the Company from terminating or amending
any employee benefit plan or program from time to time after the Effective Date.
4. Paid Time Off. The Company’s executive-level employees (Vice President and above) have the flexibility to take time off as needed to achieve
balance in their lives and to deliver exceptional results when on the job. Such flexible time off policy does not designate a set number of vacation days per
year but allows the Executive to set a schedule that works for him as long as it does not disrupt Company operations.
5. Business Expenses. The Company shall reimburse the Executive for all necessary and reasonable travel (which does not include commuting) and
other business expenses incurred by the Executive in the performance of his duties hereunder in accordance with such policies and procedures as the
Company may adopt generally from time to time for executives. Such reimbursement shall include necessary and reasonable business expenses incurred by
the Executive prior to relocating to the Boston, MA metropolitan area.
6. Termination Without Cause; Resignation for Good Reason. The Company may terminate the Executive’s employment at any time without Cause
upon 30 days’ advance written notice. The Executive may initiate a termination of employment by resigning for Good Reason as described below. Upon
termination by the Company without Cause or resignation by the Executive for Good Reason before or after the Change of Control Protection Period (as
defined below), if the Executive executes and does not revoke a written Release (as defined below), the Executive shall be entitled to receive, in lieu of any
payments under any severance plan or program for employees or executives, the following:
(a) The Company will pay the Executive an aggregate amount equal to one times the Executive’s annual Base Salary. Payment shall be
made over the 12-month period following the termination date in installments in accordance with the Company’s normal payroll practices. Payment will
begin within 60 days following the termination date, and any installments not paid between the termination date and the date of the first payment will be
paid with the first payment.
(b) The Company shall make a lump-sum payment within 60 days following the termination date equal to the COBRA premiums that the
Executive would pay if he elected continued health coverage under the Company’s health plan for the Executive and his dependents for the 12-month
period following the termination date, based on the COBRA rates in effect at the termination date.
(c) The Company shall pay any other amounts earned, accrued, and owing but not yet paid under Section 2 above and any benefits accrued
and due under any applicable benefit plans and programs of the Company (“Accrued Obligations”), regardless of whether the Executive executes or
revokes the Release.
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7. Change of Control Termination. Notwithstanding the foregoing, upon termination by the Company without Cause or resignation by the Executive
for Good Reason, in each case on or within 12 months following a Change of Control (as defined in the Plan, or a successor to the Plan) (the “Change of
Control Protection Period”), and provided that the Executive executes and does not revoke a written Release, then the Executive shall be entitled to receive,
in lieu of any payments under Section 6 of this Agreement or any severance plan or program for employees or executives, the following:
(a) The Company will pay the Executive an aggregate amount equal to the sum of (x) one times the Executive’s annual Base Salary, plus
(y) the Executive’s target Annual Bonus for the year of termination. Payment shall be made over the 12-month period following the termination date in
installments in accordance with the Company’s normal payroll practices. Payment will begin within 60 days following the termination date, and any
installments not paid between the termination date and the date of the first payment will be paid with the first payment.
(b) The Company shall make a lump-sum payment within 60 days following the termination date equal to the COBRA premiums that the
Executive would pay if he elected continued health coverage under the Company’s health plan for the Executive and his dependents for the 12-month
period following the termination date, based on the COBRA rates in effect at the termination date.
(c) The Company shall pay any Accrued Obligations, regardless of whether the Executive executes or revokes the Release.
8. Cause. The Company may immediately terminate the Executive’s employment at any time for Cause upon written notice to the Executive, in
which event all payments under this Agreement shall cease, except for any Accrued Obligations.
9. Voluntary Resignation Without Good Reason. The Executive may voluntarily terminate employment without Good Reason upon 30 days’ prior
written notice to the Company. In such event, after the effective date of such termination, no payments shall be due under this Agreement, except that the
Executive shall be entitled to any Accrued Obligations.
10. Disability. If the Executive incurs a Disability during the Term, in accordance with applicable law, the Company may terminate the Executive’s
employment on or after the date of Disability. If the Executive’s employment terminates on account of Disability, the Executive shall be entitled to receive
any Accrued Obligations. For purposes of this Agreement, the term “Disability” shall mean the Executive is eligible to receive long-term disability benefits
under the Company’s long-term disability plan.
11. Death. If the Executive dies during the Term, the Executive’s employment shall terminate on the date of death and the Company shall pay any
Accrued Obligations to the Executive’s executor, legal representative, administrator or designated beneficiary, as applicable. Otherwise, the Company shall
have no further liability or obligation under this Agreement to the Executive’s executors, legal representatives, administrators, heirs or assigns or any other
person claiming under or through the Executive.
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12. Resignation of Positions. Effective as of the date of any termination of employment for any reason, the Executive will be automatically deemed
to resign from all Company-related positions, including as an officer and director of the Company and its parents, subsidiaries and Affiliates, as applicable,
and shall execute all documentation necessary to effectuate such resignation(s).
13. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) “Cause” shall mean a determination by the Board that the Executive (i) has breached this Agreement or any confidentiality, non-
solicitation, non-competition or inventions assignment agreement or obligations with the Company; (ii) committed an act of dishonesty, fraud,
embezzlement or theft; (iii) engaged in conduct that causes, or is likely to cause, material damage to the property or reputation of the Company; (iv) failed
to perform satisfactorily the material duties of the Executive’s position (other than by reason of Disability) after receipt of a written warning from the
Board; (v) committed a felony or any crime of moral turpitude; or (vi) materially failed to comply with the Company’s code of conduct or employment
policies.
(b) “Good Reason” shall mean the occurrence of one or more of the following without the Executive’s consent, other than on account of the
Executive’s Disability:
(i) A material diminution by the Company of the Executive’s authority, duties or responsibilities;
(ii) A material and permanent change in the geographic location at which the Executive must perform services under this
Agreement (which, for purposes of this Agreement, means relocation of the offices of the Company at which the Executive is principally employed to a
location that increases the Executive’s commute to work by more than 50 miles);
situated executives in substantially the same proportions;
(iii) A material diminution in the Executive’s Base Salary, other than a general reduction in Base Salary that affects all similarly-
(iv) Any action or inaction that constitutes a material breach by the Company of this Agreement; or
The Company terminates this Agreement for any reason other than Cause or Disability and does not offer the Executive continued employment on
substantially similar terms as set forth in this Agreement.
The Executive must provide written notice of termination for Good Reason to the Company within 30 days after the event constituting Good Reason. The
Company shall have a period of 30 days in which it may correct the act or failure to act that constitutes the grounds for Good Reason as set forth in the
Executive’s notice of termination. If the Company does not correct the act or failure to act, the Executive’s employment will terminate for Good Reason on
the first business day following the Company’s 30-day cure period. If the Executive does not provide written notice of termination for Good Reason to the
Company within 30 days after an event constituting Good Reason, then the Executive will be deemed to have waived the Executive’s right to terminate for
Good Reason with respect to such event.
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(c) “Release” shall mean a separation agreement and general release of any and all claims against the Company and all related parties with
respect to all matters arising out of the Executive’s employment by the Company, and the termination thereof (other than claims for any entitlements under
the terms of this Agreement or under any plans or programs of the Company under which the Executive has accrued and is due a benefit). The Release will
be in a standard form determined by and acceptable to the Company and shall include the Restrictive Covenants set forth in Section 15.
14. Section 409A.
(a) This Agreement is intended to comply with section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and its
corresponding regulations, or an exemption thereto, and payments may only be made under this Agreement upon an event and in a manner permitted by
section 409A of the Code, to the extent applicable. Severance benefits under this Agreement are intended to be exempt from section 409A of the Code
under the “short-term deferral” exception, to the maximum extent applicable, and then under the “separation pay” exception, to the maximum extent
applicable. Notwithstanding anything in this Agreement to the contrary, if required by section 409A of the Code, if the Executive is considered a “specified
employee” for purposes of section 409A of the Code and if payment of any amounts under this Agreement is required to be delayed for a period of six
months after separation from service pursuant to section 409A of the Code, payment of such amounts shall be delayed as required by section 409A of the
Code, and the accumulated amounts shall be paid in a lump-sum payment within 10 days after the end of the six-month period. If the Executive dies during
the postponement period prior to the payment of benefits, the amounts withheld on account of section 409A of the Code shall be paid to the personal
representative of the Executive’s estate within 60 days after the date of the Executive’s death.
(b) All payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service,”
if required under section 409A of the Code. For purposes of section 409A of the Code, each payment hereunder shall be treated as a separate payment, and
the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. In no event may the
Executive, directly or indirectly, designate the calendar year of a payment. Notwithstanding any provision of this Agreement to the contrary, in no event
shall the timing of the Executive’s execution of the Release, directly or indirectly, result in the Executive’s designating the calendar year of payment of any
amounts of deferred compensation subject to section 409A of the Code, and if a payment that is subject to execution of the Release could be made in more
than one taxable year, payment shall be made in the later taxable year.
(c) All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements
of section 409A of the Code, including, where applicable, the requirement that (i) any reimbursement be for expenses incurred during the period specified
in this Agreement, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a fiscal year not affect the expenses eligible
for reimbursement, or in-kind benefits to be provided, in any other fiscal year, (iii) the reimbursement of an eligible expense be made no later than the last
day of the fiscal year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits not be subject to
liquidation or exchange for another benefit.
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15. Restrictive Covenants.
(a) Non-Competition.
(i) The Executive agrees that during the Executive’s employment with the Company and its Affiliates and the one-year period
following the date on which the Executive’s employment terminates for any reason (the “Restriction Period”), the Executive will not, without the Board’s
express written consent, engage (directly or indirectly) in any Competitive Business in the Restricted Area. The term “Competitive Business” means any
activities or services conducted by any third party with respect to the research, development, marketing, manufacturing or sale of oncolytic
immunotherapies that are similar to the activities or services the Executive has performed (or gained Proprietary Information about (as defined below)) at
any time during the last two years of the Executive’s employment with the Company. The term “Restricted Area” means the United States of America,
Canada and countries within Europe, in respect of which the Company or any of its Affiliates has material business operations as of the date on which the
Executive’s employment terminates and in which the Executive has provided services or had a material presence or influence at any time during the last
two years of the Executive’s employment with the Company or its Affiliates. Notwithstanding the generality of the foregoing, if for any reason Executive
separates from employment with the Company prior to his anticipated relocation from California to Massachusetts, then for purposes of the Restrictive
Covenants set forth under Sections 15(a), (b) and (c), the Restriction Period shall only apply to such time that the Executive was employed with the
Company, and not to any post-termination period.
(ii) The Executive agrees that this offer of employment, and the Base Salary provided for in Section 2(a), the Annual Bonus
percentage opportunity provided for in Section 2(b), the Sign-On Bonus provided for in Section 2(d), the Option and the Restricted Stock Units provided
for in Section 2(e), the separation benefits provided for in Section 6 and the Change of Control Termination benefits provided for in Section 7, are fair and
reasonable consideration for the Executive’s compliance with this Section 15(a). The Executive understands and agrees that, given the nature of the
business of the Company and its Affiliates and the Executive’s position with the Company, the foregoing geographic scope is reasonable and appropriate
and that more limited geographical limitations on this non-competition covenant are therefore not appropriate. For purposes of this Agreement, the term
“Affiliate” means the Company’s sole shareholder, any subsidiary of the Company or other entity under common control with the Company.
(iii) The Company shall not enforce this Section 15(a) if it terminates the Executive’s employment without Cause as defined in
Section 13(a). The Executive shall not be entitled to any payments under Section 6, however, unless he executes and does not revoke a Release containing
the Restrictive Covenants set forth in Section 15, including a one-year post-employment non-compete restriction.
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(b) Non-Solicitation of Company Personnel. The Executive agrees that during the Restriction Period, the Executive will not, either directly or
through others, hire or attempt to hire any employee, consultant or independent contractor of the Company or its Affiliates, or solicit or attempt to solicit
any such person to change or terminate his or her relationship with the Company or an Affiliate or otherwise to become an employee, consultant or
independent contractor to, for or of any other person or business entity, unless more than 12 months shall have elapsed between the last day of such
person’s employment or service with the Company or Affiliate and the first day of such solicitation or hiring or attempt to solicit or hire. If any employee,
consultant or independent contractor is hired or solicited by any entity that has hired or agreed to hire the Executive, such hiring or solicitation shall be
conclusively presumed to be a violation of this subsection (b).
(c) Non-Solicitation of Business Partners. The Executive agrees that during the Restriction Period, the Executive will not, either directly or
through others, solicit, divert or appropriate, or attempt to solicit, divert or appropriate for the benefit of a Competitive Business, any (i) business partner or
(ii) prospective business partner of the Company or an Affiliate who is or was identified through leads developed during the course of the Executive’s
employment or service with the Company, in each case, with whom the Executive was involved as part of the Executive’s job responsibilities during the
Executive’s employment or service with the Company, or regarding whom the Executive learned Proprietary Information (as defined below) during the
Executive’s employment or service with the Company.
(d) Proprietary Information. At all times, the Executive will hold in strictest confidence and will not disclose, use, lecture upon or publish any
of the Proprietary Information (defined below) of the Company or an Affiliate, except as such disclosure, use or publication may be required in connection
with the Executive’s work for the Company or as described in Section 15(e) below, or unless the Company expressly authorizes such disclosure in writing.
“Proprietary Information” shall mean any and all confidential and/or proprietary knowledge, data or information of the Company and its Affiliates and
shareholders, including but not limited to information relating to financial matters, investments, budgets, business plans, marketing plans, personnel
matters, business contacts, products, processes, know-how, designs, methods, improvements, discoveries, inventions, ideas, data, programs, and other
works of authorship. Proprietary Information does not include information which (i) was disclosed in response to a valid order by a court or other
governmental body, where the Executive provided the Company with prior written notice of such disclosure, (ii) was or becomes generally available to the
public other than as a result of disclosure by the Executive or any of the Executive’s agents, advisors or representatives, (iii) was within the Executive’s
possession prior to its being furnished to the Executive by or on behalf of the Company, provided that the source of the information was not bound by a
confidentiality agreement with the Company or otherwise prohibited from transmitting the information to the Executive by a contractual, legal or fiduciary
obligation, or (iv) was or becomes available to the Executive on a non-confidential basis from a source other than the Company or its representatives,
provided that such source is not bound by a confidentiality agreement with the Company or otherwise prohibited from transmitting the information to the
Executive by a contractual, legal or fiduciary obligation.
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(e) Reports to Government Entities. Nothing in this Agreement shall prohibit or restrict the Executive from initiating communications directly
with, responding to any inquiry from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation
to, or filing a claim or assisting with an investigation directly with a self-regulatory authority or a government agency or entity, including the Equal
Employment Opportunity Commission, the Massachusetts Commission Against Discrimination, the Department of Labor, the National Labor Relations
Board, the Department of Justice, the Securities and Exchange Commission, Congress, any agency Inspector General or any other federal, state or local
regulatory authority, or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. The
Executive does not need the prior authorization of the Company to engage in conduct protected by this subsection, and the Executive does not need to
notify the Company that the Executive has engaged in such conduct. Please take notice that federal law provides criminal and civil immunity to federal and
state claims for trade secret misappropriation to individuals who disclose trade secrets to their attorneys, courts, or government officials in certain,
confidential circumstances that are set forth at 18 U.S.C. §§ 1833(b)(1) and 1833(b)(2), related to the reporting or investigation of a suspected violation of
the law, or in connection with a lawsuit for retaliation for reporting a suspected violation of the law.
(f) Work Made for Hire; Inventions Assignment. The Executive agrees that all inventions, innovations, improvements, developments, methods,
designs, analyses, reports, and all similar or related information which relates to the Company’s or its Affiliates’ actual or anticipated business, research and
development or existing or future products or services and which are conceived, developed or made by the Executive while employed by the Company
(“Work Product”) belong to the Company. The Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the
extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such
copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, the Executive hereby irrevocably assigns to the Company,
for no additional consideration, the Executive’s entire right, title, and interest in and to all Work Product and intellectual property rights therein, including,
without limitation, the right to sue, counterclaim, and recover for all past, present, and future infringement, misappropriation, or dilution thereof, and all
rights corresponding thereto throughout the world. The Executive will promptly disclose such Work Product to the Board and perform all actions
reasonably requested by the Board (whether during or after the Term) to establish and confirm such ownership (including, without limitation, executing
assignments, consents, powers of attorney and other instruments). If requested by the Company, the Executive agrees to execute any inventions assignment
and confidentiality agreement that is required to be signed by Company employees generally. Nothing contained in this Agreement shall be construed to
reduce or limit the Company’s rights, title, or interest in any Work Product or intellectual property rights so as to be less in any respect than that the
Company would have had in the absence of this Agreement. The Executive understands that this Agreement does not, and shall not be construed to, grant
the Executive any license or right of any nature with respect to any Work Product or intellectual property rights or any Proprietary Information, materials,
software, or other tools made available to the Executive by the Company.
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(g) Return of Company Property. Upon termination of the Executive’s employment with the Company for any reason, and at any earlier time
the Company requests, the Executive will (i) deliver to the person designated by the Company all originals and copies of all documents and property of the
Company or an Affiliate that is in the Executive’s possession or under the Executive’s control or to which the Executive may have access, (ii) deliver to the
person designated by the Company all Company property, including keys, key cards, access cards, identification cards, security devices, employer credit
cards, network access devices, computers, cell phones, smartphones, PDAs, pagers, fax machines, equipment, manuals, reports, files, books, compilations,
work product, e-mail messages, recordings, disks, thumb drives or other removable information storage devices, hard drives, and data, and (iii) to the
extent that the Executive made use of the Executive’s personal electronics (e.g., laptop, iPad, telephone, thumb drives, etc.) during employment with the
Company, permit the Company to delete all Company property and information from such personal devices. The Executive will not reproduce or
appropriate for the Executive’s own use, or for the use of others, any property, Proprietary Information or Work Product.
(h) Future Cooperation. The Executive agrees that, following the termination of his employment, he will cooperate fully with the Company,
upon request, in relation to (i) transitioning the Executive’s job duties to his successor and any other operational issues that may arise in connection with his
separation from employment; and (ii) the Company’s defense, prosecution or other involvement in any continuing or future claims, lawsuits, charges,
arbitrations, or internal or external investigations (or audits or reviews of any type) arising out of events or matters that occurred during the Executive’s
employment by the Company or to which he is otherwise a relevant witness.
16. Legal and Equitable Remedies.
(a) Because the Executive’s services are personal and unique and the Executive has had and will continue to have access to and has become and
will continue to become acquainted with the Proprietary Information of the Company and its Affiliates, and because any breach by the Executive of any of
the restrictive covenants contained in Section 15 would result in irreparable injury and damage for which money damages would not provide an adequate
remedy, the Company shall have the right to enforce Section 15 and any of its provisions by injunction, specific performance or other equitable relief,
without bond and without prejudice to any other rights and remedies that the Company may have for a breach, or threatened breach, of the restrictive
covenants set forth in Section 15. The Executive agrees that in any action in which the Company seeks injunction, specific performance or other equitable
relief, the Executive will not assert or contend that any of the provisions of Section 15 are unreasonable or otherwise unenforceable.
(b) The Executive irrevocably and unconditionally (i) agrees that any legal proceeding arising out of this Agreement shall be brought solely in
the United States District Court for the District of Massachusetts, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of
general jurisdiction in the Commonwealth of Massachusetts, (ii) consents to the exclusive jurisdiction of such court in any such proceeding, and
(iii) waives any objection to the laying of venue of any such proceeding in any such court. The Executive also irrevocably and unconditionally consents to
the service of any process, pleadings, notices or other papers.
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(c) Notwithstanding anything in this Agreement to the contrary, if the Executive breaches any of the Executive’s obligations under Section 15,
the Company shall be obligated to provide only the Accrued Obligations, and all payments under Section 2, Section 6, or Section 7 hereof, as applicable,
shall cease. In such event, and in addition to any legal and equitable remedies permitted by law, the Company may require that the Executive repay all
amounts theretofore paid to him pursuant to Sections 6 and 7 hereof (other than Sections 6(c) and 7(c)), and in such case, the Executive shall promptly
repay such amounts on the terms determined by the Company.
17. Survival. The respective rights and obligations of the parties under this Agreement (including, but not limited to, under Sections 15 and 16) shall
survive any termination of the Executive’s employment or termination or expiration of this Agreement to the extent necessary to the intended preservation
of such rights and obligations.
18. No Mitigation or Set-Off. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced regardless of whether the
Executive obtains other employment. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Executive or others.
19. Section 280G. In the event of a change in ownership or control under section 280G of the Code, if it shall be determined that any payment or
distribution in the nature of compensation (within the meaning of section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would constitute an “excess parachute payment”
within the meaning of section 280G of the Code, the aggregate present value of the Payments under the Agreement shall be reduced (but not below zero) to
the Reduced Amount (defined below) if and only if the Accounting Firm (described below) determines that the reduction will provide the Executive with a
greater net after-tax benefit than would no reduction. No reduction shall be made unless the reduction would provide the Executive with a greater net after-
tax benefit. The determinations under this Section shall be made as follows:
(a) The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of Payments under this
Agreement without causing any Payment under this Agreement to be subject to the Excise Tax (defined below), determined in accordance with section
280G(d)(4) of the Code. The term “Excise Tax” means the excise tax imposed under section 4999 of the Code, together with any interest or penalties
imposed with respect to such excise tax.
(b) Payments under this Agreement shall be reduced on a nondiscretionary basis in such a way as to minimize the reduction in the economic
value deliverable to the Executive. Where more than one payment has the same value for this purpose and they are payable at different times, they will be
reduced on a pro rata basis. Only amounts payable under this Agreement shall be reduced pursuant to this Section.
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(c) All determinations to be made under this Section shall be made by an independent certified public accounting firm selected by the Company
and agreed to by the Executive immediately prior to the change-in-ownership or -control transaction (the “Accounting Firm”). The Accounting Firm shall
provide its determinations and any supporting calculations both to the Company and the Executive within 10 days of the transaction. Any such
determination by the Accounting Firm shall be binding upon the Company and the Executive. All of the fees and expenses of the Accounting Firm in
performing the determinations referred to in this Section shall be borne solely by the Company.
20. Notices. All notices and other communications required or permitted under this Agreement or necessary or convenient in connection herewith shall
be in writing and shall be deemed to have been given when hand-delivered or mailed by registered or certified mail, as follows (provided that notice of
change of address shall be deemed given only when received):
If to the Company, to:
Replimune Inc.
500 Unicorn Park Drive, 3rd Floor
Woburn, MA 01801
Attn: Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
One Federal Street
Boston, MA 02110
Attn: Benjamin Stein
If to the Executive, to the most recent address on file with the Company or to such other names or addresses as the Company or the Executive, as
the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section.
21. Withholding. All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any
payments under this Agreement all federal, state, and local taxes as the Company is required to withhold pursuant to any law or governmental rule or
regulation. The Executive shall bear all expense of, and be solely responsible for, all federal, state, and local taxes due with respect to any payment received
by him under this Agreement.
22. Remedies Cumulative; No Waiver. No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and each
and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at law or
in equity. No delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be construed
as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or
necessary by such party in its sole discretion.
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23. Assignment. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective
heirs, executors, administrators, legal representatives, successors, and assigns of the parties hereto, except that the duties and responsibilities of the
Executive under this Agreement are of a personal nature and shall not be assignable or delegable in whole or in part by the Executive. The Company may
assign its rights, together with its obligations hereunder, in connection with any sale, transfer or other disposition of all or substantially all of its business
and assets, and such rights and obligations shall inure to, and be binding upon, any successor to the business or any successor to substantially all of the
assets of the Company, whether by merger, purchase of stock or assets or otherwise, which successor shall expressly assume such obligations, and the
Executive acknowledges that in such event the obligations of the Executive hereunder, including but not limited to those under Section 15, will continue to
apply in favor of the successor.
24. Company Policies. This Agreement and the compensation payable hereunder shall be subject to any applicable clawback or recoupment policies,
share trading policies, and other policies that may be implemented by the Board from time to time with respect to officers of the Company.
25. Indemnification. In the event the Executive is made, or threatened to be made, a party to any legal action or proceeding, whether civil or criminal,
including any governmental or regulatory proceedings or investigations, by reason of the fact that the Executive is or was a director or officer of the
Company or any of its Affiliates, the Executive shall be indemnified by the Company, and the Company shall pay the Executive’s related expenses when
and as incurred, to the fullest extent permitted by applicable law and the Company’s articles of incorporation and bylaws. During the Executive’s
employment with the Company or any of its Affiliates and after termination of employment for any reason, the Company shall cover the Executive under
the Company’s directors’ and officers’ insurance policy applicable to other officers and directors according to the terms of such policy. The Executive
agrees to notify the Company promptly upon becoming aware of any claim or potential claim asserted against him arising from his performance of his job
duties.
26. Entire Agreement; Amendment. This Agreement sets forth the entire agreement of the parties hereto and supersedes any and all prior agreements and
understandings concerning the Executive’s employment by the Company, including the Prior Agreement. This Agreement may be changed only by a
written document signed by the Executive and the Company.
27. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement, which can be
given effect without the invalid or unenforceable provision or application, and shall not invalidate or render unenforceable such provision or application in
any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full
force and effect in all other circumstances.
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28. Governing Law; Forum. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive and procedural laws
of Massachusetts without regard to rules governing conflicts of law. Any lawsuit arising under this Agreement or otherwise from the Executive’s
employment with the Company shall be brought solely in a state or federal court located in Massachusetts.
29. Acknowledgements. The Executive acknowledges (a) that the Company hereby advises him to consult with legal counsel prior to signing this
Agreement, (b) that he has had a full and adequate opportunity to read and understand the terms and conditions contained in this Agreement, (c) that he has
been provided with this Agreement a minimum of 10 business days prior to the date this Agreement becomes effective, and (d) that the post-employment
non-competition and non-solicitation provisions are supported by fair and reasonable consideration.
30. Counterparts. This Agreement may be executed in any number of counterparts (including facsimile counterparts), each of which shall be an original,
but all of which together shall constitute one instrument.
(Signature Page Follows)
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
REPLIMUNE, INC.
/s/ Philip Astley-Sparke
Name: Philip Astley-Sparke
Title: Chief Executive Officer
Date: May 3, 2021
REPLIMUNE GROUP, INC. (solely for purposes of acknowledging that the
Prior Agreement was entered into with Replimune Group, Inc ..in error)
/s/ Philip Astley-Sparke
Name: Philip Astley-Sparke
Title: Chief Executive Officer
Date: May 3, 2021
EXECUTIVE
/s/ Sushil Patel
Name: Sushil Patel
Date: May 3, 2021
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EMPLOYMENT AGREEMENT
EXHIBIT 10.12
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into by and between Replimune, Inc. (the “Company”) and Tanya Lewis
(the “Executive”) as of May 10, 2021.
WHEREAS, the Company desires to employ the Executive as its Chief Development Operations Officer, and the Executive desires to serve in
such capacity on behalf of the Company.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Company and the
Executive hereby agree as follows:
1.
Employment.
(a) Term. The initial term of this Agreement shall begin on May 10, 2021 (the “Effective Date”) and shall continue for two years, unless the
Executive’s employment is sooner terminated in accordance with Sections 6, 7, 8, 9, 10, or 11. Unless earlier terminated, the term of this Agreement shall
automatically renew for periods of one year unless either party gives the other party written notice at least 90 days prior to the end of the then existing term
that the term of this Agreement shall not be further extended. The period commencing on the Effective Date and ending on the date on which the term of
this Agreement terminates is referred to herein as the “Term.”
(b) Duties.
(i) During the Term, the Executive shall serve as the Chief Development Operations Officer of the Company, with duties,
responsibilities, and authority commensurate therewith, and shall report to the Chief Executive Officer of the Company (the “CEO”). The Executive shall
perform all duties and accept all responsibilities incident to such position as may be reasonably assigned to the Executive by the CEO.
(ii) The Executive represents to the Company that the Executive is not subject to or a party to any employment agreement,
noncompetition covenant, or other agreement that would be breached by, or prohibit the Executive from, executing this Agreement and performing fully the
Executive’s duties and responsibilities hereunder. The Executive acknowledges that during her prior employment, she may have had access to trade secrets
or proprietary information of her prior employer that may continue to be of value to her prior employer. The Executive represents that she will not disclose
her prior employer’s trade secrets or proprietary information to anyone within the Company, use those trade secrets and proprietary information in the
course of her duties with the Company or bring those trade secrets and proprietary information onto the Company’s premises.
(c) Best Efforts. During the Term, the Executive shall devote her best efforts and full time and attention to promote the business and affairs of
the Company and its affiliated entities, and may be engaged in other business activities only to the extent the Executive has received the prior written
consent of the Board of Directors of the Company (the “Board”) and such activities do not materially interfere or conflict with the Executive’s obligations
to the Company hereunder, including, without limitation, obligations pursuant to Section 15 below. The foregoing shall not be construed as preventing the
Executive from (i) serving on civic, educational, philanthropic or charitable boards or committees and (ii) managing personal investments, so long as such
activities are permitted under the Company’s code of conduct and employment policies and do not violate the provisions of Section 15 below.
(d) Principal Place of Employment. The Executive understands and agrees that her principal place of employment will be in the Company’s
offices located in the Boston, MA metropolitan area and that the Executive will be required to travel for business in the course of performing her duties for
the Company.
2. Compensation.
(a) Base Salary. During the Term, the Company shall pay the Executive a base salary (“Base Salary”), at the annual rate of $425,000.00, which
shall be paid in installments in accordance with the Company’s normal payroll practices. The Executive’s Base Salary shall be reviewed annually by the
CEO pursuant to the normal performance review policies for senior-level executives and may be adjusted from time to time as the Compensation
Committee of the Board (the “Compensation Committee”) deems appropriate. The Compensation Committee may take any actions of the Board pursuant
to this Agreement.
(b) Annual Bonus. The Executive shall be eligible to be awarded an annual discretionary bonus for each fiscal year during the Term, based on
the establishment and attainment of individual and corporate performance goals and targets established by the Compensation Committee (“Annual Bonus”)
in its sole discretion. The target amount of the Executive’s Annual Bonus for any fiscal year during the Term is 40% of the Executive’s annual Base Salary,
and the actual Annual Bonus awarded, if any, may be more or less than the target amount, as determined by the Compensation Committee in its sole
discretion. Any Annual Bonus awarded shall be paid after the end of the fiscal year to which it relates, at the same time and under the same terms and
conditions as the bonuses for other executives of the Company; provided that the Executive must be employed in good standing on the date that the
Executive’s Annual Bonus is paid. The Annual Bonus shall be subject to the terms of the annual bonus plan that is applicable to other executives of the
Company, including the requirement as to continued employment in good standing, subject to the provisions of Section 7 below.
(c) Equity Awards. Subject to the approval of the Compensation Committee, which has already been obtained contingent on the Executive’s
commencement of employment, the Executive will be granted (i) a Nonqualified Stock Option (as defined in the Replimune Group, Inc. 2018 Omnibus
Incentive Compensation Plan (the “Plan”)) to purchase 110,000 shares, pursuant to the terms of the Company’s Plan and subject to the standard form of
Nonqualified Stock Option Award Agreement under the Plan (the “Option”) and (ii) 73,333 Restricted Stock Units (as defined in the Plan), pursuant to the
terms of the Plan and subject to the standard form of Restricted Stock Unit Agreement under the Plan (the “Restricted Stock Units”). Vesting and
exercisability of the Option will be over four years from the date of grant with 25% vesting and becoming exercisable on the first anniversary of the date of
grant, and the remainder vesting and becoming exercisable in substantially equal monthly installments for three years thereafter. The Restricted Stock Units
will vest as to 25% on May 15, 2022 (assuming the start date first written above) and the remainder will vest in substantially equal annual installments for
three years thereafter.
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3. Retirement and Welfare Benefits. During the Term, the Executive shall be eligible to participate in the Company’s health, life insurance, long-term
disability, retirement and welfare benefit plans, and programs available to similarly-situated employees of the Company, pursuant to their respective terms
and conditions. Nothing in this Agreement shall preclude the Company or any Affiliate (as defined below) of the Company from terminating or amending
any employee benefit plan or program from time to time after the Effective Date.
4. Vacation / Time Off. The Executive will have the flexibility to take time off as needed to achieve balance in work/life endeavors and to deliver
exceptional results when on the job. The Company’s flexible time off policy (for Vice President level and above) does not designate a set number of
vacation days per year.
5. Business Expenses. The Company shall reimburse the Executive for all necessary and reasonable travel (which does not include commuting) and
other business expenses incurred by the Executive in the performance of her duties hereunder in accordance with such policies and procedures as the
Company may adopt generally from time to time for executives.
6. Termination Without Cause; Resignation for Good Reason. The Company may terminate the Executive’s employment at any time without Cause
upon 30 days’ advance written notice. The Executive may initiate a termination of employment by resigning for Good Reason as described below. Upon
termination by the Company without Cause or resignation by the Executive for Good Reason before or after the Change of Control Protection Period (as
defined below), if the Executive executes and does not revoke a written Release (as defined below), the Executive shall be entitled to receive, in lieu of any
payments under any severance plan or program for employees or executives, the following:
(a) The Company will pay the Executive an amount equal to one times the Executive’s annual Base Salary. Payment shall be made over the 12-
month period following the termination date in installments in accordance with the Company’s normal payroll practices. Payment will begin within 60 days
following the termination date, and any installments not paid between the termination date and the date of the first payment will be paid with the first
payment.
(b) Provided that the Executive is eligible for and timely elects continuation coverage under COBRA, the Company will reimburse the
Executive on a monthly basis for the COBRA premiums the Executive pays for continued health care coverage under the Company’s group health plans for
the Executive and the Executive’s eligible dependents (“COBRA Reimbursement”). The Company will pay the Executive the COBRA Reimbursements for
the period from the Executive’s termination date until the earliest to occur of (i) the end of the 12-month period following the Executive’s termination date;
(ii) the date the Executive becomes eligible for group health insurance coverage through a subsequent employer; or (iii) the date the Executive ceases to be
eligible for COBRA coverage for any reason, including the Executive ceasing to pay the applicable COBRA premiums (each of the events described in
(ii) or (iii) in this Section 6(b) shall be referred to herein as a “Disqualifying Event”). The Executive is required to notify the Company within five days of
becoming aware that a Disqualifying Event has occurred or will occur. The COBRA health care continuation coverage period under section 4980B of the
Internal Revenue Code of 1986, as amended (the “Code”), shall run concurrently with the period during which the Company pays the COBRA
Reimbursements.
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(c) The Company shall pay any other amounts earned, accrued, and owing but not yet paid under Section 2 above and any benefits accrued and
due under any applicable benefit plans and programs of the Company (“Accrued Obligations”), regardless of whether the Executive executes or revokes the
Release.
7. Change of Control Termination. Notwithstanding the foregoing, upon termination by the Company without Cause or resignation by the Executive for
Good Reason, in each case on or within 12 months following a Change of Control (as defined in the Plan, or a successor to the Plan) (the “Change of
Control Protection Period”), and provided that the Executive executes and does not revoke a written Release, then the Executive shall be entitled to receive,
in lieu of any payments under Section 6 of this Agreement or any severance plan or program for employees or executives, the following:
(a) The Company will pay the Executive an amount equal to the sum of (x) the Executive’s annual Base Salary, plus (y) the Executive’s target
Annual Bonus for the year of termination. Payment shall be made over the 12-month period following the termination date in installments in accordance
with the Company’s normal payroll practices. Payment will begin within 60 days following the termination date, and any installments not paid between the
termination date and the date of the first payment will be paid with the first payment.
(b) Provided that the Executive is eligible for and timely elects continuation coverage under COBRA, the Company will pay the Executive the
COBRA Reimbursements for the period from the Executive’s termination date until the earliest to occur of (i) the end of the 12-month period following the
Executive’s termination date or (ii) a Disqualifying Event. The Executive is required to notify the Company within five days of becoming aware that a
Disqualifying Event has occurred or will occur. The COBRA health care continuation coverage period under section 4980B of the Code shall run
concurrently with the period during which the Company pays the COBRA Reimbursements.
(c) The Company shall pay any Accrued Obligations, regardless of whether the Executive executes or revokes the Release.
8. Cause. The Company may immediately terminate the Executive’s employment at any time for Cause upon written notice to the Executive, in which
event all payments under this Agreement shall cease, except for any Accrued Obligations.
9. Voluntary Resignation Without Good Reason. The Executive may voluntarily terminate employment without Good Reason upon 30 days’ prior
written notice to the Company. In such event, after the effective date of such termination, no payments shall be due under this Agreement, except that the
Executive shall be entitled to any Accrued Obligations.
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10. Disability. If the Executive incurs a Disability during the Term, in accordance with applicable law, the Company may terminate the Executive’s
employment on or after the date of Disability. If the Executive’s employment terminates on account of Disability, the Executive shall be entitled to receive
any Accrued Obligations. For purposes of this Agreement, the term “Disability” shall mean the Executive is eligible to receive long-term disability benefits
under the Company’s long-term disability plan.
11. Death. If the Executive dies during the Term, the Executive’s employment shall terminate on the date of death and the Company shall pay any
Accrued Obligations to the Executive’s executor, legal representative, administrator or designated beneficiary, as applicable. Otherwise, the Company shall
have no further liability or obligation under this Agreement to the Executive’s executors, legal representatives, administrators, heirs or assigns or any other
person claiming under or through the Executive.
12. Resignation of Positions. Effective as of the date of any termination of employment for any reason, the Executive will be automatically deemed to
resign from all Company-related positions, including as an officer and director of the Company and its parents, subsidiaries and Affiliates, as applicable,
and shall execute all documentation necessary to effectuate such resignation(s).
13. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) “Cause” shall mean a determination by the Board that the Executive (i) has breached this Agreement or any confidentiality, nonsolicitation,
noncompetition or inventions assignment agreement or obligations with the Company; (ii) committed an act of dishonesty, fraud, embezzlement or theft;
(iii) engaged in conduct that causes, or is likely to cause, material damage to the property or reputation of the Company; (iv) failed to perform satisfactorily
the material duties of the Executive’s position (other than by reason of Disability) after receipt of a written warning from the Board; (v) committed a felony
or any crime of moral turpitude; or (vi) materially failed to comply with the Company’s code of conduct or employment policies.
(b) “Good Reason” shall mean the occurrence of one or more of the following without the Executive’s consent, other than on account of the
Executive’s Disability:
(i) A material diminution by the Company of the Executive’s authority, duties or responsibilities;
(ii) A material and permanent change in the geographic location at which the Executive must perform services under this Agreement
(which, for purposes of this Agreement, means relocation of the offices of the Company at which the Executive is principally employed to a location that
increases the Executive’s commute to work by more than 50 miles);
(iii) A material diminution in the Executive’s Base Salary, other than a general reduction in Base Salary that affects all similarly-
situated executives in substantially the same proportions;
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(iv) Any action or inaction that constitutes a material breach by the Company of this Agreement; or
(v) The Company elects not to renew the Term of this Agreement pursuant to Section 1(a) above for any reason other than Cause or
Disability and does not offer the Executive continued employment on substantially similar terms as set forth in this Agreement.
The Executive must provide written notice of termination for Good Reason to the Company within 30 days after the event constituting Good Reason. The
Company shall have a period of 30 days in which it may correct the act or failure to act that constitutes the grounds for Good Reason as set forth in the
Executive’s notice of termination. If the Company does not correct the act or failure to act, the Executive’s employment will terminate for Good Reason on
the first business day following the Company’s 30-day cure period. If the Executive does not provide written notice of termination for Good Reason to the
Company within 30 days after an event constituting Good Reason, then the Executive will be deemed to have waived the Executive’s right to terminate for
Good Reason with respect to such event.
(c) “Release” shall mean a separation agreement and general release of any and all claims against the Company and all related parties with
respect to all matters arising out of the Executive’s employment by the Company, and the termination thereof (other than claims for any entitlements under
the terms of this Agreement or under any plans or programs of the Company under which the Executive has accrued and is due a benefit). The Release will
be in a standard form determined by and acceptable to the Company and shall include the Restrictive Covenants set forth in Section 15.
14. Section 409A.
(a) This Agreement is intended to comply with section 409A of the Code, and its corresponding regulations, or an exemption thereto, and
payments may only be made under this Agreement upon an event and in a manner permitted by section 409A of the Code, to the extent applicable.
Severance benefits under this Agreement are intended to be exempt from section 409A of the Code under the “short-term deferral” exception, to the
maximum extent applicable, and then under the “separation pay” exception, to the maximum extent applicable. Notwithstanding anything in this
Agreement to the contrary, if required by section 409A of the Code, if the Executive is considered a “specified employee” for purposes of section 409A of
the Code and if payment of any amounts under this Agreement is required to be delayed for a period of six months after separation from service pursuant to
section 409A of the Code, payment of such amounts shall be delayed as required by section 409A of the Code, and the accumulated amounts shall be paid
in a lump-sum payment within 10 days after the end of the six-month period. If the Executive dies during the postponement period prior to the payment of
benefits, the amounts withheld on account of section 409A of the Code shall be paid to the personal representative of the Executive’s estate within 60 days
after the date of the Executive’s death.
(b) All payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service,” if
required under section 409A of the Code. For purposes of section 409A of the Code, each payment hereunder shall be treated as a separate payment, and
the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. In no event may the
Executive, directly or indirectly, designate the calendar year of a payment. Notwithstanding any provision of this Agreement to the contrary, in no event
shall the timing of the Executive’s execution of the Release, directly or indirectly, result in the Executive’s designating the calendar year of payment of any
amounts of deferred compensation subject to section 409A of the Code, and if a payment that is subject to execution of the Release could be made in more
than one taxable year, payment shall be made in the later taxable year.
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(c) All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of
section 409A of the Code, including, where applicable, the requirement that (i) any reimbursement be for expenses incurred during the period specified in
this Agreement, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a fiscal year not affect the expenses eligible for
reimbursement, or in-kind benefits to be provided, in any other fiscal year, (iii) the reimbursement of an eligible expense be made no later than the last day
of the fiscal year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits not be subject to liquidation or
exchange for another benefit.
15. Restrictive Covenants.
(a) Noncompetition. The Executive agrees that during the Executive’s employment with the Company and its Affiliates and the one-year period
following the date on which the Executive’s employment terminates for any reason (the “Restriction Period”), the Executive will not, without the Board’s
express written consent, engage (directly or indirectly) in any Competitive Business in the Restricted Area. The term “Competitive Business” means any
activities or services conducted by any third party with respect to the research, development, marketing, manufacturing or sale of oncolytic
immunotherapies that are similar to the activities or services the Executive has performed (or gained Proprietary Information about (as defined below)) at
any time during the last two years of the Executive’s employment with the Company. The term “Restricted Area” means the United States of America,
Canada and countries within Europe, in respect of which the Company or any of its Affiliates has material business operations as of the date on which the
Executive’s employment terminates and in which the Executive has provided services or had a material presence or influence at any time during the last
two years of the Executive’s employment with the Company or its Affiliates. The Executive agrees that this offer of employment, and the Base Salary
provided for in Section 2(a), the Annual Bonus percentage opportunity provided for in Section 2(b), the Option and Restricted Stock Units provided for in
Section 2(c), the separation benefits provided for in Section 6 and the Change of Control Termination benefits provided for in Section 7, are fair and
reasonable consideration for the Executive’s compliance with this Section 15(a). The Executive understands and agrees that, given the nature of the
business of the Company and its Affiliates and the Executive’s position with the Company, the foregoing geographic scope is reasonable and appropriate
and that more limited geographical limitations on this non-competition covenant are therefore not appropriate. For purposes of this Agreement, the term
“Affiliate” means the Company’s sole shareholder, any subsidiary of the Company or other entity under common control with the Company. The Company
shall not enforce this Section 15(a) if it terminates the Executive’s employment without Cause as defined in Section 13(a).
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(b) Nonsolicitation of Company Personnel. The Executive agrees that during the Restriction Period, the Executive will not, either directly or
through others, hire or attempt to hire any employee, consultant or independent contractor of the Company or its Affiliates, or solicit or attempt to solicit
any such person to change or terminate his or her relationship with the Company or an Affiliate or otherwise to become an employee, consultant or
independent contractor to, for or of any other person or business entity, unless more than 12 months shall have elapsed between the last day of such
person’s employment or service with the Company or Affiliate and the first day of such solicitation or hiring or attempt to solicit or hire. If any employee,
consultant or independent contractor is hired or solicited by any entity that has hired or agreed to hire the Executive, such hiring or solicitation shall be
conclusively presumed to be a violation of this subsection (b).
(c) Nonsolicitation of Business Partners. The Executive agrees that during the Restriction Period, the Executive will not, either directly or
through others, solicit, divert or appropriate, or attempt to solicit, divert or appropriate for the benefit of a Competitive Business, any (i) business partner or
(ii) prospective business partner of the Company or an Affiliate who is or was identified through leads developed during the course of the Executive’s
employment or service with the Company, in each case, with whom the Executive was involved as part of the Executive’s job responsibilities during the
Executive’s employment or service with the Company, or regarding whom the Executive learned Proprietary Information (as defined below) during the
Executive’s employment or service with the Company.
(d) Proprietary Information. At all times, the Executive will hold in strictest confidence and will not disclose, use, lecture upon or publish any
of the Proprietary Information (defined below) of the Company or an Affiliate, except as such disclosure, use or publication may be required in connection
with the Executive’s work for the Company or as described in Section 15(e) below, or unless the Company expressly authorizes such disclosure in writing.
“Proprietary Information” shall mean any and all confidential and/or proprietary knowledge, data or information of the Company and its Affiliates and
shareholders, including but not limited to information relating to financial matters, investments, budgets, business plans, marketing plans, personnel
matters, business contacts, products, processes, know-how, designs, methods, improvements, discoveries, inventions, ideas, data, programs, and other
works of authorship. Proprietary Information does not include information which (i) was disclosed in response to a valid order by a court or other
governmental body, where the Executive provided the Company with prior written notice of such disclosure, (ii) was or becomes generally available to the
public other than as a result of disclosure by the Executive or any of the Executive’s agents, advisors or representatives, (iii) was within the Executive’s
possession prior to its being furnished to the Executive by or on behalf of the Company, provided that the source of the information was not bound by a
confidentiality agreement with the Company or otherwise prohibited from transmitting the information to the Executive by a contractual, legal or fiduciary
obligation, or (iv) was or becomes available to the Executive on a non-confidential basis from a source other than the Company or its representatives,
provided that such source is not bound by a confidentiality agreement with the Company or otherwise prohibited from transmitting the information to the
Executive by a contractual, legal or fiduciary obligation.
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(e) Reports to Government Entities. Nothing in this Agreement shall prohibit or restrict the Executive from initiating communications
directly with, responding to any inquiry from, providing testimony before, providing confidential information to, reporting possible violations of law or
regulation to, or filing a claim or assisting with an investigation directly with a self-regulatory authority or a government agency or entity, including the
Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and
Exchange Commission, Congress, any agency Inspector General or any other federal, state or local regulatory authority, or from making other disclosures
that are protected under the whistleblower provisions of state or federal law or regulation. The Executive does not need the prior authorization of the
Company to engage in conduct protected by this subsection, and the Executive does not need to notify the Company that the Executive has engaged in such
conduct. Please take notice that federal law provides criminal and civil immunity to federal and state claims for trade secret misappropriation to individuals
who disclose trade secrets to their attorneys, courts, or government officials in certain, confidential circumstances that are set forth at 18 U.S.C. §§ 1833(b)
(1) and 1833(b)(2), related to the reporting or investigation of a suspected violation of the law, or in connection with a lawsuit for retaliation for reporting a
suspected violation of the law.
(f) Work Made for Hire; Inventions Assignment. The Executive agrees that all inventions, innovations, improvements, developments,
methods, designs, analyses, reports, and all similar or related information which relates to the Company’s or its Affiliates’ actual or anticipated business,
research and development or existing or future products or services and which are conceived, developed or made by the Executive while employed by the
Company (“Work Product”) belong to the Company. The Executive acknowledges that, by reason of being employed by the Company at the relevant times,
to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and
such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, the Executive hereby irrevocably assigns to the
Company, for no additional consideration, the Executive’s entire right, title, and interest in and to all Work Product and intellectual property rights therein,
including, without limitation, the right to sue, counterclaim, and recover for all past, present, and future infringement, misappropriation, or dilution thereof,
and all rights corresponding thereto throughout the world. The Executive will promptly disclose such Work Product to the Board and perform all actions
reasonably requested by the Board (whether during or after the Term) to establish and confirm such ownership (including, without limitation, executing
assignments, consents, powers of attorney and other instruments). If requested by the Company, the Executive agrees to execute any inventions assignment
and confidentiality agreement that is required to be signed by Company employees generally. Nothing contained in this Agreement shall be construed to
reduce or limit the Company’s rights, title, or interest in any Work Product or intellectual property rights so as to be less in any respect than that the
Company would have had in the absence of this Agreement. The Executive understands that this Agreement does not, and shall not be construed to, grant
the Executive any license or right of any nature with respect to any Work Product or intellectual property rights or any Proprietary Information, materials,
software, or other tools made available to the Executive by the Company.
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(g) Return of Company Property. Upon termination of the Executive’s employment with the Company for any reason, and at any earlier
time the Company requests, the Executive will (i) deliver to the person designated by the Company all originals and copies of all documents and property
of the Company or an Affiliate that is in the Executive’s possession or under the Executive’s control or to which the Executive may have access, (ii) deliver
to the person designated by the Company all Company property, including keys, key cards, access cards, identification cards, security devices, employer
credit cards, network access devices, computers, cell phones, smartphones, PDAs, pagers, fax machines, equipment, manuals, reports, files, books,
compilations, work product, e-mail messages, recordings, disks, thumb drives or other removable information storage devices, hard drives, and data, and
(iii) to the extent that the Executive made use of the Executive’s personal electronics (e.g., laptop, iPad, telephone, thumb drives, etc.) during employment
with the Company, permit the Company to delete all Company property and information from such personal devices. The Executive will not reproduce or
appropriate for the Executive’s own use, or for the use of others, any property, Proprietary Information or Work Product.
16. Legal and Equitable Remedies.
(a) Because the Executive’s services are personal and unique and the Executive has had and will continue to have access to and has become
and will continue to become acquainted with the Proprietary Information of the Company and its Affiliates, and because any breach by the Executive of
any of the restrictive covenants contained in Section 15 would result in irreparable injury and damage for which money damages would not provide an
adequate remedy, the Company shall have the right to enforce Section 15 and any of its provisions by injunction, specific performance or other equitable
relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach, or threatened breach, of the restrictive
covenants set forth in Section 15. The Executive agrees that in any action in which the Company seeks injunction, specific performance or other equitable
relief, the Executive will not assert or contend that any of the provisions of Section 15 are unreasonable or otherwise unenforceable.
(b) The Executive irrevocably and unconditionally (i) agrees that any legal proceeding arising out of this Agreement shall be brought solely
in the United States District Court for the District of Massachusetts, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of
general jurisdiction in the State of Massachusetts, (ii) consents to the exclusive jurisdiction of such court in any such proceeding, and (iii) waives any
objection to the laying of venue of any such proceeding in any such court. The Executive also irrevocably and unconditionally consents to the service of
any process, pleadings, notices or other papers.
(c) Notwithstanding anything in this Agreement to the contrary, if the Executive breaches any of the Executive’s obligations under
Section 15, the Company shall be obligated to provide only the Accrued Obligations, and all payments under Section 2, Section 6, or Section 7 hereof, as
applicable, shall cease. In such event, and in addition to any legal and equitable remedies permitted by law, the Company may require that the Executive
repay all amounts theretofore paid to her pursuant to Sections 6 and 7 hereof (other than Sections 6(c) and 7(c)), and in such case, the Executive shall
promptly repay such amounts on the terms determined by the Company.
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17. Survival. The respective rights and obligations of the parties under this Agreement (including, but not limited to, under Sections 15 and 16) shall
survive any termination of the Executive’s employment or termination or expiration of this Agreement to the extent necessary to the intended preservation
of such rights and obligations.
18. No Mitigation or Set-Off. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced regardless of whether the
Executive obtains other employment. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Executive or others.
19. Section 280G. In the event of a change in ownership or control under section 280G of the Code, if it shall be determined that any payment or
distribution in the nature of compensation (within the meaning of section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would constitute an “excess parachute payment”
within the meaning of section 280G of the Code, the aggregate present value of the Payments under the Agreement shall be reduced (but not below zero) to
the Reduced Amount (defined below) if and only if the Accounting Firm (described below) determines that the reduction will provide the Executive with a
greater net after-tax benefit than would no reduction. No reduction shall be made unless the reduction would provide the Executive with a greater net after-
tax benefit. The determinations under this Section shall be made as follows:
(a) The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of Payments under
this Agreement without causing any Payment under this Agreement to be subject to the Excise Tax (defined below), determined in accordance with section
280G(d)(4) of the Code. The term “Excise Tax” means the excise tax imposed under section 4999 of the Code, together with any interest or penalties
imposed with respect to such excise tax.
(b) Payments under this Agreement shall be reduced on a nondiscretionary basis in such a way as to minimize the reduction in the
economic value deliverable to the Executive. Where more than one payment has the same value for this purpose and they are payable at different times,
they will be reduced on a pro rata basis. Only amounts payable under this Agreement shall be reduced pursuant to this Section.
(c) All determinations to be made under this Section shall be made by an independent certified public accounting firm selected by the
Company and agreed to by the Executive immediately prior to the change-in-ownership or -control transaction (the “Accounting Firm”). The Accounting
Firm shall provide its determinations and any supporting calculations both to the Company and the Executive within 10 days of the transaction. Any such
determination by the Accounting Firm shall be binding upon the Company and the Executive. All of the fees and expenses of the Accounting Firm in
performing the determinations referred to in this Section shall be borne solely by the Company.
11
20. Notices. All notices and other communications required or permitted under this Agreement or necessary or convenient in connection herewith
shall be in writing and shall be deemed to have been given when hand-delivered or mailed by registered or certified mail, as follows (provided that notice
of change of address shall be deemed given only when received):
If to the Company, to:
Replimune Inc.
500 Unicorn Park Dr.
Woburn, MA 01801
Attn: Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
One Federal Street
Boston, MA 02110
Attn: Benjamin Stein
If to the Executive, to the most recent address on file with the Company or to such other names or addresses as the Company or the Executive, as
the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section.
21. Withholding. All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any
payments under this Agreement all federal, state, and local taxes as the Company is required to withhold pursuant to any law or governmental rule or
regulation. The Executive shall bear all expense of, and be solely responsible for, all federal, state, and local taxes due with respect to any payment received
under this Agreement.
22. Remedies Cumulative; No Waiver. No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at
law or in equity. No delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be
construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed
expedient or necessary by such party in its sole discretion.
23. Assignment. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, executors, administrators, legal representatives, successors, and assigns of the parties hereto, except that the duties and responsibilities of
the Executive under this Agreement are of a personal nature and shall not be assignable or delegable in whole or in part by the Executive. The Company
may assign its rights, together with its obligations hereunder, in connection with any sale, transfer or other disposition of all or substantially all of its
business and assets, and such rights and obligations shall inure to, and be binding upon, any successor to the business or any successor to substantially all
of the assets of the Company, whether by merger, purchase of stock or assets or otherwise, which successor shall expressly assume such obligations, and
the Executive acknowledges that in such event the obligations of the Executive hereunder, including but not limited to those under Section 15, will continue
to apply in favor of the successor.
12
24. Company Policies. This Agreement and the compensation payable hereunder shall be subject to any applicable clawback or recoupment policies,
share trading policies, and other policies that may be implemented by the Board from time to time with respect to officers of the Company.
25. Indemnification. In the event the Executive is made, or threatened to be made, a party to any legal action or proceeding, whether civil or
criminal, including any governmental or regulatory proceedings or investigations, by reason of the fact that the Executive is or was a director or officer of
the Company or any of its Affiliates, the Executive shall be indemnified by the Company, and the Company shall pay the Executive’s related expenses
when and as incurred, to the fullest extent permitted by applicable law and the Company’s articles of incorporation and bylaws. During the Executive’s
employment with the Company or any of its Affiliates and after termination of employment for any reason, the Company shall cover the Executive under
the Company’s directors’ and officers’ insurance policy applicable to other officers and directors according to the terms of such policy.
26. Entire Agreement; Amendment. This Agreement sets forth the entire agreement of the parties hereto and supersedes any and all prior agreements
and understandings concerning the Executive’s employment by the Company. This Agreement may be changed only by a written document signed by the
Executive and the Company.
27. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement, which can be
given effect without the invalid or unenforceable provision or application, and shall not invalidate or render unenforceable such provision or application in
any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full
force and effect in all other circumstances.
28. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive and procedural laws of
Massachusetts without regard to rules governing conflicts of law.
29. Acknowledgements. The Executive acknowledges (a) that the Company hereby advises her to consult with legal counsel prior to signing this
Agreement, (b) that she has had a full and adequate opportunity to read and understand the terms and conditions contained in this Agreement, (c) that she
has been provided with this Agreement a minimum of 10 business days prior to the date this Agreement becomes effective, and (d) that the post-
employment noncompetition and nonsolicitation provisions are supported by fair and reasonable consideration.
13
30. Counterparts. This Agreement may be executed in any number of counterparts (including facsimile counterparts), each of which shall be an
original, but all of which together shall constitute one instrument.
(Signature Page Follows)
14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date written above.
REPLIMUNE, INC.
/s/ Philip Astley-Sparke
Name: Philip Astley-Sparke
Title: Chief Executive Officer
EXECUTIVE
/s/ Tanya Lewis
Name: Tanya Lewis
15
EXHIBIT 10.13
Participant:
Date of Grant:
Shares subject to the Option:
per-Share Exercise Price:
REPLIMUNE GROUP, INC.
NONQUALIFIED STOCK OPTION GRANT AGREEMENT
Sushil Patel
May 3, 2021
125,000
$36.75
RECITALS
Pursuant to the terms of the Amended and Restated Employment Agreement dated May 3, 2021 between Replimune, Inc. (the “Company”) and
the Participant (as it may be amended from time to time, the “Employment Agreement”), the Company agreed to provide for the grant of an option to
acquire shares of Company common stock, $0.001 par value per share (“Company Stock”) to the Participant on the terms and subject to the conditions set
forth herein. The Committee has decided to make this nonqualified stock option grant as an inducement material for the Participant to enter into
employment with the Company and to align the Participant’s interests with those of the Company and its stockholders. The grant of the option provided for
herein is intended to constitute an “employment inducement grant” as described in Rule 5635(c)(4), or any successor provision, of the Nasdaq Listing
Rules, and is not being issued under the Replimune Group, Inc. 2018 Omnibus Incentive Compensation Plan, as amended from time to time (the “Plan”).
Capitalized terms used herein and not otherwise defined will have the meanings set forth in the Plan.
1. Grant of Option.
(a) Grant. In accordance with the employment inducement grant exception to the shareholder-approval requirements of the Nasdaq Stock
Market set forth in Rule 5635(c)(4), or any successor provision, of the Nasdaq Listing Rules, the Company hereby grants to the Participant a nonqualified
stock option (the “Option”) to purchase the number of shares of Company Stock set forth above (“Shares”) at the per-Share Exercise Price set forth above,
on the terms and subject to the conditions set forth in this Nonqualified Stock Option Grant Agreement (this “Agreement”) and, subject to
Section 1(c) below, otherwise on terms identical to the terms provided in the Plan. In the event of any conflict between this Agreement and the Plan, this
Agreement shall control. The Option is not intended to qualify as an incentive stock option pursuant to Section 422 of the Code. The Option shall become
exercisable according to Section 2 below. The Company shall promptly file with the Securities and Exchange Commission a registration statement on
Form S-8 registering the Shares issuable pursuant to this Option.
(b) Inducement Award. The Participant acknowledges that the grant of the Option hereunder satisfies in full the Company’s obligation to
provide the Participant with an option grant as described in the Employment Agreement. The Participant acknowledges that the grant of the Option
hereunder is intended to be in consideration for, in part, the covenants set forth in Section 15 of the Employment Agreement.
(c) Incorporation by Reference. It is understood that the Option is not being granted pursuant to the Plan; provided, however, that this
Agreement shall be construed and administered in a manner consistent with the provisions of the Plan as if granted pursuant thereto, the terms of which are
incorporated herein by reference (including, without limitation, any interpretations, amendments, rules and regulations promulgated by the Committee from
time to time pursuant to the Plan, which shall be deemed to apply to the Option granted hereunder without any further action of the Committee, unless
expressly provided otherwise by the Committee). The Committee shall have final authority to interpret and construe the terms of this Agreement and the
Plan’s terms as they are incorporated herein by reference and deemed to apply to the Option granted hereunder, and to make any and all determinations
under them, and its decision shall be binding and conclusive upon the Participant and the Participant’s beneficiaries in respect of any questions arising
under the Plan or this Agreement. The Participant acknowledges that the Participant has received a copy of the Plan, the official prospectus for the Plan,
which is available by accessing the Company’s intranet at www.replimune.com, and the official prospectus for this Agreement. The Participant also
acknowledges that the Participant had an opportunity to review the Plan and agrees to be bound by all the terms and provisions of the Plan, as incorporated
into this Agreement. Paper copies of the Plan, the official Plan prospectus and the prospectus for this Agreement are available by contacting the Chief
Financial Officer of the Company at (781) 222-9606, or emailing jean.franchi@replimune.com. For the avoidance of doubt, neither the Option granted
hereunder nor any Shares issued upon the exercise of the Option shall reduce the number of Shares available for issuance pursuant to Grants granted under
the Plan.
2. Exercisability of Option.
(a) The Option shall become vested and exercisable as to (25%) of the Shares subject to the Option on the first anniversary of the Date of Grant
and as to (2.0833%) of the Shares subject to the Option on the 3rd day of the month thereafter for 36 months (each, a “Vesting Date”), provided that the
Participant continues to be employed by, or provide service to, the Employer from the Date of Grant until the applicable Vesting Date.
(b) The vesting and exercisability of the Option is cumulative, but shall not exceed 100% of the Shares subject to the Option.
(c) If the Participant’s employment or service terminates on account of the Participant’s death or Disability before the last Vesting Date, any
unvested and unexercisable portion of the Option shall become fully vested and exercisable upon such termination of employment or service.
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(d) In the event of a Change of Control, the provisions of the Plan applicable to a Change of Control shall apply to the Option, and, in the event
of a Change of Control, the Committee may take such actions as it deems appropriate as described in the Plan.
In addition, if the Company is not the surviving corporation (or survives only as a subsidiary of another corporation) as a result of the Change of
Control and the Option is assumed by, or replaced with an award with comparable terms by, the surviving corporation (or parent or subsidiary of the
surviving corporation) and the Participant’s employment or service is terminated by the Employer without Cause or by the Participant for Good Reason (if
applicable) upon or within 12 months following a Change of Control and before the Option is fully vested and exercisable in accordance with the vesting
schedule set forth in Section 2(a) above, any unvested and unexercisable portion of the Option shall become fully vested and exercisable upon such
termination of employment or service. In the event that the surviving corporation (or a parent or subsidiary of the surviving corporation) does not assume or
replace the Option with a grant that has comparable terms, and the Participant is employed by, or providing services to, the Employer on the date of the
Change of Control, any unvested and unexercisable portion of the Option shall become fully vested and exercisable upon the date of the Change of Control.
3. Term of Option.
(a) The Option shall have a term of ten years from the Date of Grant and shall terminate at the expiration of that period, unless it is terminated
at an earlier date pursuant to the provisions of this Agreement or the applicable terms of the Plan. Notwithstanding the foregoing, in the event that on the
last business day of the term of the Option, the exercise of the Option is prohibited by applicable law, including a prohibition on purchases or sales of
Company Stock under the Company’s insider trading policy, the term of the Option shall be extended for a period of 30 days following the end of the legal
prohibition, unless the Committee determines otherwise.
(b) The Option shall automatically terminate upon the happening of the first of the following events:
(i) The expiration of the 90-day period after the Participant ceases to be employed by, or provide service to, the Employer, if the
termination is for any reason other than Disability, death or Cause.
(ii) The expiration of the one-year period after the Participant ceases to be employed by, or provide service to, the Employer on
account of the Participant’s Disability.
(iii) The expiration of the one-year period after the Participant ceases to be employed by, or provide service to, the Employer, if the
Participant dies while employed by, or providing service to, the Employer or the Participant dies within 90 days after the Participant ceases to be
so employed by or to provide services to the Employer for any reason other than Disability, death or Cause.
(iv) The date on which the Participant ceases to be employed by, or provide service to, the Employer for Cause. In addition,
notwithstanding the prior provisions of this Section 3, if the Participant engages in conduct that constitutes Cause after the Participant’s
employment or service terminates, the Option shall immediately terminate.
-3-
Notwithstanding the foregoing, in no event may the Option be exercised after the date that is immediately before the tenth anniversary of the Date of Grant,
except as provided under Section 3(a) above. Any portion of the Option that is not exercisable at the time the Participant ceases to be employed by, or
provide service to, the Employer shall immediately terminate.
4. Exercise Procedures.
(a) Subject to the provisions of Sections 2 and 3 above, the Participant may exercise part or all of the exercisable Option by giving the
Company or its delegate written notice of intent to exercise, specifying the number of Shares as to which the Option is to be exercised and such other
information as the Company or its delegate may require.
The Participant shall pay the per-Share Exercise Price (i) in cash or check, (ii) unless the Committee determines otherwise, by delivering shares of
Company Stock owned by the Participant, which shall be valued at their Fair Market Value on the date of exercise, or by attestation (in accordance with
procedures prescribed by the Company) to ownership of shares of Company Stock having a Fair Market Value on the date of exercise at least equal to the
per-Share Exercise Price, (iii) if permitted by the Committee, by payment through a broker in accordance with procedures permitted by Regulation T of the
Federal Reserve Board, or (iv) by such other method as the Committee may approve, to the extent permitted by applicable law. The Committee may impose
from time to time such limitations as it deems appropriate on the use of shares of Company Stock to exercise the Option.
(b) The obligation of the Company to deliver Shares upon exercise of the Option shall be subject to all applicable laws, rules, and regulations
and such approvals by governmental agencies as may be deemed appropriate by the Committee, including such actions as Company counsel shall deem
necessary or appropriate to comply with relevant securities laws and regulations.
(c) All obligations of the Company under this Agreement shall be subject to the rights of the Employer as set forth in the Plan to withhold
amounts required to be withheld for any taxes, if applicable. The Participant shall be required to pay to the Employer, or make other arrangements
satisfactory to the Employer to provide for the payment of, any federal, state, local or other taxes that the Employer is required to withhold with respect to
the Option.
(d) Upon exercise of the Option (or portion thereof), the Option (or portion thereof) will terminate and cease to be outstanding.
5. Restrictions on Exercise. Except as the Committee may otherwise permit, only the Participant may exercise the Option during the Participant’s
lifetime and, after the Participant’s death, the Option shall be exercisable (subject to the limitations specified in the Plan) solely by the legal representatives
of the Participant, or by the person who acquires the right to exercise the Option by will or by the laws of descent and distribution, to the extent that the
Option is exercisable pursuant to this Agreement.
6. No Employment or Other Rights. The grant of the Option shall not confer upon the Participant any right to be retained by or in the employ or service
of any Employer and shall not interfere in any way with the right of any Employer to terminate the Participant’s employment or service at any time. The
right of any Employer to terminate at will the Participant’s employment or service at any time for any reason is specifically reserved.
-4-
7. No Stockholder Rights. Neither the Participant, nor any person entitled to exercise the Participant’s rights in the event of the Participant’s death, shall
have any of the rights and privileges of a stockholder with respect to the Shares subject to the Option, until certificates for Shares have been issued upon
the exercise of the Option.
8. Assignment and Transfers. Except as the Committee may otherwise permit, the rights and interests of the Participant under this Agreement may not
be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Participant, by will or by the laws of descent and
distribution. In the event of any attempt by the Participant to alienate, assign, pledge, hypothecate, or otherwise dispose of the Option or any right
hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests
hereby conferred, the Company may terminate the Option by notice to the Participant, and the Option and all rights hereunder shall thereupon become null
and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company’s parents,
subsidiaries, and affiliates. This Agreement may be assigned by the Company without the Participant’s consent.
9. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof.
10. Notice. Any notice to the Company provided for in this instrument shall be addressed to the Company in care of the Chief Financial Officer at the
corporate headquarters of the Company, and any notice to the Participant shall be addressed to such Participant at the current address shown on the payroll
of the Employer, or to such other address as the Participant may designate to the Employer in writing. Any notice shall be delivered by hand or enclosed in
a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States
Postal Service or by the postal authority of the country in which the Participant resides or to an internationally recognized expedited mail courier.
11. Company Policies. The Participant agrees that payment by the Participant shall be made in such manner and on such terms and conditions as may be
required by the Committee and the Employer shall be entitled to set off against the amount of any such payment any amounts otherwise owed to the
Participant by the Employer. In addition, the Participant agrees that the Option shall be subject to any applicable clawback or recoupment policies, share
trading policies and other policies that may be implemented by the Board or imposed under applicable rule or regulation from time to time.
12. Application of Section 409A of the Code. This Agreement is intended to be exempt from section 409A of the Code and to the extent this Agreement
is subject to section 409A of the Code, it will in all respects be administered in accordance with section 409A of the Code.
-5-
IN WITNESS WHEREOF, the Company has caused an officer to execute this Agreement, and the Participant has executed this Agreement,
effective as of the Date of Grant.
REPLIMUNE GROUP, INC.
/s/ Jean Franchi
Name: Jean Franchi
Title: Chief Financial Officer
I hereby accept the Option described in this Agreement, and I agree to be bound by the terms of the Plan and this Agreement, effective as of the Date of
Grant. I hereby further agree that all decisions and determinations of the Committee shall be final and binding.
Participant: /s/ Sushil Patel
-6-
REPLIMUNE GROUP, INC.
RESTRICTED STOCK UNIT GRANT AGREEMENT
EXHIBIT 10.14
Participant:
Date of Grant:
Restricted Units Granted:
Sushil Patel
May 3, 2021
88,333
RECITALS
Pursuant to the terms of the Amended and Restated Employment Agreement dated May 3, 2021 between Replimune, Inc. (the “Company”) and
the Participant (as it may be amended from time to time, the “Employment Agreement”), the Company agreed to provide for the grant of restricted stock
units to the Participant on the terms and subject to the conditions set forth herein. The Committee has decided to make this grant of restricted stock units as
an inducement material for the Participant to enter into employment with the Company and to align the Participant’s interests with those of the Company
and its stockholders. The grant of the restricted stock units provided for herein is intended to constitute an “employment inducement grant” as described in
Rule 5635(c)(4), or any successor provision, of the Nasdaq Listing Rules, and is not being issued under the Replimune Group, Inc. 2018 Omnibus
Incentive Compensation Plan, as amended from time to time (the “Plan”). Capitalized terms used herein and not otherwise defined will have the meanings
set forth in the Plan.
1. Grant of Stock Units.
(a) Grant. In accordance with the employment inducement grant exception to the shareholder-approval requirements of the Nasdaq Stock
Market set forth in Rule 5635(c)(4), or any successor provision, of the Nasdaq Listing Rules, the Company hereby grants to the Participant the number of
restricted stock units set forth above (the “Stock Units”), on the terms and subject to the conditions set forth in this Restricted Stock Unit Grant Agreement
(this “Agreement”) and, subject to Section 1(c) below, otherwise on terms identical to the terms provided in the Plan. In the event of any conflict between
this Agreement and the Plan, this Agreement shall control. Each Stock Unit represents the right of the Participant to receive a share of common stock,
$0.001 par value per share, of the Company (“Company Stock”) on the applicable payment date set forth in Section 5 below. The Company shall promptly
file with the Securities and Exchange Commission a registration statement on Form S-8 registering the shares of Company Stock represented by the Stock
Units.
(b) Inducement Award. The Participant acknowledges that the grant of the Stock Units hereunder satisfies in full the Company’s obligation to
provide the Participant a restricted stock unit grant as described in the Employment Agreement. The Participant acknowledges that the grant of the Stock
Units hereunder is intended to be in consideration for, in part, the covenants set forth in Section 15 of the Employment Agreement.
(c) Incorporation by Reference. It is understood that the Stock Units are not being granted pursuant to the Plan; provided, however, that this
Agreement shall be construed and administered in a manner consistent with the provisions of the Plan as if granted pursuant thereto, the terms of which are
incorporated herein by reference (including, without limitation, any interpretations, amendments, rules and regulations promulgated by the Committee from
time to time pursuant to the Plan, which shall be deemed to apply to the Stock Units granted hereunder without any further action of the Committee, unless
expressly provided otherwise by the Committee). The Committee shall have final authority to interpret and construe the terms of this Agreement and the
Plan’s terms as they are incorporated herein by reference and deemed to apply to the Stock Units granted hereunder, and to make any and all determinations
under them, and its decision shall be binding and conclusive upon the Participant and the Participant’s beneficiaries in respect of any questions arising
under the Plan or this Agreement. The Participant acknowledges that the Participant has received a copy of the Plan, the official prospectus for the Plan,
which is available by accessing the Company’s intranet at www.replimune.com, and the official prospectus for this Agreement. The Participant also
acknowledges that the Participant had an opportunity to review the Plan and agrees to be bound by all the terms and provisions of the Plan, as incorporated
into this Agreement. Paper copies of the Plan, the official Plan prospectus, and the official prospectus for this Agreement are available by contacting the
Chief Financial Officer of the Company at (781) 222-9606, or emailing jean.franchi@replimune.com. For the avoidance of doubt, neither the Stock Units
granted hereunder nor any shares of Company Stock issued upon settlement of such Stock Units shall reduce the number of shares of Company Stock
available for issuance pursuant to Grants granted under the Plan.
2. Stock Unit Account. Stock Units represent hypothetical shares of Company Stock, and not actual shares of stock. The Company shall
establish and maintain a Stock Unit account, as a bookkeeping account on its records, for the Participant and shall record in such account the number of
Stock Units granted to the Participant. No shares of Company Stock shall be issued to the Participant at the time the grant is made, and the Participant shall
not be, and shall not have any of the rights or privileges of, a stockholder of the Company with respect to any Stock Units recorded in the Stock Unit
account. The Participant shall not have any interest in any fund or specific assets of the Company by reason of this award or the Stock Unit account
established for the Participant.
3. Vesting.
(a) The Stock Units are anticipated to become vested over a period of four years, with 25% of the Stock Units vesting on the Designated
Vesting Date (as defined in the following table), and 25% of the Stock Units subject to this Agreement vesting on the yearly anniversaries of the
Designated Vesting Date thereafter for the next three consecutive years (each, a “Vesting Date”); provided that the Participant continues to be employed by,
or provide service to, the Employer from the Date of Grant until the applicable Vesting Date.
Date of Grant
Designated Vesting Date*
January 1 – March 31
April 1 – June 30
July 1 – September 30
October 1 – December 30
February 15th of the next calendar year
May 15th of the next calendar year
August 15th of the next calendar year
November 15th of the next calendar year
2
* If a Designated Vesting Date falls on a weekend, federal holiday or any other day the Nasdaq Global Market is closed for trading, such
Designated Vesting Date will become the next active trading day of the Company’s common stock.
(b) The vesting of the Stock Units shall be cumulative, but shall not exceed 100% of the Stock Units. If the foregoing schedule would
produce fractional Stock Units, the number of Stock Units that vest shall be rounded down to the nearest whole Stock Unit and the fractional Stock Units
will be accumulated so that the resulting whole Stock Units will be included in the number of Stock Units that become vested on the last Vesting Date.
(c) If the Participant’s employment or service terminates on account of the Participant’s death or Disability before the last Vesting Date, any
unvested Stock Units shall become fully vested upon such termination of employment or service.
(d) In the event of a Change of Control, the provisions of the Plan applicable to a Change of Control shall apply to the Stock Units, in the
event of a Change of Control, the Committee may take such actions as it deems appropriate as described in the Plan.
In addition, if the Company is not the surviving corporation (or survives only as a subsidiary of another corporation) as a result of a Change of
Control and the Stock Units are assumed by, or replaced with an award with comparable terms by, the surviving corporation (or parent or subsidiary of the
surviving corporation) and the Participant’s employment or service is terminated by the Employer without Cause or by the Participant for Good Reason (if
applicable) upon or within 12 months following a Change of Control and before the Stock Units are fully vested in accordance with the vesting schedule set
forth in Section 3(a) above, any unvested Stock Units shall become fully vested upon such termination of employment or service. In the event that the
surviving corporation (or a parent or subsidiary of the surviving corporation) does not assume or replace the Stock Units with an award with comparable
terms, and the Participant is employed by, or providing services to, the Employer on the date of the Change of Control, any unvested Stock Units shall
become fully vested upon the date of the Change of Control.
4. Termination of Stock Units. If the Participant ceases to be employed by, or provide service to, the Employer for any reason before all of
the Stock Units vest, any unvested Stock Units shall automatically terminate and shall be forfeited as of the date of the Participant’s termination of
employment or service. No payment shall be made with respect to any unvested Stock Units that terminate as described in this Section 4.
5. Payment of Stock Units.
(a) If and when the Stock Units vest, the Company shall issue to the Participant one share of Company Stock for each vested Stock Unit,
subject to applicable Withholding Taxes (as defined below). Payment shall be made within 30 days after the applicable Vesting Date.
3
(b) All obligations of the Company under this Agreement shall be subject to the rights of the Employer as described in the Plan to withhold
amounts required by law to be withheld for any federal (including FICA), state, local and other taxes with respect to the payment of the Stock Units
(“Withholding Taxes”). The Participant irrevocably (i) has elected, as of the Date of Grant, to sell shares of Company Stock in an amount having an
aggregate Fair Market Value equal to the Withholding Taxes, and to allow the Company’s designated broker (the “Broker”) to remit the cash proceeds of
such sale to the Employer (a “Sell to Cover”) and (ii) directs the Employer to make a cash payment to satisfy the Withholding Taxes from the cash proceeds
of such sale directly to the appropriate taxing authorities. To the extent the Sell to Cover does not cover all Withholding Taxes due, the Participant shall be
required to pay to the Employer, or make other arrangements satisfactory to the Employer to provide for the payment of, any Withholding Taxes that the
Employer is required to withhold with respect to the Stock Units.
(c) The obligation of the Company to deliver Company Stock following vesting of the Stock Units shall be subject to all applicable laws,
rules, and regulations and such approvals by governmental agencies as may be deemed appropriate by the Committee, including such actions as Company
counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations.
6. No Stockholder Rights. Neither the Participant, nor any person entitled to receive payment in the event of the Participant’s death, shall
have any of the rights and privileges of a stockholder with respect to shares of Company Stock, including voting, dividend rights or dividend equivalent
rights, until certificates for shares have been issued upon payment of Stock Units. The Participant acknowledges that no election under Section 83(b) of the
Code is available with respect to Stock Units.
7. No Employment or Other Rights. The grant of the Stock Units shall not confer upon the Participant any right to be retained by or in the
employ or service of any Employer and shall not interfere in any way with the right of any Employer to terminate the Participant’s employment or service
at any time. The right of any Employer to terminate at will the Participant’s employment or service at any time for any reason is specifically reserved.
8. Assignment and Transfers. Except as the Committee may otherwise permit, the rights and interests of the Participant under this
Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Participant, by will or by the laws of
descent and distribution. In the event of any attempt by the Participant to alienate, assign, pledge, hypothecate, or otherwise dispose of the Stock Units or
any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or
interests hereby conferred, the Company may terminate the Stock Units by notice to the Participant, and the Stock Units and all rights hereunder shall
thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the
Company’s parents, subsidiaries, and affiliates. This Agreement may be assigned by the Company without the Participant’s consent.
9. Applicable Law; Jurisdiction. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof. Any action arising out of, or relating
to, any of the provisions of this Agreement shall be brought only in the United States District Court for the District of Massachusetts, or if such court does
not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Boston, Massachusetts, and the jurisdiction of such court in any
such proceeding shall be exclusive. Notwithstanding the foregoing sentence, on and after the date a Participant receives shares of Company Stock
hereunder, the Participant will be subject to the jurisdiction provision set forth in the Company’s bylaws.
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10. Notice. Any notice to the Company provided for in this instrument shall be addressed to the Company in care of the Chief Financial
Officer at the corporate headquarters of the Company, and any notice to the Participant shall be addressed to such Participant at the current address shown
on the payroll of the Employer, or to such other address as the Participant may designate to the Employer in writing. Any notice shall be delivered by hand,
or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the
United States Postal Service or by the postal authority of the country in which the Participant resides or to an internationally recognized expedited mail
courier.
11. Company Policies. The Participant agrees that payment to the Participant shall be made in such manner and on such terms and conditions
as may be required by the Committee and the Employer shall be entitled to set off against the amount of any such payment any amounts otherwise owed to
the Participant by the Employer, to the extent permitted by applicable law. In addition, the Participant agrees that the Stock Units shall be subject to any
applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Board or imposed under applicable
rule or regulation from time to time.
12. Application of Section 409A of the Code. This Agreement is intended to be exempt from section 409A of the Code under the “short-term
deferral” exception and to the extent this Agreement is subject to section 409A of the Code, it will in all respects be administered in accordance with
section 409A of the Code.
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IN WITNESS WHEREOF, the Company has caused an officer to execute this Agreement, and the Participant has executed this Agreement,
effective as of the Date of Grant.
REPLIMUNE GROUP, INC.
/s/ Jean Franchi
Name: Jean Franchi
Title: Chief Financial Officer
I hereby accept the Stock Units described in this Agreement, and I agree to be bound by the terms of the Plan and this Agreement, effective as of the Date
of Grant. I hereby further agree that all decisions and determinations of the Committee shall be final and binding.
Participant: /s/ Sushil Patel
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Subsidiaries of Replimune Group, Inc.
Name of Subsidiary
Replimune, Inc.
Replimune Limited
Replimune Securities Corporation
Replimune (Ireland) Limited
Exhibit 21.1
Jurisdiction
Delaware
United Kingdom
Massachusetts
Ireland
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-244386) and Form S-8 (No. 333-226323) of
Replimune Group, Inc. of our report dated May 20, 2021 relating to the financial statements, which appears in this Form 10-K.
Exhibit 23.1
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
May 20, 2021
CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED
Exhibit 31.1
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Philip Astley-Sparke, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Replimune Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 20, 2021
By:
/s/ PHILIP ASTLEY-SPARKE
Philip Astley-Sparke
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED
Exhibit 31.2
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Jean Franchi, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Replimune Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 20, 2021
By:
/s/ JEAN FRANCHI
Jean Franchi
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of Replimune Group, Inc. (the "Company") for the fiscal year ended March 31, 2021, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Philip Astley-Sparke, Chief Executive Officer of the
Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of
his knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 20, 2021
By:
/s/ PHILIP ASTLEY-SPARKE
Philip Astley-Sparke
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report on Form 10-K of Replimune Group, Inc. (the "Company") for the fiscal year ended March 31, 2021, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Jean Franchi, Chief Financial Officer of the Company,
hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his
knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 20, 2021
By:
/s/ JEAN FRANCHI
Jean Franchi
Chief Financial Officer
(Principal Financial Officer)